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Gap Analysis – Definition

Gap Analysis Definition

Gap Analysis refers to the comparison between the actual and standard performance of an organization. It identifies if it is performing as per the expectations, and utilizing resources in an efficient manner.

A Little More on What is Gap Analysis

Gap Analysis gathers insights related to the present status of the company, and what it wants to achieve ahead. The gaps, identified during this process, are utilized to create a plan in order to keep organization moving forward. Also, this analysis will inform the company if it’s following the right path, or if it will achieve goals following that direction. It is not commonly used and execute because of its non-user-friendly nature. However, it is still used to ascertain exposure to various term structure activities.

Gap analysis involves a 4-step process that ultimately identifies the loopholes of the company, and tells which areas need special attention.

  • Define objectives clearly: The very first thing is to identify and define objectives clearly. Also, the company should ensure that they are specific, quantifiable, and can be achieved in a given time frame.
  • Benchmarking: Benchmarking is about determining and ascertaining the company’s existing performance in reference to the objectives set in the first step.
  • Analysis- After measuring the present performance, the next step is to do an analysis of the present performance, and find out the reasons why this performance is not able to meet the set standards.
  • Preparing Gap report: In the end, the gap report is formulated in order to analyze the measurable/quantifiable data gathered, and look into the qualitative causes for not attaining the set goals. Also, they create an action plan for accomplishing the set organizational objectives in future.

Gap Analysis in Asset Management

Gap analysis ascertains risks related to interest rates and liquidity of assets in asset management scenarios. However, the credit risks are excluded in asset-liability management. IRR method helps in ascertaining the discrepancies between rate-sensitive assets and liabilities for a given period of time. However, it is feasible only if the assets and liabilities constitute fixed cash flows, that turns out to be a loophole while using gap analysis. It is so because such analysis includes certainty and reliability which is not the case of cash flows.

Every company should follow gap analysis for its growth and success. For instance: In 2016, Minnesota’s Spring Valley collaborated with University of Minnesota for understanding the future needs of businesses. The university used gap analysis for letting domestic firms know if they should be borrowing from domestic banks or not. Because of this improvement in the operations of business, it further led to the improvement of domestic economy.

References for Gap Analysis

Academic Research on Gap Analysis

·       A gap analysis of professional service quality, Brown, S. W., & Swartz, T. A. (1989). The Journal of Marketing, 92-98.

·       Integrating energy efficiency performance in production management–gap analysis between industrial needs and scientific literature, Bunse, K., Vodicka, M., Schönsleben, P., Brülhart, M., & Ernst, F. O. (2011). Journal of Cleaner Production, 19(6-7), 667-679.

·       State government promotion of manufacturing exports: a gap analysis, Kotabe, M., & Czinkota, M. R. (1992). Journal of international business studies, 23(4), 637-658.

·       Gap analysis of college student satisfaction as a measure of professional service quality, Hampton, G. M. (1993). Journal of professional services marketing, 9(1), 115-128.

·       A gap analysis approach to marketing curriculum assessment: A study of skills and knowledge, Davis, R., Misra, S., & Van Auken, S. (2002). Journal of Marketing Education, 24(3), 218-224.

·       Towards total project quality: a gap analysis approach, Winch, G., Usmani, A., & Edkins, A. (1998). Construction Management & Economics, 16(2), 193-207.

·       Achieving service quality through gap analysis and a basic statistical approach, Headley, D. E., & Choi, B. (1992). Journal of Services Marketing, 6(1), 5-14.

·       Benchmarking and gap analysis: what is the next milestone?, Balm, G. J. (1996). Benchmarking for Quality Management & Technology, 3(4), 28-33.

·       A gap analysis model for improving airport service quality, Tsai, W. H., Hsu, W., & Chou, W. C. (2011). Total Quality Management & Business Excellence, 22(10), 1025-1040.

·       Competitive benchmarking of Korean luxury hotels using the analytic hierarchy process and competitive gap analysis, Min, H., & Min, H. (1996). Journal of Services Marketing, 10(3), 58-72.

·       Employees’ overestimation of functional and relational service quality: A gap analysis, Peiro, J. M., Martínez-Tur, V., & Ramos, J. (2005). Service Industries Journal, 25(6), 773-788.

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