<< Watch More: Why Profitable Growth Matters – Part 3
<< Watch More: Competing Forces: Profitability And Growth – Part 2
<< Watch More: World Class Benchmarking Is Simple, Focused, And Team Building – Part 1
Video Length: 00:16:39
How to compare
Benefits of comparing to nearest competitor
Weaknesses of comparing to nearest competitor
If that competitor is performing poorly, then beating them may not be a strong measure of success. Your future competition could come from many other companies. Focusing only on beating your nearest competitor may get management team overly focused and then miss opportunities and miss the new competitors approaching.
Comparing brands (Apple Macbook to Dell XPS) is sometimes a very close comparison. But comparing brands is not the same as comparing companies, with brands we rarely have financial disclosure.
Comparing against a direct competitor, such as Coke vs. Pepsi, may not be as simple as it seems. PepsiCo’s snack foods division accounts for more than 50% of its revenue, while Coca-Cola’s revenue comes almost all from beverages. You could try to breakout PepsiCo’s beverage division and compare that to Coca-Cola’s. However, most companies try to reveal the minimum of financial details amount about divisions so getting this data may be hard.
In conclusion, the direct comparison method sounds good, and sometimes works, but in practice there are many flaws. After years as an analyst doing directly comparison my answer is… “There is no perfectly comparable company.”
