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A strategic gap is the difference between a company’s desired and actual performance, determined by a strategic gap analysis. It considers tangible and intangible factors and helps with budgeting and identifying underlying issues or positive factors for future growth.
A strategic gap is a term used to describe the difference between a company’s desired level of performance and the actual performance of the business since the last closed accounting period. Ideally, this type of gap is narrowed as much as possible and serves as an indication that the company is competently pursuing its goals and objectives as exemplified by the sales and profit margins generated in that recent period. When the company’s performance appraisal indicates that the strategic gap is widening rather than closing, steps are taken to reverse the situation and return the operation to a more desirable level of performance.
The strategic gap is determined based on the consideration of several factors. In addition to the amount of revenue generation actually achieved versus forecasts for revenue for that same period, the gap will also take into account intangible factors such as how well the company is moving towards certain internal goals or objectives or how well it is doing. living the overall operation to the company’s mission statement. This means that while a company may experience a slight decline in revenue, this may or may not be a sign that the strategic gap is widening, if the company’s current internal function is undergoing some sort of reorganization as a way to relate more closely to the corporate mission statement. In this type of situation, the expectation is normally that once the changes are implemented and have a chance to become a part of the company culture, revenues will increase once again.
Determining the current state of the gap usually involves conducting what is known as a strategic gap analysis. The assessment will look at a number of factors relating to the company’s objectives, particularly in terms of objectives relating to the management of tangible and intangible expenses, revenue generation and the general movement of the company towards achieving its stated objectives. Because goals and objectives will vary from one business to another, the actual criteria used to conduct a strategic gap analysis will be different for each company.
Understanding the current nature of the strategic gap is very helpful when it comes to budgeting for future periods, as the data gathered as part of the analysis can often provide the tools needed to accurately predict the company’s future prospects. In some cases, strategic gap assessment can lead to the discovery of underlying issues that could potentially generate a greater and more negative impact on the business in the future, giving owners and managers the ability to defuse those issues now and avoid losses later . At the same time, a strategic gap assessment can also identify certain factors that show promise for accelerating the company’s movement toward its goals, enabling the company to adopt new policies and procedures that make the most of these positive factors now rather than in the future. following.
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