What method is used to compare a business's performance against its competitors within the same industry?

The method used to compare a business's performance against its competitors within the same industry is benchmarking. Benchmarking involves identifying key performance indicators (KPIs) and comparing them with similar metrics from other organizations, specifically competitors. This process helps businesses assess where they stand in relation to others in their industry, allowing them to identify best practices, understand competitive advantages, and recognize areas that may require improvement.

Such analysis is critical for strategic planning and performance improvement, as it provides a realistic view of how a company is performing compared to its peers. This comparison can encompass various aspects, including financial performance, operational efficiency, customer service, and more—enabling companies to set realistic goals and optimize their performance based on industry standards.

While ratio analysis is a valuable tool for examining a company's financial health by evaluating various financial ratios, it does not specifically compare performance directly against competitors in the industry. Trend analysis focuses on identifying patterns over time within a single entity rather than comparing entities. Cost-benefit analysis is primarily used to evaluate the economic feasibility of a project or decision by comparing costs against benefits, rather than comparing performance across competing businesses.