Gap analysis is a tool that helps evaluate business strategies in terms of targets and goals. A key part of checking for the effectiveness of strategies is to ask what progress the company has made in comparison to what the strategies predict. Gap analysis lets you perform a systematic evaluation of company performance. It gives numeric results based on documented values and lets company management adjust strategic plans to fix the problems it finds.

Desired Position

Strategies detail the activities that the company has to carry out to reach its targets. Once a company implements a strategy, it moves from the position it occupied to a new, more desirable one, closer to the targets. With gap analysis, you start by checking whether the company met the specified targets. You identify the measurable quantities of the targets, verify the desired values and calculate to what extent the company reached them.

Actual Situation

Company strategies define the desired position that the company wants to occupy. Gap analysis identifies the company's actual position. You take the measurable quantities from the targets of the strategy and analyze the market to find out where the company stands. A marketing strategy typically specifies target sales levels in particular market segments. A competition strategy might specify the desired market share. For your gap analysis you have to determine the actual figures for target values.


Once you analyze the company's actual and desired positions, you need to calculate the differences between the actual and target values. These differences are the gaps. If the sales target was 10,000 units and the actual sales were 8,000, the gap is 2,000 units. For an actual market share of 60 percent with a target of 63 percent, there is a 3-percent gap. With gap analysis, you check the underlying strategic activities and market mechanisms to find the reasons for each gap.

Causes and Remedies

You may find that sales were down because of supply delays or that market share was down because a competitor reduced prices. Once you have identified the reasons for the gap, you can implement corrective actions. For supply delays, you have to investigate suppliers and internal bottlenecks to create an action plan that increases supply. For market share, you may decide to reduce prices to match the competition or increase promotion if the shortfall was not substantial.