CS Professional · Strategic Management and Corporate Finance · Managing the Multi-Business Firm and Analyzing Strategic Edge
A Pune-based auto-component maker compares its order-to-delivery cycle time, defect rate and cost per unit with those of the best-performing firm in its industry and then redesigns its processes to close the gaps. Which strategic tool is it using?
The firm is using competitive benchmarking. It measures its cycle time, defect rate and unit cost against the best performer in the industry and then redesigns processes to close the gaps, which is the essence of benchmarking as a strategic improvement tool.
- ACompetitive benchmarkingCorrect
- BDivestment
- CBackward integration
- DCapital rationing
Explanation
Benchmarking means measuring a firm's processes, costs and performance against the best in the industry and acting to close the gaps. The firm compares its own metrics with the industry leader, so it is competitive benchmarking. The other options are a restructuring move, a value-chain move and a budgeting concept.
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