This article continues our complete Kwirtmak Strategic Case Study Revision Series.
If you have not already read the previous articles, start here:
- Part 1 – Company Performance SWOT and Corporate Governance
- Part 2A – Position Audit and Value Drivers
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Understanding Gap Analysis
One of the most practical strategic planning tools discussed during the revision session was Gap Analysis.
Although CIMA may not ask candidates to define Gap Analysis directly, they frequently expect students to apply its principles when recommending strategies.
Gap Analysis simply asks one question.
How does the company move from its current position to its desired future position?
For Kwirtmak, this question is highly relevant.
The company has experienced declining revenue and weaker financial performance while operating in an industry that continues to grow. Management therefore needs a structured plan to close the performance gap.
Understanding the Performance Gap
Imagine Kwirtmak sets the following strategic objective.
Increase revenue by 20 percent within the next two years.
That represents the desired position.
However, after one year management discovers revenue has increased by only 5 percent.
There is now a strategic gap.
Gap Analysis helps management understand:
- Why targets are not being achieved
- Which assumptions were incorrect
- Which strategic initiatives are succeeding
- Which initiatives should be changed
- Whether the original objective remains realistic
Instead of waiting until the end of the strategic plan, Gap Analysis enables continuous review and timely corrective action.
Applying Gap Analysis to Kwirtmak
Suppose the Board believes revenue growth will come from:
- Launching five new printers
- Entering two international markets
- Winning ten major B2B customers
- Maintaining dividend payments
- Increasing investment in innovation
Halfway through implementation, management discovers:
- Only two products are ready
- International expansion has been delayed
- Customer acquisition is slower than expected
- Additional investment is required
Gap Analysis immediately identifies that the company is unlikely to achieve its original objective without changing strategy.
This allows the Board to respond before significant value is destroyed.
Strategic Responses to Close the Gap
During the revision session, several practical responses were discussed.
Kwirtmak could consider:
Improving Operational Efficiency
Reducing waste throughout manufacturing.
Improving production scheduling.
Increasing automation.
Optimising inventory management.
These actions improve profitability without relying solely on higher sales.
Increasing Sales Within Existing Markets
Instead of entering high-risk international markets immediately, Kwirtmak could deepen relationships within existing markets.
Possible strategies include:
- Cross selling materials
- Selling maintenance contracts
- Introducing subscription software
- Expanding consulting services
- Offering additional technical support
This approach generally carries lower risk than entering unfamiliar markets.
Diversifying into New Industries
Another option involves diversification.
Rather than targeting highly competitive sectors, Kwirtmak could explore niche industries where additive manufacturing demand is increasing.
Examples include:
- Sports equipment
- Medical devices
- Construction
- Defence applications
- Education
Diversification should always be supported by detailed market research.
Risks of Aggressive Gap Closing
Gap Analysis is extremely useful.
However, management can become overly focused on achieving targets.
This creates new strategic risks.
During our revision session several important dangers were discussed.
Changing the Company’s Risk Profile
Attempting to achieve unrealistic targets may force management to:
- Enter unfamiliar markets
- Invest heavily in uncertain projects
- Increase borrowing
- Expand too quickly
- Accept higher operational risk
The organisation may eventually achieve revenue growth while exposing shareholders to excessive strategic risk.
Damaging Stakeholder Relationships
Rapid expansion often places pressure on:
- Employees
- Suppliers
- Customers
- Investors
- Governments
If management focuses only on financial targets, stakeholder confidence may decline.
Strategic growth should never compromise long-term relationships.
Reducing Product Quality
One of the strongest discussion points during the session involved quality.
Kwirtmak has built its reputation over many years.
If management rushes production to achieve ambitious sales targets, quality control may suffer.
Potential consequences include:
- Product failures
- Warranty claims
- Customer complaints
- Lost contracts
- Reputational damage
A temporary increase in revenue could therefore create long-term strategic problems.
Competing Through Lower Prices
Lower prices may increase short-term sales.
However, competitors often respond quickly.
This reduces industry profitability without creating sustainable competitive advantage.
Instead, management should continue strengthening Value Drivers discussed in Part 2A.
Should Management Always Achieve Every Target
One particularly interesting discussion during the revision session challenged a common assumption.
Many managers believe strategic targets must always be achieved.
That is not necessarily true.
Sometimes the original target was unrealistic.
For example, expecting Kwirtmak to move from declining revenue to 20 percent growth within a short period may require excessive investment and unacceptable levels of risk.
A better approach may involve:
- Increasing revenue gradually
- Building capability first
- Protecting product quality
- Preserving customer relationships
- Maintaining financial stability
Strong strategic leaders recognise when assumptions need revising rather than pursuing unrealistic objectives simply to avoid admitting mistakes.
Understanding Forecasting
Forecasting forms an important part of Gap Analysis.
Once management identifies the current position, it must estimate future performance.
Forecasting attempts to predict future events using historical information together with current market trends.
For Kwirtmak, forecasting may involve estimating:
- Industry growth
- Customer demand
- Revenue
- Material costs
- Research expenditure
- Exchange rates
- Capacity utilisation
These estimates support strategic planning and resource allocation.
Forecasting Using Industry Trends
Suppose additive manufacturing is expected to grow significantly over the next five years.
Management might reasonably forecast increasing demand for commercial 3D printers.
However, this does not automatically guarantee that Kwirtmak will grow.
Forecasts should also consider:
- Competitive pressure
- Pricing
- Innovation
- Customer preferences
- Technological disruption
Strategic planning requires balancing optimism with realism.
Time Series Analysis
Another forecasting technique discussed during the session was Time Series Analysis.
This approach identifies historical trends and projects them into the future.
Examples include:
- Monthly printer sales
- Quarterly revenue
- Customer growth
- Material prices
- R&D expenditure
Although historical trends provide useful guidance, they should never become the only basis for strategic decisions.
Markets change rapidly.
Past performance cannot guarantee future success.
Continue Your Revision
In the next section of Part 2B we will cover:
- Foresight versus Forecasting
- AI and Digital Innovation
- Scenario Planning Preparation
- Technology Strategy
- CAD Software and AI Integration
- Practical Examiner Application
- Common Student Mistakes
- FAQs
- Key Takeaways
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