Situational Analysis

Situational Analysis, according to the Business Dictionary, is “the systematic collection and evaluation of past and present economical, political, social and technological data”.

It is aimed at

• identification of internal and external forces that may influence the organization’s performance and choice of strategies, and
• assessment of the organization’s current and future strengths, weaknesses, opportunities and threats.

Situational Analysis is used mostly in marketing.  Situational analysis is done by using the 5C analysis. 

5C analysis is an environmental situation.  The elements of 5Cs are:

• Company,
• Customer,
• Competitors,
• Collaborators,
• Climate.

 Company:

• Product Line,
• Image in the market,
• Technology and experience, 
• Culture,
• Goals.

Collaborators:

• Distributors,
• suppliers, and
• Alliances.

Customers:

• Market size and growth,
• Market segments,
• Tangible and intangible benefits that the customers are seeking.
• Motivation for purchase – value drivers: cost vs. benefits.
• Decision makers or decision making unit.
• Retail channel – where does the customer buy the product. 
• Consumer information sources: Where does the customer get the information about the product?
• Buying Process: Impulse or careful comparison.
• Frequency of purchase or seasonal factors.
• Quantity purchased at a time, and
• Trends – how consumer needs and preferences change over time.

Competitors:  

• Actual or potential,
• Direct or indirect,
• Products,
• Positioning,
• Market share, and
• Strengths and weaknesses of competitors.

Climate:  The climate or macro-environmental factors.

• Political and regulatory environment – government policies and regulations that affect the market.
• Economic environment: business cycle, inflation rate, interest rate, and other macro-economic issues.
• Social and cultural environment: Society’s trends and fashions.
• Technological environment: New knowledge that makes possible new ways of satisfying needs, the impact of technology on the demand for existing products.

The analysis of these four external factors is called PEST Analysis.

The findings of the analysis should be validated through focused group discussions and consultation with the representatives of the target population.  The problems identified should be given priority based on given criteria.

Questions:

• Define Situational Analysis?
• What is the purpose of situational analysis?