gap, etop analyses, bsc

7/31/2019 Gap, ETOP Analyses, BSC

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Gap Analysis

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Gap Analysis

Objective or Target

Sales

Time

UnchangedStrategy

The Gap

Aspiration

Achievement

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Gap Analysis

Gap Analysis is a tool that compares actual performance

with potential performance.

It identifies gaps between the optimized allocation and

integration of the of the resources and the current level of

allocation. Gap analysis flows from bench marking companys current

level of performance against industry performance.

Gap analysis is performed at three levels:

Business processes

Business direction

Organization (Human Resources)

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Gap Analysis Market Gap

Example: Marketing Gap Analysis

Data required for this calculation is

Market potential: Maximum number of consumers

available for the product, obtained usually fromdemographic data and government statistics.

Existing usage: Total cumulative market share

obtained from panel data collected by third parties

like AC Nielsen. Market Gap = Market Potential Existing Usage

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Gap Analysis Product Gap

Product Gap

Exists because of poor positioning or drift

This gap is calculated by comparing segment size andcompanys share in that segment.

Gap is analyzed and decisions on reposition is made.

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Gap Analysis Service Gap

Service Gap

Service Quality Gap: Difference between serviceexpected versus service received by customers.

Management Understanding Gap: The difference

between actual service expected by customers and

management perception of the requirement.

Service Design Gap: The difference between

management perception and process capability to

provide service.

Service Delivery Gap: The difference between the

standard established and actual service delivered.

Communication Gap: The gap between what promise

is communicated to the customer to what is actually

delivered. 6


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Gap Analysis Tools

Focus Group Interviews.

Questionnaire Surveys.

Statistical Analysis.

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ETOP

Environmental Threat and Opportunity Profile

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Environment analysis results in a mass of information related

to forces in the environment.

They deal with events, trends, issues and expectations.

Structuring of environmental issues is necessary to make

them meaning full for strategy formulation.

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Sources of Information

Primary Sources: Internal analysis departments, paid surveys,

employees.

Secondary Sources(Documentary): Government bulletins,

Industry Associations, Banks etc.

Mass Media: TV, Newspaper etc.

External Agencies: Third party consultants

Formal Studies: Directly appointing an agency to collect data.

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ETOP(Environmental Threat and Opportunity Profile) is a

technique to structure environmental issues. ETOP involves:

Dividing the environment into different sectors. Each

sectors can be subdivided into sub sectors. Analyzing the impact of each sector and subsector on the

organization.

Describe the impact in the form of a statement.

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Advantage of ETOP

1. It provides a clear of which sector and sub sectors have

favorable impact on the organization. It helps interpret the

result of environment analysis.2. The organization can assess its competitive position.

3. Appropriate strategies can be formulated to take

advantage of opportunities and counter the threat.

4. SWOT analysis (Strategic weakness, opportunities and

threats.)

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ETOP Example for a Motor Cycle Co.

Environmental Sectors Impact of each sector

Social Customer prefers 2 wheeler to public Transport

Political No Significant change

Economic Growing affluence of urban consumer. Export potential

Regulatory 2-Wheeler industry a thrust area for exports

Market Industry growing at 7 to 8%

Supplier Mostly ancillaries, Availability is increasing

Technological Industry is upgrading technology

Up indicate favorable , down unfavorable & Flat arrows indicate neutral impact.

The preparation of an ETOP provides a clear picture to the organization to know where it

stands with respect to the environment. 13


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Assessing Impact of Opportunities & Threats

The impact of each threat and opportunity could be analyzed with

the help of opportunity threat matrix. A company after identifying

various threats, can use its judgments to place the threats in any

of the four cells in the following matrix

Attractiveness

High Major Threat Moderate Threat

Low Moderate Threat Minor Threat

High Low

Probability of Occurrence

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Threat Matrix


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Assessing Impact of Opportunities & Threats

Similar to the threat matrix we have an opportunity matrix that

the opportunities are placed according to their attractiveness as

given below:

Attractiveness

High Very Attractive Moderately Attractive

Low Moderately Attractive Less Attractive

High Low

Probability of Occurrence

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Opportunity Matrix


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The Impact Matrix

The impact of the trend on various strategies could be

visualized using an impact matrix.

After identifying the emerging trends in relevant environments,

the degree of their impact can be assessed with the help of the

impact scale.

The matrix enables us to have a consolidated view of the

impact on different strategies, which a firm may be following.

To assess the degree and quality of impact of each trend on

different strategies a five-point impact scale could be used.

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The Impact Matrix

Trends Probability of Occurrence Impact on Strategies

S1 S2 S3 S4

T1

T2

T3

The pattern of scoring is:

+2 extremely favorable impact

+1 moderately favorable impact

0 no impact

-1 moderately unfavorable impact

-2 extremely unfavorable impact

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Balance Score Card

The balanced scorecard is a strategic planning and management

system used extensively in business and industry, government,

and nonprofit organizations worldwide

To align business activities to the vision and strategy of the

organization.

Improve internal and external communications.

To monitor organization performance against strategic goals.

It was originated by Drs. Robert Kaplan (Harvard Business

School) and David Norton as a performance measurement

framework added strategic non-financial performancemeasures to traditional financial metrics to give managers and

executives a more balanced view of organizational

performance.

It is a dashboard of performance measures. 18


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Balance Score Card

The balanced scorecard approach provides a clear prescription

as to what companies should measure in order to balance thefinancial perspective.

The balanced scorecard is a management system that enables

organizations to clarify their vision and strategy and translate

them into action.

It provides feedback around both the internal business

processes and external outcomes in order to continuously

improve strategic performance and results.

When fully deployed, the balanced scorecard transforms

strategic planning from an academic exercise into the nerve

center of an enterprise.

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BSC Approach

Control measures that evaluate actual performance of the

company are called output controls.

Output controls measure past performance and contain no

information on future performance / profitability. Examples of

output controls are

ROI, EPS

The controls that predict the future performance of the company

are called steering controls.

Steering controls measure variables that predict future

performance. Examples of steering controls are

Cost per passenger (airline)

Inventory turnover (retail)

Customer Satisfaction 20


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BSC Approach

In a balanced score card combines output control measures with

steering control measures to help management drive future

performance.

In a balance score card the management develops goals or

objectives in four areas, namely:

Financial: How do we appear to the shareholders?

Customer: How do customers view us?

Internal business perspective: What we must excel at?

Innovation and learning: How can we continue to improve

and create value?

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Balance Score Card

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Balance Score Card

The four perspectives of the balance score card.

1. The Learning and Growth Perspective: This perspectiveincludes employee training and corporate cultural attitude at

both individual and corporate level.

2. The Business Process Perspective: This perspective refers to

internal business process. Metrics allow managers to judge

performance against expectations.

3. The Customer Perspective: This is the customer satisfaction

perspective and focus on customer requirements.

4. The Financial Perspective: This perspective emphasizes on

timely and accurate funding, risk assessment and cost-benefit

data.

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Balance Score Card

Key performance measures

Financial Cash flow, sales growth, ROE

Customer

Market share, Customer satisfaction, % of sales from

new products

Internal

businessCycle time, unit cost

InnovationLearning

Time to develop new products

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BSC M B d M


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BSC Measurement Based Management

Includes key TQM concepts like

Customer Define Quality

Continuous Improvement

Employee Empowerment

Fact-based Management

Feedback & Control

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Th L i f BSC M B d M


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The Logic of BSC Measurement Based Management

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Th L i f BSC M B d M


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Identify Potential StakeholderSegments

9Reassess Strategy

(strategy audit)

1Select Stakeholder Strategies

(focus/intent)

2Identify Target Segments'

Requirements(CSF's)

5Link to Internal Processes

(core competancies)

3Detrmine Performance Gaps(relatiive/absolute)

4Set Improvement Priorities

(external perspective)

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Establish Process ImprovementPriorities

(internal perspective)

8Improve Critical Processes

(process management

7Establish Metrics and Set Goals(BSC)

1aStrategicWeights

2aStakeholderImportance

Weights

3aPerformanceScores

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Th L i f BSC M t B d M t


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Step Description Detail

1 Choose targeted stakeholder segmentsStrategic intent. Focus limited organizational

resources to chosen market segments.

2 Identify their requirementsIdentify each customer segments own unique set

of requirements.

3Determine performance gaps (external

perspective)

By asking customers how we are meeting their

needs we can identify our performance gaps.

4 Set stakeholder improvement priorities

Focus improvement efforts on major gaps in

prioritized customer requirements. High

importance and low performance is the basis.

5Link stakeholder requirements to internal

processes

Link of external improvement priorities to internal

processes.

6Establish process improvement (PI)

priorities (internal perspective)

Identify internal processes that drive the most

important customer needs to set PI priorities

7Establish metrics and goals for the process

improvement priorities - the BSC

Define process output metrics and relate them to

internal performance metrics.

8 Improve critical processesReengineer the critical processes to meet the

performance criteria.

9 Reassess strategy

Check the results and take corrective actions on

continual basis. 28

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