The situation analysis is the most important step in developing your marketing plan as well as your overall strategic business plan.
It involves the study of both relevant internal components (important advantages and disadvantages of your company) as well as external components (the external opportunities and threats you are facing now or expect to face them in the future).
Situational analysis is known as a technique managers use to evaluate both internal and external conditions of the business to be able to understand the firm’s core capabilities, target customers and the general business conditions where the company operates.
This type of analysis may involve various marketing analysis and business management tools such as using the SWOT analysis, PEST analysis and other traditional strategic management tools and concepts.
What is the overall goal of this type of marketing analysis, research and evaluation? One of the main benefits is for the company to create clarity, focus and position where it can minimize the risks and threats and maximize the opportunities both inside the company and in the marketplace.
In simple words, the company has to be able to connect the benefits of its products and services with the needs of potential customers in a unique and effective way by avoiding risks, threats and direct competitors.
The situation analysis examines both the macro environment which impacts all the companies in the industry as well as the micro environment which impacts only the specific company. At a very basic level your situational analysis should include a thorough analysis of your company, your customers and your competitors.
The internal evaluation helps you understand your strongest and weakest points within your business. These types of elements are internal and controlled by your organization and they are results of the way of doing business now and in the past. Strengths are favorable to developing your strategy and plan while weaknesses are issues you have to deal with in order to avoid risks in accomplishing your goals and objectives in the future.
Opportunities and threats are identified with your external analysis. Each change in the business environment can cause changes in the balance of your opportunities and threats. Elements such as economy, technology, politics, social developments, etc. can dramatically change your marketplace conditions.
Based on these types of changes opportunities evolve as a way to take advantage of current trends and threats and risks evolve as well which must be analyzed and assessed and in addition minimized or completely avoided.
When working on situation analysis you can use the SWOT and PEST analysis templates as tools to help you guide your focus on the most relevant aspects for your business. This type of analysis will help you develop a foundation for your strategic planning and your business plan.