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Situation analysis is a method managers use to analyze both the internal and external environments of an organization in order to understand the firm’s 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."

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. [3]

Marketing Plan

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. [4]

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.[5]

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.[6]

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 collaborator-business 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:

SWOT

Main article:
SWOT Analysis

A

SWOT Analysis is another method under the situation analysis that examines the Strengths and Weaknesses of a company (internal environment) as well as the Opportunities and Threats within the market (external environment). A SWOT analysis looks at both current and future situations, where they analyze their current strengths and weaknesses while looking for future opportunities and threats. The goal is to build on strengths as much as possible while reducing weaknesses. A future threat can be a potential weakness while a future opportunity can be a potential strength.[13]
This analysis helps a company come up with a plan that keeps it prepared for a number of potential scenarios.

Porter's Five Forces Industry Analysis

Main article:
Porter five forces analysis

The Porter models involves scanning the environment for threats from competitors and identifying problems early on in order to minimize threats imposed by competitors. This model can apply for any type of business, from small to larger sized businesses. It is important to take note that the Porter’s five forces model are not just for businesses, but can also be applied to a country to help gain insight into creating a competitive advantage in the global market.[14] The 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 company’s profits as the consumers have more variety to choose from.
  • 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.


See also

References

  1. ^ "Dictionary of marketing terms". American Marketing Association. Retrieved 14 January 2008.
  2. ^ Steenburgh, Thomas; Avery, Jill. "Marketing Analysis Toolkit: Situation Analysis". Case Harvard Business Review. Retrieved 04 February 2010. {{cite web}}: Check date values in: |accessdate= (help)
  3. ^ "Create your marketing strategy". Business Link. Retrieved 2012. {{cite web}}: Check date values in: |accessdate= (help)
  4. ^ "The marketing process". Business Knowledge Centre. Retrieved 2010. {{cite web}}: Check date values in: |accessdate= (help)
  5. ^ a b c d e "Situation Analysis". Business Knowledge Centre. Retrieved 2010. {{cite web}}: Check date values in: |accessdate= (help)
  6. ^ a b c Anderson, Gene (March 2005). "Framework for marketing planning". Michigan Business School.
  7. ^ Verganti, Roberto. "Quantity vs. Quality in Collaborations". Hardvard Business Review. Retrieved June 15, 2011.
  8. ^ "What is an employment agency or temp agency?". settlement.org. Retrieved March 26, 2012.
  9. ^ "Types of Suppliers - The Reseller Network". reseller network. Retrieved March 26, 2012.
  10. ^ Jordan, Peter. "Distribution 25: Supply-Chain Advantages". CRN. Retrieved June 22, 2001.
  11. ^ "Partnership". The Government of Western Australia - Small Business Development Corporation.
  12. ^ "PEST Analysis". NetMBA. Retrieved March 28 2012. {{cite web}}: Check date values in: |accessdate= (help)
  13. ^ "SWOT Analysis". Business and Organizational Developement Tools, Training, and Services. Retrieved 2012. {{cite web}}: Check date values in: |accessdate= (help)
  14. ^ Porter, Michael. "The Five Competitive Forces That Shape Strategy". The Harvard Business Review. Retrieved March 28, 2012.
  15. ^ "Porter's 5 Forces". University of Cambridge.
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Category:Business economics Category:Market research Category:Situation analysis

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