Steps to carry out Situation analysis with examples
Market research is a vital part of any business studies curriculum. The situational analysis gives you an in-depth insight into the internal and external factors affecting an enterprise. It helps students improve their decision-making skills, giving them the space to structure their arguments rationally.
Here, I will discuss a step-by-step approach to situational analysis. Students can also refer to the quick links section towards the end of the blog for more references and tools.
Step 1: Collecting Information
The first step to any market research is collecting relevant information. This is where you conduct extensive surveys, customer studies, stat reports etc. As business students, you learn to ask the right questions and figure out the best ways to tackle them.
Step 2: Data Analysis
Data analysis is when you take this raw information and divide it into categories. The stats gathered from customer studies can fall under either internal or external factors. The internal factors include elements that you can directly control. The external factors are situational and hence out of your control.
SWOT analysis, PESTEL analysis and other elements help you sort data into categories. I will elaborate on these points later in the blog.
Learn to read the issue, understand the brand, and then figure out which of these methods would be a better fit
Step 3: Gathering Insights
Data analysis gives you a different perspective on how to read it. It helps you define the nature and scope of the business venture. With these insights, you determine the next course of action and how to set up the brand in the sector.
Step 4: Draft a Shared Vision
The first draft is where you provide insights into the market environment and understand your competitors. It answers some core questions about your brand, the nature of your business and your core advertising strategies.
The shared vision presents a very holistic picture of your business venture. For business assignments, I suggest students follow the structure as advised by their professors. You can refer to research papers, studies and surveys conducted by marketing experts to strengthen your argument.
Elements of Situational Analysis
Situational analysis is a process that aims to understand the nature of the business and its place in the industry. There are four main analysis methods to give you a complete picture of the market.
- PESTEL analysis
- Porter’s five forces analysis
- The Five-C’s
- SWOT analysis
Each of these situational analysis methods tackles a different aspect of the market. Now, you don’t have to use all these techniques for a single case. That would be extremely cumbersome and time-taking.
Instead, you must learn to read the issue, understand the brand, and then figure out which of these methods would be a better fit. Read on to know more about these four situational analysis methods and when to use them.
The Five-C’s provide a basic outline of the market and your brand’s position in the grand scheme of things. This situational analysis tool looks at your branding strategy from five diverse areas. Refer to this 5-Cs analysis template for more details.
SWOT stands for strengths, weaknesses, opportunities, and threats.
Firstly, there is the company, i.e. your business decisions and the brand reputation earned over time. The services, products and perks make up the brand image. Other than that, you also need to focus on the logo, brand tagline, name, line of business and further such details.
The competitors refer to the other companies in your line of work. These brands have an added advantage of experience with customer trends. You also must look out for potential entries in the market.
The customers decide the demand patterns of the industry. Of course, other social, psychological, and economic factors come into play. But the Five-C method deals with the stat-based aspects like your outlets, the sales, market figures and more.
Collaborator refers to the business partners or aids that you get along the way as your business grows. The distributors, manufacturers, salespersons, and middlemen also come in this section.
The business climate refers to the economic and political stability of the market. You can add a brief of the PESTLE analysis here for some extra brownie points.
With SWOT analysis, you understand where your brand is falling behind and what is the ideal solution
SWOT analysis is perhaps one of the best-known marketing tools for students who want a basic idea of the industry. It is a functional strategy that gives you a rudimentary picture of the internal and external factors affecting your business.
The acronym SWOT stands for strengths, weaknesses, opportunities, and threats. This marketing analysis tool is suitable for brands that want a microscopic vision of the market.
Strengths are the core advantages your business has over the others in the market. These can be anything ranging from your location to the unique manufacturing technology the brand uses. Note that these perks are internal, i.e. related to the functionality of the business.
For instance, the entrepreneur can control the location, product design, packaging, and other factors that decide sales.
The weaknesses, again, are internal to the business. These mistakes or errors depend mainly on how the brand functions. With SWOT analysis, you understand where your brand is falling behind and what is the ideal solution. For instance, lack of proper equipment, issues with employee management and other organisational errors are correctable.
Opportunities are potential earning schemes/ideas the brand must invest in to earn a profit. The chances are external, or, depending on the market. You cannot control these circumstances. However, with a SWOT analysis, you can accurately predict these trends and benefit from them
Threats, again, are an external element that refers to the risks and pitfalls of the sector you plan to enter. The existing competition, risks, losses and changing customer demands might be potential threats for your business. SWOT analysis gives you an estimate of these threats and how to avoid them.
Porter’s Five Forces Analysis
Porter’s Five Forces is a marketing strategy used to gauge the competitors of the industry. It gives you an idea about the prevalent trends and preferences of the customers. You also learn about the existing marketing campaigns, products, and services available to the customers.
The insights gathered from Porter’s five forces you can gain an edge over your peers. A student, upon reviewing these factors, can understand if the brand can survive the current market conditions. Read on to know about these five forces.
The threat of substation can be an excellent motivation for extensive market research
Supplier power refers to similar brands and enterprises that already function in your core marketing space. It also gives you an idea about the kind of products available to the people.
Every market has two main forces- demand and supply. Supplier power deals with the supply side of things.
Buyer power is the consumer’s preference and demand for a particular product or service. The demand side of things is often dependent on the supplier power and vice versa. Marketing surveys offer an interesting perspective on the buying tendencies of customers
The buyer power helps a brand understand their core customer base. What is your product and whom do you cater to? These are the two core questions that buyer power attempts to answer.
Competitive rivalry refers to both internal and external rivalry in a company. Any rivalry or competition between the managers or workforce for more opportunities refers to an internal conflict. The external rivalry is more apparent in the market competition.
Threat of Substitution
Every brand must face the fear of getting replaced by something better, cheaper, and overall, more desirable. And especially in a market as diversified and accessible as the one we function in, this fear manifests in several ways.
The threat of substation can be an excellent motivation for extensive market research. It encourages the brand to renovate and update itself with the changing times.
The more demand a sector has, the more brands enter the competition to cater to that demand
The threat of New Entry
When considering the competition, don’t just discuss the present companies but also the potential threats and entries. Every market poses a lot of opportunity for growth. The more demand a sector has, the more brands enter the competition to cater to that demand. Therefore, the last aspect of Porter’s five forces gives you a glimpse of the potential risks and threats of the sector.
PESTLE analysis is often seen as a foil to SWOT analysis and rightfully so. For a while, SWOT deals with the microscopic view of the market, PESTLE tackles the broader picture. The elements of the PESTLE analysis give you a holistic viewpoint of the market.
It tackles the political, economic, social, legal, and environmental factors that have a direct/indirect effect on your brand. I have discussed these elements in detail below.
- Political factors: refer to the impact of government policies on trade.
- Economic factors: refers to the currency value, GDP, import-export regulations posed by the state.
- Social factors: refer to internal security, national safety, cultural changes that affect customer behaviour.
- Technological factors: refer to the recent developments in technology, i.e. new equipment, tools, and software launched to simplify production and marketing.
- Legal factors: refer to the laws about trade and finance in a country. International relations and labour laws also fall in this category.
- Environmental factors: refer to the impact of climate change and global warming on your business.
Quick links and references