What is a Gap Analysis?

Definition: Gap analysis is an assessment tool that measures the difference between the current result and the expected result. It is an diagnostic tool that identifies the current requirements to achieve the goal.

What Does Gap Analysis Mean?

These analyses are often employed as a performance assessment tool that helps an organization, or even an individual, to identify what steps need to be taken in order to achieve the expected result. To create a gap analysis a goal must be set first. This goal will establish the target to where all efforts should be directed. Then, the analyst can estimate the current stage, by analyzing present results. This can be illustrated graphically or numerically, but the goal can be qualitative.

This means that, the goal can be measured in numbers but the goal itself might be qualitative. After identifying the size of the gap, strategies should be suggested to reduce the gap. These strategies must have an impact on current results, to bring the current result’s line closer to the expected result line. These analyses are applicable to all kinds of organizations and they are widely useful for all the different areas and departments, since all of them have goals and expected results to be achieved.

Example

Laser Printers LLC is a company that manufactures and sells printers for home and office uses. The company is currently analyzing the markets it serves to determine how big its market shares are on each. For the purpose of this analysis, they divided the market in two: domestic market and office market. After performing the proper calculations, the Marketing Department informed the company’s Board that the market share they currently had in the domestic market was 7.5. On the other hand, the company’s market share on the office market is 16%. Five years ago, the company set a goal for each market.

For the domestic one, they aimed to achieve 10% by now and for the office market they set a goal of 15%. This recent report showed that the goal set for the office market was achieved and surpassed; but the domestic market is still underperforming.

The analysts created a gap analysis to explain and address this remaining gap of 2.5%. Two key elements were identified that must be addressed to achieve the goal. First, the company must increase its advertising efforts in some of its key markets and second of all, the company must create a brand for low-income individuals. These strategies will reduce the gap until the 10% goal is reached.