Benchmark the Company

Benchmark The Company

ABSTRACT

This paper explores and identifies what benchmarking is. It will discuss the variety of methods that can be utilized in this process. It will identify several different cases where one benchmark method is beneficial over another benchmark method as well as explain how each one works. It will discuss the various limitations that each benchmark has.

Benchmark The Company

“Benchmarking is a strategic tool used by companies to compare themselves with their competitors, thus offering them information on the necessary changes that need to be made in order to become much more efficient” (Bordean, Pop, & Borza, 2015, par. 1). This quote says it is a strategic tool. In reality, there are a multitude of tools that are utilized and based on various sources they are called different things. After identifying them, exploring what they are, positive/negative aspects to each on, and also illustrate why it is even important to perform them.

        From a theoretical stand point, Benchmarking is identifying who is the best and using what data you can to enhance or improve your own company. This type of comparison will push companies who aren’t performing as best as they supposedly can to reevaluate finances, procedures, and management. Each year the companies can reevaluate based on this set standard and see how they compared to themselves last year and also their competitors. This sounds relatively simple in concept but by now you have learned that everything isn’t as perceived in the finance world. The items that are identified are “corporate functions, workflows, products, services, costs, resources or corporate structures” (Bordean, Pop, & Borza, 2015, par. 1). Each of these items could easily be moved into various different parts on a financial statement. A corporation could sell a bunch of products, alter services, and move around resources where they won’t be exactly or remotely identified the same way they were last year.

        The two methods outlined in the course material are Time Trend Analysis and Peer Group Analysis. We will first discuss Time Trend Analysis. As the name implies, it focuses on analysis of a particular company over a length of time. This method is known as internal benchmarking by various different resources because it compares the company against itself.  If the ratio of the firm declines over a length of time, it could be a sign the firm isn’t doing well. However, something that merits consideration is that even with this method there are ways the firm could have altered their finances, current assets, method of business, or even the business entirely. For example, a company that branches part of its services to another company or sells part of its company may show significant changes using this process.