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# QOTD: One way to judge the performance of a company

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MBA Section Director
Joined: 19 Mar 2012
Posts: 5180
Location: India
GMAT 1: 760 Q50 V42
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WE: Marketing (Non-Profit and Government)
QOTD: One way to judge the performance of a company [#permalink]

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17 Oct 2017, 12:04
2
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45% (medium)

Question Stats:

66% (01:27) correct 34% (01:37) wrong based on 310 sessions

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Verbal Question of The Day: Day 127: Sentence Correction

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One way to judge the performance of a company is to compare it with other companies. This technique, commonly called "benchmarking", permits the manager of a company to discover better industrial practices and can provide a justification for the adoption of good practices.

Any of the following, if true, is a valid reason for benchmarking the performance of a company against companies with which it is not in competition rather that against competitors EXCEPT:

(A) Comparisons with competitors are most likely to focus on practices that the manager making the comparisions already employs
(B) Getting "inside" information about the unique practices of competitors is particularly difficult
(C) Since companies that compete with each other are likely to have comparable levels of efficiency, only benchmarking against noncompetitors is likely to reveal practices that would aid in beating competitors
(D) Managers are generally more receptive to new ideas that they find outside their own industry
(E) Much of the success of good companies is due to their adoption of practices that take advantage of the special circumstances of their products of markets

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Re: QOTD: One way to judge the performance of a company [#permalink]

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17 Oct 2017, 12:09
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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:

Quote:
(A) Comparisons with competitors are most likely to focus on practices that the manager making the comparisons already employs

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.

Quote:
(B) Getting "inside" information about the unique practices of competitors is particularly difficult

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.

Quote:
(C) Since companies that compete with each other are likely to have comparable levels of efficiency, only benchmarking against noncompetitors is likely to reveal practices that would aid in beating competitors

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.

Quote:
(D) Managers are generally more receptive to new ideas that they find outside their own industry

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.

Quote:
(E) Much of the success of good companies is due to their adoption of practices that take advantage of the special circumstances of their products or markets

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.
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Joined: 28 Mar 2017
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Re: QOTD: One way to judge the performance of a company [#permalink]

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17 Oct 2017, 21:45
One way to judge the performance of a company is to compare it with other companies. This technique, commonly called "benchmarking", permits the manager of a company to discover better industrial practices and can provide a justification for the adoption of good practices.

Any of the following, if true, is a valid reason for benchmarking the performance of a company against companies with which it is not in competition rather that against competitors EXCEPT:

(A) Comparisons with competitors are most likely to fous on practices that the manager making the comparisions already employs -This is a valid reason for comparisons with non-competitors.
(B) Getting "inside" information about the unique practices of competitors is particularly difficult -This is a valid reason for comparisons with non-competitors because if the information regarding processes of competitors is not available then it makes sense to compare the processes with those of non-competitors.
(C) Since companies that compete with each other are likely to have cpmparable levels of efficiency, only benchmarking against noncompetitors is likely to reveal practices that would aid in beating competitors -This is a valid reason for comparisons with non-competitors.
(D) Managers are generally more receptive to new ideas that they find outside their own industry -This is a valid reason for comparisons with non-competitors.
(E) Much of the success of good companies is due to their adoption of practices that take advantage of the special circumstances of their products of markets -Correct. This option is talking about the internal processes and product line. Irrelevant.
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Re: QOTD: One way to judge the performance of a company [#permalink]

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18 Oct 2017, 06:10
The answer must be option E. My take :

The premise says that benchmarking permits managers to discover best practices and provides justification for adoption of best practices. The question stem is an "except type" one.

Pre-think - We need to identify options that do not justify benchmarking with non competitors over competitors.

POE:

Option A - Justifies as to why benchmarking must be done with respect to non-competitors
Option B - Insinuates that benchmarking be dobe w.r.t non-competitors
Option C - -do-
Option D - -do-
Option E - Does not justify. I.e after reading this option we can not conclude that benchmarking with non-competitors is better.

Hence option E.
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Re: QOTD: One way to judge the performance of a company   [#permalink] 18 Oct 2017, 06:10
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