Situation analysis

Situation analysis is a method managers use to analyze both the internal and external environments of an organization in order to understand the firms own capabilities, customers and business environment. As described by the American Marketing Association, a situation analysis is "the systematic collection and study of past and present data to identify trends, forces, and conditions with the potential to influence the performance of the business and the choice of appropriate strategies."
The situation analysis consists of several methods of analysis: The 5Cs Analysis, SWOT analysis and Porter five forces analysis.[2] A Marketing Plan is created to guide businesses on how to communicate the benefits of their products to the needs of potential customer. The situation analysis is the second step in the marketing plan and is a critical step in establishing a long term relationship with customers The situation analysis looks at both the macro-environmental factors that affect many firms within the environment and the micro-environmental factors that specifically affect the firm. The purpose of the situation analysis is to indicate to a company about the organizational and product position, as well as the overall survival of the business, within the environment. Companies must be able to provide a summary of opportunities and problems that may be encountered within the environment in order to gauge an understanding of their own capabilities within the market.

Elements in the Situational Analysis

Product Situation What is my current product? You may want to break this definition up into parts such as the core product and any secondary or supporting services or products that also make up what you sell. It is important to observe this in terms of its different parts in order to be able to relate this back to core client needs. Feel free to also discuss here which of your clients needs your product is meeting.

Competitive situation Analyze your main competitors who are they what are they up to how do they compare feature/ benefit analysis. What are their competitive advantages?

Distribution Situation Review your distribution Situation how are you getting your product to market? Do you need to go through distributors or other intermediaries?

Environmental factors What external and internal environmental factors are there that need to be taken into account. This can include economic or sociological factors that impact on your performance.

Opportunity and issue analysis Which requires conduction a SWOT analysis (Strengths, Weaknesses, Opportunity and Threats). Things to write down her are what current opportunities that are available in the market, the main threats that business is facing and may face in the future, the strengths that the business can rely on and any weaknesses that may effect the business performance.

5C Analysis
While a situation analysis is often referred to as the "3C analysis", the extension to the 5c analysis has allowed businesses to gain more information on the internal, macro-environmental and micro-environmental factors within the environment. The 5C analysis is considered to be the most useful and common method in analyzing the market environment due to the extensive information it provides to a business. [5]

Company

The analysis of the company allows for the evaluation of the company's objectives, strategy and capabilities. These areas indicate to an organization about the strength of the business model or whether there are areas for improvement, as well as how well an organization will fit with the external environment.[6]
Goals & Objectives: An analysis on the mission of the business, the industry of the business and the stated goals required to achieve the mission. Position: An analysis on the Marketing strategy and the Marketing mix. Performance: An analysis on how effectively the business is achieving their stated mission and goals.

Product line: An analysis on the products manufactured by the business and how successful it will be in the market

Competitors

The competitor analysis takes into consideration the competitors position within the industry and the potential threat it may pose to other businesses. The main purpose of the competitor analysis is for businesses to analyze both the current and potential nature and capabilities of a competitor in order to be prepared against competition. The competitor analysis looks at the following criteria's:

Identity competitors: Businesses must be able to identify competitors within their industry. Identification of whether competitors provide the same service/products to the same customer base will be useful is gaining knowledge on direct competitors. Both direct and indirect competitors must be identified, as well as potential competitors that may enter the market. Assessment of competitors: The competitor analysis looks at competitor goals, mission, strategies and resources. This will allow for a thorough comparison on the goals and strategies of both competitors and organization. Predict future initiatives of competitors: An early insight into the potential activity of a competitor will help a company be prepared against competition.

Customers

Customer analysis can be vast and complicated. Some of the important areas that a company analyzes includes: [5]

Demographics

Advertising most suitable for the demographic Market size and potential growth Customer wants and needs Motivation to buy the product Distribution channels (online, retail, wholesale, etc.) Quantity and frequency of purchase Income level of customer

Collaborators

Collaborators are useful for businesses as they allow for an increase in the creation of ideas, as well as an increase in the likelihood of gaining more business opportunities.[7] The following type of collaborators are:
Agencies: Agencies are the middlemen of the business world. When businesses need a specific worker who specializes in the trade, they go to a recruitment agency.[8]

Suppliers: Suppliers provide raw materials that are required to build products. There are 7 different types of Suppliers: Manufacturers, wholesalers, merchants, franchisors, importers and exporters, independent crafts people and drop shippers. Each category of suppliers can bring a different skill and experience to the company.[9] Distributors: Distributors are important as they are the 'holding areas for inventory'. Distributors can help manage manufacturer relationships as well as handle vendor relationships. [10] Partnerships: Business partners would share assets and liabilities, allowing for a new source of capital and skills. [11]

Businesses must be able to identify whether the collaborator has the capabilities needed to help run the business as well as an analysis on the level of commitment needed for a collaboratorbusiness relationship.[6]
Climate

In order to fully understand the business climate/environment there are usually many different factors that can affect a business, and if researched well it will contribute to a company that can respond well to change. An analysis on the climate is also known as the PEST analysis. The types of climate/environment firms have to analyse are:
Political and regulatory environment: An Analysis of how active the government regulates the market with their policies and how it would affect the production, distribution and sale of the goods and services. Economic Environment: An Analysis of trends regarding macroeconomics, such as exchange rates and inflation rate, can prove to influence businesses. [5] Social/cultural environment: Interpreting the trends of society[5]; which includes the study of demographics, education, culture etc. Technological analysis: An analysis of technology will help improve on old routines and suggest for new methods in being more cost efficient. In order to stay competitive and gain an advantage over others, businesses must have sufficient knowledge on the technological advances.

Porter's Five Forces Industry Analysis

ultimate purpose of the Porter's five forces model is to help businesses compare and analyze their profitability and position with the industry against indirect and direct competition.[15]

The threat of new entrant: New entrants affect the companys profits as the consumers have more variety to choose from. Bargaining power of buyers: The companies influence on the buyer to purchase their product or how much the buyer depends on the product being produced by the firm. Threat of substitute product of services: more than one firm producing similar or the same product or service. Bargaining powers of suppliers: The company dependence on the resources the suppliers provide, in order to create their product or services. Rival among existing competitors: Rivals fighting to be dominant in the market, in order to stay in business and maximize profit

Swot analysis

SWOT analysis (alternately SLOT analysis) is a strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. The technique is credited to Albert Humphrey, who led a convention at the Stanford Research Institute (now SRI International) in the 1960s and 1970s using data from Fortune 500 companies.

SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. It is applicable to either the corporate level or the business unit level and frequently appears in marketing plans. SWOT (sometimes referred to as TOWS) stands for Strengths, Weaknesses, Opportunities, and Threats. The SWOT framework was described in the late 1960's by Edmund P. Learned, C. Roland Christiansen, Kenneth Andrews, and William D. Guth in Business Policy, Text and Cases (Homewood, IL: Irwin, 1969). The General Electric Growth Council used this form of analysis in the 1980's. Because it concentrates on the issues that potentially have the most impact, the SWOT analysis is useful when a very limited amount of time is available to address a complex strategic situation. The following diagram shows how a SWOT analysis fits into a strategic situation analysis. Situation Analysis / Internal Analysis /\ Strengths Weaknesses | \ External Analysis /\ Opportunities Threats

SWOT Profile

The internal and external situation analysis can produce a large amount of information, much of which may not be highly relevant. The SWOT analysis can serve as an interpretative filter to reduce the information to a manageable quantity of key issues. The SWOT analysis classifies the internal aspects of the company as strengths or weaknesses and the external situational factors as opportunities or threats. Strengths can serve as a foundation for building a competitive advantage, and weaknesses may hinder it. By understanding these four aspects of its situation, a firm can better leverage its strengths, correct its weaknesses, capitalize on golden opportunities, and deter potentially devastating threats.

PEST analysis
PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. Some analysts added Legal and rearranged the mnemonic to SLEPT;[1] inserting Environmental factors expanded it to PESTEL or PESTLE, which is popular in the United Kingdom.[2] The model has recently been further extended to STEEPLE and STEEPLED, adding Ethics and demographic factors. It is a part of the external analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macroenvironmental factors that the company has to take into consideration. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. The growing importance of environmental or ecological factors in the first decade of the 21st century have given rise to green business and encouraged widespread use of an updated version of the PEST framework. STEER analysis systematically considers Sociocultural, Technological, Economic, Ecological, and Regulatory factors.

Module 1. Situational Analysis