Situation Analysis

The term "situation analysis" refers to a detailed examination of the environment in which a company, brand or a problem exists. It is important to fully understand the situation before moving forward and deciding on a plan of action.

A situation analysis encompasses the micro and macro environments of a company.  The examination of the macro environment takes a high level look at factors such as the economy, the government, legal issues, technology etc. This is sometimes referred to as a PEST analysis (political, economic, social, technological). 

A reminder of the key things we should look at in a situation analysis are the 3Cs - the company, customers, and competition. This is sometimes extended by two additional Cs - collaborators such as suppliers and channel to market and context which refers to the economic and legal framework in which a company exists.

It is also necessary to look at the overall market – its size, trends, profitability, distribution channels and success factors. The market sizing and assessment tool could be useful here.

And then there are many things to consider about customers and potential customers. Again, the size of the market is important and especially the segmentation as this enables a closer focus on the customer. It is important here to also think about the buying motivations and behaviours of customers. System 1 and system 2 thinking may be relevant to this part of the analysis.

Different tools and frameworks can be used to analyse a situation. A SWOT analysis is probably the most common and popular tool for looking at a situation as it encompasses both the detailed (micro) examination of strengths and weaknesses as well as a broader (macro) external exploration of opportunities and threats.

Some things to think about:

• Carrying out a situation analysis is the most important part of any strategy review. When did you last carry out a situation analysis?

  
  

• What do you know about the macro environment in which your company operates? How is this environment affecting your company?

  
  

• What do you know about the market in which you operate? What do you know about its market size, segmentation and competitive environment?

  
  

• Crucially, what do you know about customers and potential customers? What do you know about their demographics, their buying expectations and motivations, and their buying behaviour?