As a business owner, you already have some possible solutions in mind. However, before you choose the best solution, you need to identify what needs to be done to meet this objective.
This is where Gap Analysis is very useful. This simple tool helps you identify the gap between your current situation and the future state that you want to reach, along with the tasks that you need to complete to close this gap etc
- Gap analysis is used to identify strategic and operational gaps in performance
- It analyses the gap between the current capabilities of your company and its future development
- ’’What are we doing today and how will this lead us to our next goal?’’
Gap analysis is a standard tool in strategic planning that is tailored towards:
- Product/market matrix
- Strategic management
- Portfolio analysis
- Added value etc
Strategic and Operational gap
Strategic gap i.e the difference between a company’s profit objectives for a given future period and its projected level of profit for the same period.
Different between strategic and operational gap
“Operational” is something that helps things to work smoothly today, and requires constant attention, while. “Strategic” is something from the world of top managers, defined for a longer-term, often less tangible, but still very important
- deviation from the potential core business value
- (= development limit)
- Is bridged by additional strategic measures such as the development of new products/market combinations
- distinguishing between the performance and competitive gaps
- both work together to make up the operational gap; the level reached would be the potential core business(the actual value is the core business)
- Is bridged by utilizing all resources (optimizing existing core business)
Performance gap and Competitive gap as part of Operational gap
- Performance gap: as part of the operational gap can be bridged by a realistic view of all rationalization potential is subjected to an analysis of generated income by revenue
- Competitive gap: as part of the operational gap is bridged by exhausting every resource (beyond the rationalization potential)
Advantages and Disadvantages of Gap analysis
- shows the first rough analysis of strategic and operational gaps
- the basis for further detailed analysis procedures
- early warning system
- no assessment function
- doesn’t include any recommended next steps
- exact values aren’t determined
- no consideration of environmental dynamics
- misunderstandings or misinterpretations
A gap analysis is the process companies use to compare their current performance with their desired, expected performance. This analysis is used to determine whether a company is meeting expectations and using its resources effectively.
What are the different types of Gap analysis?
- Performance (or strategy) gap: Actual versus expected performance.
- Product (or market) gap: Actual versus budgeted sales.
- Profit gap: Actual versus target profit.
- Manpower gap: Actual number and quantified performance of workforce versus that which is required.
- Identify the area to be analyzed and identify the goals to be accomplished. …
- Establish the ideal future state.
- Analyze the current state.
- Compare the current state with the ideal state.
- Describe the gap and quantify the difference.
Eight Steps of Gap analysis that can be applicable in an organization.
- REVIEW: Create a coordinate system
- TARGET DEFINITION: List strategic objectives at any given time and the way to get there
- PRESENT STATE: Extrapolate the current state
- DEVELOPMENT: Present the development by using operational actions
- OPERATIONAL GAP: Determine the operational gap
- STRATEGIC GAP: Determine the strategic gap
- ACTIONS: Develop strategic measures for bridging the strategic gap
- REVIEW SYSTEM: Review operational and strategic actions regularly.
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