Question 1
Company ‘A’ has used performance benchmarking to compare its product ‘X’ with the competitor’s product ‘Y’ and found out that the product ‘X’ is priced slightly lower, but it also has fewer features than product ‘Y’. The company recognized that to win a larger market share and establish itself in the market, it has to increase the number of features in its product while keeping the price at the same level or even decreasing it.
To achieve this, the company ’A’ has set up a team that investigated the product ‘X’ value chain analysis. The team identified that the activities adding the most to the cost are marketing and purchasing parts in an open market. The team also identified that by buying standards parts in the market, the company has little room to introduce new features as this would require customized parts for its product ‘X’. The next step was to assign the proper metrics to market and purchasing activities and gather the required data. The company joined the benchmarking network and, in a few weeks, gathered enough data to compare the performance of its processes.
In view of the above scenario, critically discuss benchmarking as the mechanism of improving the quality and the standards of the product offering. Should one have to adopt any Benchmarking Strategies, what should be one’s approach in developing the Benchmarking Strategy that provides the impetus for quality enhancement? Use theory to enhance your research-based answer to the above practical case. While presenting you are expected to quote industry players that have engaged in the path to enhance your argument. (40)
Benchmarking is a powerful mechanism for improving the quality and standards of a product offering by comparing it with competitors' products or industry best practices. It allows companies to identify areas for improvement and learn from others who have already achieved superior results. In the case of Company 'A', benchmarking was used to identify the areas where their product 'X' lagged behind their competitor's product 'Y' and to create a strategy for improvement.
One important aspect of benchmarking is the identification of key performance metrics that are relevant to the product or process being benchmarked. In the case of Company 'A', they identified that marketing and purchasing activities were the ones adding the most cost to their product. By assigning proper metrics to these activities, they were able to gather data and compare their performance with industry standards.
In order to develop a benchmarking strategy that provides the impetus for quality enhancement, it is essential to follow a systematic approach. Firstly, the company needs to clearly define its objectives and identify the areas that need improvement. In the case of Company 'A', the objective was to increase the number of features in their product while keeping the price at the same level or even decreasing it.
Once the objectives are defined, the company should select the appropriate benchmarking method. There are several types of benchmarking including internal benchmarking, competitive benchmarking, functional benchmarking, and generic benchmarking. In this case, competitive benchmarking was used to compare Company 'A's product 'X' with the competitor's product 'Y'.
After selecting the benchmarking method, the company needs to gather the necessary data. Company 'A' joined a benchmarking network to gather the required data. Benchmarking networks are associations or groups of companies that share data and best practices to facilitate benchmarking. One example of such a network is the Automotive Industry Action Group (AIAG), which provides benchmarking services to companies in the automotive industry.
Once the data is collected, the company needs to analyze and interpret the results. This involves comparing their performance with industry standards or best practices and identifying gaps and areas for improvement. Company 'A' identified that by buying standardized parts in the market, they had little room to introduce new features. This shows that benchmarking can reveal specific areas where a company can focus its efforts for quality enhancement.
To enhance my argument, let's take the example of Tesla. Tesla Motors has been a pioneer in the electric vehicle industry and has consistently set high standards for product quality. A study conducted by J.D. Power in 2020 found that Tesla had the highest initial quality among all US automotive brands. This demonstrates the impact of benchmarking on quality enhancement, as Tesla has used benchmarking to identify and improve areas where their competitors were falling short.
In conclusion, benchmarking is a crucial mechanism for improving the quality and standards of a product offering. It allows companies to identify areas for improvement, learn from industry best practices, and ultimately enhance their product's value proposition. By following a systematic approach and selecting the appropriate benchmarking method, companies can gather data, compare their performance with industry standards, and develop a strategy for quality enhancement. Industry players like Tesla have successfully used benchmarking to achieve superior product quality, showcasing the effectiveness of this mechanism.