One way to judge the performance of a company is to compare it with

We need to find and eliminate the four answer choices that are VALID reasons "for benchmarking the performance of a company against companies with which it is not in competition rather that against competitors." Before diving into the answer choices, let's make sure we are clear about the given information:

• "Benchmarking" is a way to judge the performance of a company by comparing it with other companies.
• Notice the word "One" in the first sentence; benchmarking is just ONE way to judge the performance of a company. Benchmarking is not the ONLY way to judge the performance of a company.
• Benchmarking permits the manager of a company to discover better industrial practices.
• Benchmarking can provide a justification for the adoption of good practices.

From the question stem, we can infer that there are valid reasons for benchmarking the performance of a company against its competitors, but what might be a valid reason for benchmarking the performance of a company against noncompetitors rather than against competitors? Any valid for reason for doing so must be eliminated:


This suggests that benchmarking against competitors probably will not help a company discover better industrial practices. If such an analysis only reveals practices that the company already employs, what's the point? Choice (A) seems to suggest that benchmarking against noncompetitors, on the other hand, might focus on practices that managers don't already employ and thus be more useful.

You might be thinking, "Well, we can't say for sure that benchmarking against noncompetitors doesn't have the same disadvantage." That might be true, but at the very least choice (A) gives us no reason to believe that benchmarking against noncompetitors has the same disadvantage. In that case, choice (A) is neutral towards benchmarking against noncompetitors and negative towards benchmarking against competitors. This is a valid reason for benchmarking against noncompetitors instead of competitors, so (A) should be eliminated.


We know that benchmarking permits the manager of a company to discover better industrial practices. But what if competitors are intent on hiding such industrial practices from its competitors? In that case, it might be difficult to discover better industrial practices from competitors. If it's easier to get "inside" information about the unique practices of noncompetitors, then it would be easier to discover better industrial practices from those companies. (B) is a valid reason for benchmarking against noncompetitors instead of competitors, so it should be eliminated.


If companies that compete with each other are likely to have comparable levels of efficiency, it is unlikely that studying the practices of a competitor would help make your company any more efficient than your competitors. In other words, at best, you might end up learning some new practices that make your company about as efficient as it was to begin with. Studying noncompetitors, on the other hand, is likely to reveal practices that would aid in beating competitors. This is clearly a valid reason for benchmarking against noncompetitors instead of competitors, so choice (C) can be eliminated.


Let's say your company benchmarks against its competitors (within the same industry) and discovers some new practices that might be useful to adopt. However, if the managers at your company are not very receptive to those ideas and are unwilling to implement them, then the analysis would be of little value. Choice (D) tells us that managers are generally more receptive to new ideas from outside their own industry and thus more likely to adopt practices discovered from noncompetitors. This is a valid reason for benchmarking against noncompetitors instead of competitors, so (D) should be eliminated.


Consider the special circumstances of a company's products or markets. Competitors will likely have some of the same circumstances. Since noncompetitors will likely not have those same circumstances, benchmarking against noncompetitors probably won't help the company discover practices that take advantage of those special circumstances. Because choice (E) describes a disadvantage of benchmarking against noncompetitors, it should not be eliminated.

Choice (E) is the best answer.