Final answer:
Benchmarking is the practice of measuring a company's performance against that of industry leaders to identify areas for improvement. It includes internal, competitive, and functional comparisons and helps companies understand their market position and establish goals for enhancement.
Step-by-step explanation:
Benchmarking is the process by which a company compares its performance with that of high-performing organizations. This involves looking at various metrics that reflect success in certain areas of business, such as productivity, quality, processes, customer service, and costs. Companies use benchmarking to gain insight into where they stand in relation to industry leaders and to develop strategies for improving their own performance. Benchmarking can be broken down into different types such as internal, where comparison is made within the same organization, competitive, which compares business processes and performance metrics to industry peers, and functional, which compares to organizations known for their excellence in a specific function. In doing so, companies can learn about best practices and set meaningful goals to enhance their competitiveness.