Final answer:
Internal benchmarking allows a company to identify areas for improvement, enhance competitiveness, and is cost-effective. The main challenge of internal benchmarking is the lack of external perspective.
Step-by-step explanation:
Advantages of Conducting Internal Benchmarking
Internal benchmarking is a process in which a company compares its performance against its own past performance or against its competitors within the same organization. There are several advantages to conducting internal benchmarking:
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- Identify areas for improvement: Internal benchmarking allows a company to identify areas where it can improve its processes, performance, and efficiency. By comparing its own performance against previous years or other departments within the organization, a company can identify best practices and areas that need improvement.
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- Enhance competitiveness: By benchmarking against its own performance, a company can set targets and goals to improve its competitiveness. It can strive to surpass its previous records and achieve higher levels of performance.
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- Cost-effective: Internal benchmarking is often more cost-effective than external benchmarking because it utilizes existing resources and data within the organization. There is no need to spend money on acquiring external benchmarking data.
Main Challenge of Internal Benchmarking
Although internal benchmarking has its advantages, there is one main challenge or negative issue often linked to it:
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- Lack of external perspective: Internal benchmarking focuses on comparing performance within the same organization. This may limit the ability to gain insights from external sources and learn from industry-wide best practices. Without the external perspective, companies may miss out on innovative ideas and improvements that could be achieved through external benchmarking.