Benchmarking

The principles of benchmarking

If a company is facing serious problems in the Chinese market, very often benchmarking is an excellent method to help find out what the right measurements for improvement are.

Benchmarking compares the products, processes and performance of a company to those of other companies facing similar conditions. The aim of benchmarking is to learn from the best practices of other companies.

Benchmarking is a process of assessment of products, services and processes in comparison with the strongest competitors facing a similar situation to the company wanting to execute the benchmarking study.

The 7 main steps of a benchmarking study are:

1. Determining which functions to benchmark,
2. Identifying the key performance variables to measure (critical success factors) for the China business,
3. Identifying leading companies in those fields, assessing and comparing their performance,
4. Identifying reasons for performance differences,
5. Measuring the company’s own performance,
6. Specifying programs and actions to close the gap, and
7. Implementing and monitoring results.

Please note:

• Benchmarking can be done without resorting to industrial espionage;
• discovering trade secrets is not what your company needs in order to compete successfully;
• you need tactical and strategic intelligence which can be developed from information sources around your competitors.

An example of a benchmarking study

The benchmarking study regarding the improvement of a company’s distribution system would be devised into three phases, taking the following structure:

Phase 1:

Initial screening of the company’s present distribution system.

• current import channel
• current distribution structure
• agents/middlemen roles and costs
• evaluation of the agents
• agents mark up
• method of promotion
• after sales service
  

Phase 2

Analysing and evaluation different methods of distribution employed by companies, who are similar to the company

• Identification of success factors for a successful distribution structure in China.
• Analysis of the distribution structure of companies which are facing a similar situation
  • import channel,
  • distribution structure (organisational structure, procedures, number and location of offices etc.),
  • costs of own distribution structure,
  • method of promotion,
  • after sales service,
  • performance assessment.
• A comparison of the different distribution methods, highlighting the pros and cons of each.
  

Phase 3

Development of a distribution strategy based on the result in Phase 2.

Based on the results of phases 1 and 2 a tailor-made and effective distribution system would be developed and implemented. This would also entail an evaluation of the estimated cost, that a new distribution system, if required, would cost.

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