What is the purpose of benchmarking in a firm?

Benchmarking serves a critical role in assessing a firm's competitive positioning by evaluating its performance, processes, and strategies against those of industry leaders or direct competitors. The primary purpose of benchmarking is to identify gaps in performance, learn from best practices, and understand how a firm's advantages hold up in comparison to others in the market.

By focusing on the evaluation of sustainability of advantages against competitors, firms can gain insights into their competitive strengths and weaknesses, and determine whether their current strategies can be maintained over time. It enables organizations to verify whether the advantages they perceive in their offerings, operational efficiencies, or market position are indeed sustainable or if adaptations are necessary to keep pace with the competition.

This contrasts with analyzing market segmentation, enhancing advertising strategies, or forecasting financial performance, which are all important business functions, but they do not directly address the evaluation of competitive advantages and their longevity in the marketplace.