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Chapter 6
The Voice of
the Market
Chapter Objectives
Discuss the different types of benchmarking.
Assess what type of benchmarking is most appropriate for a particular situation.
Compute single-, multi-, and total factor productivity.
Understand the ethical issues associated with benchmarking.
Copyright © 2017 Pearson Education, Inc.
6-2
Strategic Quality Planning Model
Copyright © 2017 Pearson Education, Inc.
Figure 6-1
6-3
Gaining Insights Through Benchmarking
Benchmark
An organization recognized for its exemplary operational performance
Initiator firm
Target firm
Benchmarking
The sharing of information between companies so that both can improve
Copyright © 2017 Pearson Education, Inc.
6-4
Gaining Insights Through Benchmarking
Benchmarking is good business because:
Openness provides an impetus to continual improvement.
Openness can create a competitive advantage through creating psychological barriers to competition.
Copyright © 2017 Pearson Education, Inc.
6-5
Gaining Insights Through Benchmarking
Process benchmarking
Financial benchmarking
Performance benchmarking
Product benchmarking
Strategic benchmarking
Functional benchmarking
Copyright © 2017 Pearson Education, Inc.
6-6
Purposes of Benchmarking
Learning from success
Borrowing ideas
Best-in-firm
Beating industry standards
Best-in-class
National leadership
Best-in-world
Copyright © 2017 Pearson Education, Inc.
6-7
Benchmarking Purpose and Quality Maturity
Copyright © 2017 Pearson Education, Inc.
Figure 6-2
6-8
Difficulties in Monitoring and Measuring Performance
Limitations of accounting systems
Variations in the ways companies compute the measures that affect the results
Focusing too much on results and not causes
Analyzing longitudinal data
Comparisons between U.S. firms and foreign companies
Copyright © 2017 Pearson Education, Inc.
6-9
Productivity Measures
Single-factor productivity = output/(a single input)
Multiple-factor productivity = output/(the sum of multiple inputs)
Total-factor productivity =
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