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What is Situational Analysis?

Situation analysis is a marketing term, and involves evaluating the situation and trends in a particular company's market. Situation analysis is often called the "three c's", which refers to the three major elements that must be studied :
  1. Customers
  2. Costs
  3. Competition

The number of "c's" is sometimes extended to four, five, or even six, with "Collaboration", "Company", and "Competitive advantage".

When developing strategies, analysis of the organization and its environment as it is at the moment and how it may develop in the future, is important. The analysis has to be executed at an internal level as well as an external level to identify all opportunities and threats of the external environment as well as the strengths and weaknesses of the organizations.

There are several factors to assess in the external situation analysis:

  1. Markets (customers)
  2. Competition
  3. Technology
  4. Supplier markets
  5. Labor markets
  6. The economy
  7. The regulatory environment

Use of Situation Analysis

A SWOT analysis is often conducted as a major part of a situation analysis. SWOT is an acronym that refers to strengths, weaknesses, opportunities and threats.

In a military planning context, situation awareness is essential for commanders to conduct effective decision-making and planning activities. Situation awareness concerns the identification and perception of the elements in the relevant environment, the comprehension of their meaning, and the projection of their status into the near future. Situation analysis is defined as a process that examines a situation, its elements, and their relations, and that is intended to provide and maintain a state of situation awareness for the decision maker/commander. Situation analysis develops hypotheses about meaningful relations between entities and events, estimates the organizational structures and intentions of threat entities, assesses vulnerabilities of both one's own force and of threat assets and the level of risk posed by specific threats.

One common application of situation analysis has to do with the marketing process. Here, the emphasis of the process has to do with looking at core factors that determine the success or failure of a given marketing campaign. In order to maximize the potential of the campaign, marketing professionals will consider the specifics of the intended customer base, and evaluate which methods can be used to reach those customers to best effect. The cost of the goods or services sold to consumers is also looked at closely, since the idea is to earn a profit from selling those products. Last, the marketing professional will look closely at the competition and determine what can be done to prompt consumers to turn away from competitors and favor the products marketed in the campaign instead. This process is often referred to as the “Three C’s” and can be applied to just about any type of marketing plan.

Situation analysis also works very well when looking at internal procedures within a business. For example, if the cost of production is higher than management believes it should be, examining the situation in detail can yield clues as to what can be done to lower the overall cost. As part of the analysis, factors such as labor, the cost of raw materials, the efficiency of any equipment used in the production process, and even the cost of packaging will come under scrutiny. If conducted properly, the analysis will identify any areas where improvements can be made, and what effect they will have on the overall cost of production.

Vision and Mission Statements

Stakeholder Analysis

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Strategic planning

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  4. What is Situational Analysis?
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  8. Use of PEST analysis
  9. SWOT and PEST analysis
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