Benchmarking

Question 1

Rezillos

Answer 1

Summary: Benchmarking Methods and Divisional Benchmarking at Rezillos

(c) (i) Methods of Benchmarking

1. Internal Benchmarking:
   
   • Compares divisions within the same organization.
   • Advantages:
     
     • Detailed operational information.
     • Sharing of best practices among divisions.
     • Integration benefits within the larger company.
   • Disadvantages:
     
     • Non-financial data can be less reliable.
     • May ignore competitor performance and world-class standards.
2. External (Competitor) Benchmarking:
   
   • Compares the company with competitors.
   • Advantages:
     
     • Identifies areas where competitors have an edge.
     • Highlights areas for improvement within the same industry.
   • Disadvantages:
     
     • Difficult to obtain detailed operational information.
     • Competitors are unlikely to share detailed data.
     • Typically reveals strategic rather than operational improvements.
3. Functional Benchmarking:
   
   • Compares with world-class companies from other sectors.
   • Advantages:
     
     • Operational data sharing without confidentiality issues.
   • Disadvantages:
     
     • Translating lessons across industries can be challenging.
     • Different data collection systems may complicate comparisons.

Recommendation: Internal benchmarking is suitable for Rezillos’ current needs to harmonize and improve performance across divisions.

(c) (ii) Divisional Benchmarking Exercise

The benchmarking exercise for Beeland, Teeland, and Veeland includes metrics that reflect the company’s strategic goals. Key findings are:

• Growth Metrics:
  
  • Beeland operates in a high-growth market, using aggressive sales strategies.
  • Teeland is in a stable market with high new product adoption.
  • Veeland grows slower than its market, possibly due to higher margins and weaker sales efforts.
• Operational Metrics:
  
  • Inventory Days: Uniform across divisions, indicating successful integration of the new inventory management system.
  • Order Book Growth: Beeland’s frequent customer interactions correlate with high growth, suggesting potential benefits from adopting similar practices in other divisions.
  • Face-to-Face Customer Interactions: Reflects efforts in maintaining customer relationships, with Beeland leading significantly.
  • Revenue from New Products: Highest in Teeland, aligning with its developed market.
  • Incident Rates: Veeland shows significant safety improvements, suggesting successful practices that could be shared.
• Training and Development:
  
  • Teeland’s high training utilization correlates with its innovative market.
  • Veeland’s lower training score may explain its lower customer interaction and slower growth.

Conclusion:
- Internal benchmarking reveals strengths and areas for improvement within each division.
- Sharing best practices, especially in customer engagement and safety procedures, can drive overall performance improvements.
- Future benchmarking exercises should include changes in shareholder value or profit to better capture financial performance across divisions.