What Is Gap Analysis?

Gap analysis is one of the strategic analysis methods. Compare the goals set by the company with the results that the company can expect, or compare the goals set by the company with the results that the company actually achieved, and analyze whether there is a gap between the two. If there is a gap, further analyze the cause of the gap and develop measures (such as changing goals, changing strategies, etc.) to reduce or eliminate the gap. ^[1]

Gap Analysis

Gap Analysis (also known as Gap Analysis)

There is often a gap between actual and expected business performance. Gap analysis is mainly to analyze the causes of gaps and propose ways to reduce or eliminate them. This can be achieved by changing goals or changing business layer strategies. The original predictions relied on four assumptions:

1. The company's business portfolio remains unchanged.

2. The competitive strategy to win in the company's products and markets will continue to develop as always.

3 Demand and profit opportunities for the company's market will develop along historical trends.

4 The company's own strategy for each business will develop along the historical evolution model.

The first step in the gap analysis is to consider modifying the company strategy. If the expected performance exceeds the target, the target can be set higher. When the target greatly exceeds the possible performance, it may be necessary to modify the target lower. After making these adjustments, if there is still a significant gap, new strategies need to be proposed to eliminate this gap.

With the introduction of alternative growth strategies for each business, managers may predict that sales will increase and they can estimate the market structure using the following indicators:

1. Industry market potential (1MP)

The difference between this sales and current sales indicates growth opportunities for each product. Related industry sales (RIS) equals the company's current sales plus the competitive gap, while actual market share (RMS) equals sales divided by related industry sales. The four factors that cause the gap between the company's potential sales and actual sales are as follows:

1. Product line gap. Bridging this gap requires perfecting the product line in terms of width or depth and introducing new or improved products. For example, the production capacity of the product line cannot meet the needs of the Beijing automobile market.

2. Distribution gap. This gap can be reduced by expanding distribution coverage, increasing distribution intensity and merchandise display.

3 Change gap. The customer's use of this strategy is to encourage people who have not used the product to try it out, and to encourage existing users to consume more products, and more buyers are considering buying cars from the 'Buick' company

4 Competition gap. This gap can be bridged by gaining additional market share from existing competitors and improving the company's position.

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