Benchmarking for investment decisions: a case of food production

Wine business performance benchmarking: a comparison of German and Ukrainian wineries

Purpose

The purpose of this paper is to evaluate and compare the efficiency of wine making in Germany and Ukraine in order to find the controllable factors of wine business performance using benchmarking tools.

Design/methodology/approach

The models of data envelopment analysis and other benchmarking tools are used to analyse the efficiency of wineries in two countries. Returns to scale, scale efficiency, super-efficiency and some other indicators are examined. The research is based on the sample of 36 German and Ukrainian wineries.

Findings

The hypothesis of higher wine making relative efficiency in Germany was compared with Ukrainian wine making, then analytically and statistically verified. A relatively high average scale efficiency score indicates good potential (above 30 per cent) for efficiency growth, due to the optimisation of a scale of production and sales. Generally, wine making in Germany and Ukraine has increasing returns to scale. The high-efficient wine business cannot bring great losses. It was found that the most efficient combinations of size and legal form of business organisation for wine business are presented in Germany.

Research limitations/implications

The research is limited by a single industry of only the two countries.

Practical implications

This study provides useful information for researchers, investors and policy makers, enabling them to understand the current state, basic problems, controllable factors and efficiency levels of wine making in Germany and Ukraine. It may be useful to wine producers in these countries for improving their business performance.

Originality/value

This is the first paper that compares wine business performance and discloses its factors for Germany and Ukraine.

International performance benchmarking in winemaking

Purpose

The purpose of this paper is to study winemaking efficiency with the help of international performance benchmarking and to finding ways for its improvement.

Design/methodology/approach

In this research, three models of data envelopment analysis (DEA) and other tools of international performance benchmarking are used to analyse the efficiency of wine companies. Return to scale (RTS) and scale efficiency, labour and capital productivity and some other indicators are examined. The research is based on a sample of 36 wine companies from 15 countries.

Findings

International benchmarking expands performance improvement for domestic companies. The most efficient wine companies are originated from Germany, USA and New Zeeland. Scale inefficiency and increasing RTS for most of the wine companies was identified. Only three wine companies have decreasing RTS (those from UK, Australia and France). To increase relative efficiency, these companies need to reduce the output and sales as their costs are growing faster than the revenues. A huge potential for cost reduction and efficiency growth within Ukrainian wine companies was revealed.

Research limitations/implications

The research is limited to a single industry. This is explained by the requirement of technology (product, service) homogeneity while using DEA tools.

Practical implications

Study results include the data and recommendations to develop winemaking. These results can be used by wine companies’ management, present and potential investors and proprietors, regulative public authority, e.g. to improve efficiency in winemaking.

Originality/value

This is the first paper that adapts various DEA models to measure efficiency in the wine industry of Ukraine and the tools of international performance benchmarking for wine companies around the world.

Efficiency ranking method using DEA and TOPSIS (ERM-DT): case of an Indian bank

Purpose

– The purpose of this paper is to present a tie-breaking procedure for computing performance efficiencies to improve benchmarking and performance evaluation process in a business situation.

Design/methodology/approach

– The authors propose a unified approach based on data envelopment analysis (DEA) and technique for order of preference by similarity to ideal solution (TOPSIS), to overcome the difficulty of unique ranking in the prevalent benchmarking and performance evaluation processes such as DEA, Super efficiency DEA model, etc., under constant return to scale (CRS) assumption. This model is called as efficiency ranking method using DEA and TOPSIS (ERM-DT). In order to check the consistency of the approach, various input-output combinations (to calculate the efficiencies) have been illustrated. Further, the authors present a case of an Indian Bank to illustrate an application of the proposed approach.

Findings

– The proposed approach, ERM-DT enables assign a unique rank to decision making units and provides a tie breaking procedure. Results obtained using the proposed approach are statistically compared with those obtained from the CRS DEA approach and super efficiency DEA approach using Friedman’s test.

Practical implications

– The proposed model provides an efficiency ranking method based on a score obtained by considering the minimum distance from the best value and maximum distance from the worst value. The proposed methodology is capable of handling negative data and undesirable output variables. This approach is unit invariant and makes the calculations simple. The authors present an application to compute the efficiency of various branches of an Indian bank. The authors hope the proposed method can enhance the decision-making ability of the management in complex situations.

Originality/value

– The authors propose an integrated DEA and TOPSIS framework for better benchmarking and performance evaluation. This approach provides a tie-breaking procedure for the efficiencies computed using CRS DEA approach. Ranks are assigned based on score obtained by considering the distance from the worst and the best solution. The proposed approach can be used with non-positive data points and undesirable output variables.

Consistency of strategic and tactical benchmarking performance measures

Purpose

– The purpose of this paper is to examine the consistency of benchmarking performance measures and to investigate the impact of organizational size and managerial positions on the deployment of strategic and tactical benchmarking performance measures.

Design/methodology/approach

– A set of eight hypotheses was used to examine the consistency of the benchmarking performance measures and the impact of organizational size and managerial positions on selection of strategic and tactical benchmarking performance measures. A questionnaire-based survey data were used to test the hypotheses. The target population was manufacturing firms in Midwestern USA; the sample covers organizations in a variety of industries. Out of 91 completed surveys received, 84 surveys were usable resulting in a response rate of 17 percent.

Findings

– The paper found evidence of misalignment between organizational goals and objectives and proactive development of organizational core capabilities. The result also indicates that managers with high-level positions as well as managers from large organizations placed higher emphasis on strategic benchmarking performance measures.

Research limitations/implications

– Research is general and not industry specific.

Practical implications

– Effective performance measurement is a critical element of organizational success. It requires a thorough understanding of organizational strategy and deployment of the strategy into consistent sub-strategies.

Originality/value

– For effective benchmarking, managers must develop a complete understanding of their own business strategy and choose long-term and short-term benchmarking performance measures that are consistent with organizational strategy.

The links between just-in-time practices and alignment of benchmarking performance measures

Purpose

– The purpose of this paper is to examine if there are links between just-in-time (JIT) practices and consistency of benchmarking performance measures at various levels of organization.

Design/methodology/approach

– A set of ten hypotheses were used to examine the differences between traditional and JIT organizations in the effectiveness of benchmarking performance measures. A questionnaire-based survey data were used to test the hypotheses. The target population was manufacturing firms in Midwestern US; the sample covers organizations in a variety of industries. Out of 91 completed surveys received, 84 surveys were usable resulting in a response rate of 17 per cent. Out of 84 usable surveys, 33 organizations were grouped as JIT and 51 as traditional organizations.

Findings

– JIT organizations are better in recognizing external environmental factors, developing organizational core competencies, building learning organization through knowledge workforce, and using a broad and balanced mix of performance measures that are consistent with organizational strategy.

Research limitations/implications

– Research is general and not industry specific.

Practical implications

– Effective performance measurement is a critical element of organizational success. It requires a thorough understanding of organizational strategy and deployment of the strategy into consistent sub-strategies and action plans.

Originality/value

– The benefits of JIT principles go beyond inventory management. These principles can be applied to other areas such as effective performance measurement.

Benchmarking the performance of department stores within an income elasticity of demand perspective

Purpose

– The purposes of this study are twofold: first, the authors attempt to confirm the effect of the income elasticity of demand in the retail industry by investigating the performance of department stores; second, the authors measure and benchmark the performance of individual department stores in order to develop strategic insights.

Design/methodology/approach

– The authors employ data envelopment analysis for measuring and benchmarking the relative performance of department stores by using pertinent variables collected over a five-year period – 2006-2010.

Findings

– The results confirmed that the luxury department stores were more sensitive to an economic cycle, and all department stores in this study demonstrated higher performance in recent years, except for one discount department store that showed consistently deteriorating performance over the observation period.

Research limitations/implications

– The limitations of this study include the use of financial data from companies' annual reports, along with the limited number of decision-making units and variables.

Originality/value

– Major contributions of this study include the confirmation of the effect of the income elasticity of demand in the retail industry in general and suggested strategic implications for specific department stores, which are not found in the current literature at the time of this study.