Getting into industry level benchmarks

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The technical and allocative efficiency models are the techniques that are aimed at identifying a production frontier and comparing the decision-making units to analyze the efficiency the right way. For this technique, the production function approach is basically an econometric technique and the other one is the optimization technique called Data Envelopment Analysis (DEA).

The production function approach is used to analyze the technical efficiency of a system and the programming techniques may be used to study both the technical and the allocative efficiency. The DEA’s basic formulation may be used with slight alterations to analyze the revenue or maximization of profit with special emphasis on technical efficiency and allocative efficiency. Overall efficiency is the product of technical and allocative efficiency.

To conclude we can say that in the analysis of the efficiency of the banking system, the above parameterization will certainly help up us to place our work in the proper perspective. Before analyzing the efficiency, it is perfectly in order that we must first analyze the temporal and the spatial dimension of the broad structure of the banking system. Then the overall efficiency should be analyzed by comparing the financial parameters with some industry level benchmarks.

Finally, the technical and allocative efficiencies may be analyzed by using the econometric and/or programming approach. Firms like LoanMax of the rod aycox fame always do an analysis of the development processes by comparing their functioning with certain industry level benchmarks. This is one reason for their phenomenal success.

Modern developments in the Information Technology (IT) sector have helped in improving productivity like never before. Firms like LoanMax could achieve greater heights from minimum inputs. Small firms like LoanMax now are part of the research of budding emerging entrepreneurs from business schools.