Situational Analysis
Defining Situational Analysis
- Situational Analysis refers to the process of researching a company’s environment to identify internal and external factors that can affect its success.
- It assists businesses in understanding their market and competition and helps inform strategic planning.
The Purpose of Situational Analysis
- It allows businesses to gain a comprehensive insight into the factors that might affect their operations.
- It provides the basis for formulating strategies by leveraging strengths and opportunities, while minimising weaknesses and threats.
Components of Situational Analysis
Understanding the Company
- Evaluate the company’s vision, mission, and strategic objectives to understand its goals and driving force.
- Assess the company’s internal environment, which includes strengths and weaknesses. This may involve analysis of its financial position, marketing capabilities, human resources, etc.
Market Analysis
- Understanding the size, growth, profitability, trends, and distribution channels of the market is essential.
- Segment markets based on demographics, geography, lifestyle, and behavioural factors to tailor strategies to different customer groups.
Competitor Analysis
- Identify direct and indirect competitors and analyse their products, pricing, marketing strategies, and market share.
- Understanding the competitive landscape aids in positioning the business and differentiating its products or services.
Customer Analysis
- Understanding who the customers are, their buying behaviour, preferences, needs, and expectations is important for strategy formulation.
- It enables businesses to provide value and build strong customer relationships.
Environmental Factors
- Assessment of PESTLE (Political, Economic, Societal, Technological, Legal, Environmental) factors affecting the business helps anticipate potential opportunities and threats.
- This includes changes in legislation, market trends, technological developments, environmental concerns, and societal attitudes.
The Role of SWOT Analysis
- SWOT Analysis is a common tool used in situational analysis.
- It helps visualise a company’s Strengths, Weaknesses, Opportunities, and Threats, serving as a basis for strategy development.
Benefits of Situational Analysis
- Provides an in-depth understanding of market dynamics and industry competition.
- Identifies potential opportunities and threats, helping businesses adapt and plan accordingly.
- Aids in strategic decision making, enhancing efficiency and effectiveness.
- Helps assess a company’s own strengths and weaknesses, guiding internal improvements.