What is Situation Analysis?
Situation Analysis refers to a collection of various methods that are used by managers with the purpose of analyzing the organization’s internal and external environment. This is done to know the organization’s capabilities, target audience, and business environment.
Before a marketing strategy is developed, it is necessary to conduct a situation analysis in order to determine the health of your business. This analysis works as a useful tool to determine the strengths and weaknesses and other opportunities and threats of your business, as these may somehow affect the health of your business.
Situation analysis is basically an analysis of the internal and external factors of any business organization. The business capabilities, the potential audience, and the business environment and their impact on the company are clearly defined in the situation analysis. Situation analysis is considered to be a crucial part of any business plan.
Purpose and Methods of Situation Analysis
In real or corporate life, Situation Analysis helps in defining where your business is currently standing. This provides you with certain actions that must be taken for the progress of the business. Situation analysis also helps in predicting the outcomes in case the decisions have been taken in any other direction. With the environment changing drastically, people are demanding analysis on a regular basis, in order to get the picture of where the company lies in the business market and to enhance its growth.
Whether you are planning to launch a new product or a service in the market, or if you are searching for the strengths and weakness of the company, micro and macro environmental factor study will contribute in indicating the plans that must be followed. This is the main purpose of the Situation Analysis.
As situation analysis depends upon both the internal and external factors, it provides you with information about the position of your organization and its products. This type of analysis is said to be very complex.
The situation analysis is similar to that of the market analysis and it consists of various theories: the 5C’s, SWOT Analysis, Porter’s Five Forces and PEST Analysis being the major ones.
The 5C’s mainly consists of the 5 Cs – Company, Competitors, Customers, Collaborators and Climate. Thus, there is a mere need to focus on the company’s mission, vision and goals, its place in the market, its performance to recognize how productively is the organization able to fulfill its aims and strategies.
Continuing with the evaluation of the company, begin to look at the competitors through Porter’s Five Forces. To carry out a reliable and efficient analysis, factors such as the behavior of the audience, distribution networks, quantity and frequency of the purchase, income level, size of the market and potential growth must be taken in consideration.
The last two elements of the 5C’s are the collaborators, that form a major part of every business. This is because the collaborators increase the likelihood of augmenting development and attaining growth opportunities and the climate. The climate is the macro-environmental factor that can be planned in the PEST Analysis. But, the exact strengths, weaknesses, opportunities, and threats can only be defined through a SWOT Analysis.
Situation analysis has some of the clear advantages; as it helps in identifying the current position on the market with all the capabilities and resources and other growth opportunities for development. One of the major drawback of this concept that there are chances of misinterpretation of the collected data.