Question

Benchmarking:

a) Is inherently unethical if it involves companies that are direct competitors because it involves gathering competitively sensitive information about the operations and costs of rivals.

b) Is not a valid tool for measuring the cost-effectiveness of an activity unless it is restricted to companies in the same industry.

c) Entails comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs of these activities.

d) Loses much of its managerial usefulness if it is done with the aid of third-party organizations.

Answer 1

Benchmarking involves analyzing performance across companies to improve business processes and is not inherently unethical among competitors. Comparisons can be valid across industries and third-party involvement can provide valuable, objective insights.

Step-by-step explanation:

Benchmarking is a widely recognized management tool that involves comparing and analyzing the performance of various companies to identify best practices and improve business processes. Addressing the specifics:

• a) Inherently unethical: Benchmarking does not have to be inherently unethical even amongst competitors, as long as it is done within legal boundaries and without compromising competitively sensitive information. Strategies for ethical benchmarking include using publicly available data, mutual agreements for information sharing, or anonymized data provided by third parties.
• b) Validity across industries: It can indeed be valuable to compare processes with firms outside one's industry as this can bring in fresh perspectives and innovative practices.
• c) Comparing value chain activities: Benchmarking indeed involves making cross-company comparisons of the costs and effectiveness of different value chain activities to identify improvements and set performance targets.
• d) Third-party involvement: The use of third-party organizations in benchmarking can actually enhance its usefulness by providing objective, specialized expertise, and often, more reliable data.

Therefore, benchmarking can be a powerful tool for a company to measure and improve cost-effectiveness and efficiency in both competitive and non-competitive aspects of their business.