I was required to do this activity, albeit in a far more informal way, numerous times in the past. It often is used in conjunction with competitive analysis, but in my experience was often used alone.
Vorhies & Morgan (2005, 81) define benchmarking as “market-based learning process by which a firm seeks to identify best practices that produce superior results in other firms and to replicate these to enhance its own competitive advantage.” The purpose of benchmarking is to gather various types of business knowledge for the company doing the benchmarking. The objective of benchmarking is to apply the gained business knowledge in to business decision-making. By doing so the company can improve the business decision-making and thus improve the business performance of the company. Therefore, the competitive advantage of the company becomes stronger. (Prašnikar etc. 2005, 257-275.)
Vorhies & Morgan (2005, 81) also state that benchmarking has potential on becoming a vital learning tool for identifying, building and improving market abilities to deliver lasting competitive advantage for a company.