Benchmarking

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Feb 20, 2024

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Benchmarking Valeria Johnson Liberty University

Abstract Many organizations are often under pressure to improve performance at the same time control expenditure growth.

Benchmark Benchmarking is a continuous improvement method in which a business, after determining its critical success factors will identify other companies’ best practices used to achieve the same critical success factors and, in turn, implement those processes in order to improve their competitive advantage (Blocher, Stout, & Juras, 2016). Through the practice of benchmarking world-class businesses, employees are exposed to new approaches, systems, and procedures, and will likely improve costs, quality, delivery, and customer service through the process (Meybodi, 2015). One company that could benefit from this contemporary management technique is Macy’s. This major retailer has suffered from several financial setbacks in recent years, closing many of its department stores across the United States due to staggering sales (McKerrow, 2016). With the increase of competition brought on by e-commerce, Macy’s would benefit from benchmarking other popular brick and mortar department stores that shown continued success in today’s commercial environment. One such example is Nordstrom. Macy’s current business strategy is to make exclusive arrangements with suppliers order to maintain their profit margins. Their preferred vendors are those that can provide unique merchandise that other retailer cannot (Doty, 2015). One method used to achieve this was through the promotion of celebrity brands such as Martha Stewart and Jessica Simpson. While brand identification is often an effective strategy, it continues to pale in comparison to the success of Nordstrom. The latter continues to be an industry leader through the ability to serve two separate markets – those seeking high-end products and those seeking to pay discounted prices – with the offering of the original Nordstrom department store as well as Nordstrom Rack. Macy’s has recently joined the outlet market with its unveiling of Macy’s Backstage, a

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store providing last season’s goods at bargain prices (Volker, 2015). This will increase the store’s accessible demographic by increasing its range of customers. Another area in which benchmarking is Nordstrom would be inventory management. Studies have shown that, even during economic downturns, even luxury department stores can maintain a profit if they maintain strong inventory management practices (Mhatre, Joo, & Lee, 2014). One risk for department store retailers is balancing the desire to provide customers with a wide selection of product while minimizing inventory costs such as inventory carrying costs, shipping and material handling costs, and presentation costs (Smith & Agrawal, 2000). Mimicking inventory best practices from other successful department stores should help Macy’s increase their competitive advantage within the industry by reducing the company’s inventory costs. Additionally, offering the aforementioned Macy’s Backstage could help reduce financial risks related to excess and obsolete inventory by offering older product at a reduced price. Benchmarking has many advantages in identifying a firm’s critical success factors because it studies the best practices of other firms (Blocher, Stout, Juras, & Cokins, 2016). This is important because clearly defined success factors are paramount to achieving revenue growth in a declining brick and mortar type setting. Macy’s is unique in that it also has brand recognition which could be leverage in a more focused online presence. This could lead to benchmarking ambiguity on Macy’s behalf however the most potential for growth will come from this platform. Benchmarking ambiguity is best defined as “… ‘Ambiguity’ refers here to a (perceived) lack of under- standing of means-ends relationships” (Strang & Still, 2006). Benchmarking ambiguity derives from the unknown for Macy’s expanding to the online marketplace and competing with larger retailers such as Amazon, moreover Macy’s is a niche department store with a much

defined clientele. A study performed by David Strang and Mary C Still (2006), analyzes the drawbacks to benchmarking ambiguity and how it effects branding imitations confusion. This study reflects that when businesses seek to benchmark ambiguity “arguments can be made that causal ambiguity promotes imitation and that it hinders imitation” (Strang and Still, 2006). The takeaway is that while benchmarking is a strategy by which Macy’s can establish good business practices, this can also lead to ambiguity and confusion of the image that is being portrayed and therefore diminish the brand.

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