Situational analysis – Definition, what it is and concept

The situational analysis is a study that is carried out with the purpose of knowing how the company is at a certain time, for this the internal and external environment in which it operates is analyzed.

Above all, to carry out this analysis it is necessary to have past, present and future data. These data are very important since they can serve as a basis to continue with the development of the corresponding strategic planning process, which will indicate to the company the actions to be followed.

Anyway, the situational analysis allows knowing how the company is at the present time and what actions must be taken to continue growing in the market and determine what strategies should be implemented.

Situational analysis of a company

In the situational analysis of a company the most important aspects analyzed are the following:

The Macroenvironment or Macroenvironment

On the one hand, the study of the macro environment takes into
an account of all the general external elements that can affect the performance
of the company, but in which the company cannot exercise any control.

So, the external analysis provides the data that they will help us find the opportunities and threats facing a business.

The External aspects that are taken into account:

  • Economic: These aspects are related to the level of income and the purchasing power of people, which could positively or negatively affect the operation of the company. Offers data on the economy and the market in general, but above all the competitive situation of the business.
  • Demographic: It includes all the variables related to variations in the population, which affects a growth or decrease of the market.
  • Legal and political: It refers to the part of laws and regulations in force in the country where the company operates, therefore, the company has to follow them, which favours or damages their performance.
  • Technological: Technological innovations will help the company if it has the necessary purchasing power to incorporate them, otherwise it can lead to delay or obsolescence.
  • Social and cultural: The sociocultural aspects are very important because they include values, beliefs and customs that have a positive or negative influence on the functioning of the business organization.
  • Environmental: The environment involves all kinds of variables from climate, geography and any natural disaster that affects the operation of the company.

The Microenvironment or Microenvironment

On the other hand, this analysis has to do with the internal situation of the company, these aspects can be controlled and managed by the company.

Indeed, the results of this analysis allow the company can determine what their strengths and weaknesses are.

The facts the most important that need to be analyzed are:

  • Consumers: They are the people or companies that buy the products that are offered in the market for their final consumption or to use them in their production process.
  • Intermediaries or distributors: The intermediaries are the ones who buy the products. Subsequently, they sell them again in the market. That is, they take care of your marketing process.
  • Suppliers: They are all the companies that supply the raw materials or supplies so that the production process can be carried out.
  • Competitors: They are all companies that participate in the same market offering the same products or Substitute products.

Examples of Situational Analysis Tools

To do a situational analysis can use the following tools:

Model 5C

This model includes the analysis of the following components

  • Customers
  • Company
  • Competitors
  • Collaborators
  • Context

Of course, this analysis offers very wide and useful information to know the market environment where the company moves.

2. Analysis SWOT or SWOT

Of course, this model analyzes the internal environment and
external. The internal environment allows to find weaknesses and strengths and the external environment makes it possible to identify threats and opportunities for business.

Consequently, the most important thing is to strengthen strengths and minimize weaknesses, considering that a threat that may arise in the future could later become a weakness. In the same way, an opportunity that we see in the future can become a potential strength.

For its part, this analysis focuses on the environment to find threats from the competition and recognize the problems that they can face, so that the impact it can cause can be minimized in the company.

The points that are analyzed are:

  • The competition and market rivalry.
  • The bargaining power of customers.
  • The power of provider’s negociation.
  • Threat of the appearance of new competitors.
  • Threat of the appearance of new products.

Also, this information helps so that the company can analyze and compare its situation on its position within the industry in which it competes and adapt its lines of action.

In conclusion, it is clear that situational analysis is a very important tool for the elaboration of any Strategic plan that the company carries out and given its importance should be carried out periodically to have updated information that allows for better business strategies to ensure success.