Benchmarking enhances creativity and promotes competition by improving on methods for becoming more profitable. It establishes a need for continuous improvement of goods and services. On the downside, benchmarking creates a narrowed focus by being subjective to only what can be improved compared to existing business strategies, thus limiting growth and new ideas.
Benchmarking raises a company's awareness about the areas of business which should be given special attention. It forces the business to be receptive to and adopt change. This process gives a broader perspective by exposing new ideas and different ways of working. Benchmarking sets standards for a business to evaluate its performance and create strategies aimed at enhancing competitiveness. This process identifies best practices in business processes and bridges the gap between the expected performance and the present state. This provides the organization with both the motivation to be better than others and a clear path to achieve the results.
By comparing a company with competitors, business decision makers get a true measure of their successes and failures. Benchmarking reduces research costs and expensive trials.
Benchmarking has limitations. A narrowed concentration on competitors leads a business away from developing based on its vision. By assuming that circumstances under which the competitors attained their successes are the same, benchmarking leads a business away from focusing on other issues in the market. Benchmarking exposes a business to stagnation once competitors' standards are surpassed.