Gap analysis is the process that is used by a business to move from the present state to its desired future state for better future planning and an effective internal control system. GAP which is existed in business is determined with help of the need analysis and gap analysis. In GAP analysis, two states are compared to find the gap and also taking the necessary steps for the improvement of the business. An effective gap of any business is determined with help of listing all the present performance factors and all those factors which want to achieve in future for a successful and strong business. It has a vital role in entrepreneurship.
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Gap Analysis definitions
“Gap analysis is the comparison of actual performance level with desired performance”.
“A gap analysis is a process of determining the differences in performance factor of business such as information system, software application and infrastructure at which level business requirements are met, what steps a business should take for successful achievement of its desired goals”.
Example: The best example of GAP analysis is the transformation of the paper-based business system to a paperless salary system for employees.
How to do a Gap Analysis?
The first time gap in business for effective management and effective strategies planning was found by Donald Fisher and Fisher in 1969. They found GAP among different age people and children on the basis of their growth rate. Gap represented the space where we in our current state and where we want to go in the future state. GAP analysis is used as a measuring tool in any business which provides the basis for the measurement of time, money and human resources required for the achievement of desired business goals. The main purpose of gap analysis is to be applied in business for designing of effective policies, procedures and infrastructure for the achievement of successfully business goals. Gap analyses can be applied to any area of the business world such as;
- Finance performance Human resource management
- Productivity Quality assurance
- Cost control Employee satisfaction
What is the GAP Analysis?
Gap analysis process
The gap analysis process helps any business to identify successful steps that need to be taken to achieve the desired goals at the current state. In the GAP analysis process uses need to write all existing different analysis’s processes and its outcome and then all process results are compared with last year results and find a major gap that exists in business. After that business plan strategies and make new policies and procedures for the achievement of desired goals. Business wants to find total gap among sales of business in different years then business applies gap analysis techniques to find gap by comparing sales of two different states.
The gap analysis process helps any business to take necessary steps for improvement in current training programs rules & regulations, performance factors and policies. The gap analysis process is conducted into business on the base of two different levels such as strategic level and the operational levels which are future divided into four different levels such as,
Step 1: To identify GAP in the current position of the business. There are different types of GAPS that exist into business such as market segmentation gap, product gap, profit expectation and profit realization gap and customer interest gap.
Step 2: To find the point where want to be a business in the future. When the gaps are finding then the business should reduce all those factors which poor down the performance of the business. For example, if GAP exists in the market segment then a business should target all those market segment variables which reduce the profit of business and market share.
Step3: To highlight the GAP in business performance factors. When it is highlighted, factors are identified then the business should apply various strategies such as customer-focused strategies, product-focused strategies and operationally focused strategies for the cover GAP and increase the profit of the business.
Step4: To find solutions for reducing of the gap in business. Business uses various tools to an overcome gap in business such as pest analysis, swot analysis and assessment analysis.
Gap Analysis Tools
There are many tools that are applied to business to find the gap and overcome gaps that exist in the profit performance factors of the business. In Gap analysis, different tools are applied by business such as to documenting and improving the differences between current requirement and current capability. When gap analysis is understood then the business should be applied to the different tools to increase the performance.
In the spreadsheet, analysis business uses a computer spreadsheet for analyzing gap which exists in the financial results of the business. Spreadsheet analysis identifies the factors which affect business internal and control. For example, if business profits are too low, the business should put all the individual costs of production and the prices change of products into a spreadsheet.
In Fishbone analysis business should find GAP between production results. In this analysis, the business lists the six Ms such manpower, methods, metrics, machine, material and minutes.
McKinsey 7S Analysis
In Mckinney, 7s analysis business should be arranged the performance variables into 7s framework when a business does not obtain the expected result. The seven aspects McKinsey examines are strategy, structure, systems, shared values, skills, style and staff.
SWOT analysis is used as strong tools to identify the strength, weakness, threat and opportunities of the business. SWAT analysis the strong and most suitable tool to clarify the GAP between business performance factors and also provides suitable opportunities for the best achievement of desired future goals.
This tool is suitable to apply in business when the gap is related to infrastructure, strategies, procedures and policies. The use of this tool is suitable for the business to overcome errors and mistakes that exist in business basic performance documents.
The Methodology of Gap Analysis
Business applies gap analysis methodology to find the comparison between the present and current situation of the business. The businessman should identify the difference in structure for the importance scale and the satisfaction scale of the business. The importance scale goes from extremely high importance to no importance, whereas the satisfaction scale goes from “Very satisfied” to the polar opposite of “Very dissatisfied. The gap analysis methodology is suitable to highlight the best performance variables and reduced all those factors which reduce profit and market share of the business. There are two major methods that use by the business to overcome GAP between profits and performance.
In this method, business uses different charts and graphs to analyze the different business intervals survey results and current financial results of the business. Graphs allow businesses to arrange numerical data into bars, lines and circles. For example, a histogram arranges data into bars. This method is suitable to show the number of sales per month, by product and by price.
This method of gap analysis typically involves researching a situation to understand human behaviour. This method allows business to investigate why people do task a certain way and how decisions get made, instead of focusing on numerical data of the business, talk to people in interviews, focus groups and individual conversations.
Gap analysis techniques
Gap analysis techniques are used by the business to find the strong performance factors and effective capabilities of employees for the achievement of desired goals. A strong and durable business need to make continuous improvements. There are always opportunities to improve the business’s performance but businesses need to identify and act on them. The gap analysis technique can help the business to do this. The gap analysis technique is a set of techniques used to examine and describe the gap between current performances and desired future goals.