Before launching into a new initiative or project, it’s important to come up with a plan. And part of that plan—the first part, in fact—should be conducting a situation analysis. At its core, situation analysis is a way to see how your business stacks up against competitors. It includes looking at several aspects of your business to help you make informed decisions as you grow your business.
So why is situation analysis so important to project planning and marketing strategies? Think of it this way: companies typically launch new projects or initiatives to build a new product, improve an existing one, or help connect their products to new and existing customers. But what happens if you do connect with customers and they don’t want or need your product? That’s months (maybe years) of work down the drain.
That's where a situation analysis can help.
While there’s no way to ensure the success of a product, situation analysis gives you the information you need to guide your business in the right direction. In this post we’ll cover the basic information you need to perform your own situation analysis.
What is a situation analysis?
Before getting into anything else, let’s address the question on everyone’s mind: What is situation analysis? We gave a brief answer in the intro, sure, but let’s really get into it.
Situation analysis is basically a methodical look at the internal and external factors influencing your business at any given moment. These factors might include customers, competitors, the market environment, and your business’s capabilities. By examining these elements of your business and its environment, you can identify strengths and weaknesses as well as potential areas of growth.
If this definition seems a little broad, that’s because it is: situation analysis is a broad term that encompasses several smaller activities. These activities include SWOT analysis, PESTEL analysis, Porter’s Five Forces, 5C analysis, and VRIO analysis (but more on those later). In other words, situation analysis is a phase of strategic planning, and during that phase, you might use several analytical tools.
Importance of situation analysis
We said it before and we’ll say it again, you should conduct a situation analysis before coming up with any concrete project plan or marketing strategy. But don’t worry, you don’t have to take us at our word—let’s break down exactly why situation analysis is so important in the early stages of planning.
Before anything else, situation analysis gives you a view of your business as it stands. No frills, no exaggeration, just an honest look at where you’re at. What are your strengths? Weaknesses? How do you compare to competitors? By performing a situation analysis, you’ll get a comprehensive view of your organization and its current state.
This can help shed light on other areas of your business. What problems are you facing? What strategies are you currently using to combat those problems?
With a well-rounded view of where your business is, you can get a better idea of where you want it to be. After performing situation analysis, you should be able to clearly identify your business’s current and desired states. From there, you can establish goals and take action to make your dream a reality.
Considerations within a situation analysis
To be effective, situation analysis needs to be thorough. A half-baked job simply won’t cut it. So what does a thorough situation analysis look like? For starters, it should look at your business from a variety of perspectives. But that’s the short answer. Let’s take a look at some of the key perspectives that go into situation analysis. As you perform situation analysis, you should consider:
- Product situation: This one’s pretty straightforward: what is your current product? In this instance it might be helpful to define “product” as all the ways you meet your customers’ needs. As you evaluate your current product, remember to also include any additional services you provide customers. Is your customer service top-notch? Because that certainly influences your product’s situation.
- Competitive situation: Situation analysis wouldn’t be complete without performing some form of competitor analysis. Your marketing strategy and business plan should always take competitors into consideration, and to do that, you’ll have to analyze where your competitors stand. (VRIO analysis can be a great tool for identifying long-term competitive advantage.)
- Distribution situation: How do you get your product to customers? This could be the app store, physical stores, etc. That’s your distribution situation. Your distribution mechanism can make or break your business—it is, after all, where you actually reach customers. Including it in your situation analysis can help you identify ways to better reach, engage, and retain customers.
- Environmental factors: You might not expect it, but environmental factors can be both internal and external. Internal environmental factors might include poor inter-company communication or changes in leadership and structure. External environmental factors are often wide-reaching: economic recessions, legal restrictions, etc. Stimulus checks are a timely example of an external environment factor.
- Opportunity and issue analysis: As you consider each of the previous situations, you’ll likely begin to identify your business’s strengths and weaknesses, and with those, opportunities and threats. To formalize and document this process, you should conduct SWOT analysis with your team.
Methods and diagrams for situation analysis
Remember how we said that situation analysis is a broad term that includes several smaller, more specific activities? It’s time to take a look at those smaller pieces that make up situation analysis.
There are five types of analysis typically used for situation analysis: SWOT analysis, PESTEL analysis, Porter’s Five Forces, 5C analysis, and VRIO analysis. Let’s take a closer look at each.
SWOT analysis
When it comes to strategic analysis, SWOT charts should be your bread and butter. SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats. As you perform SWOT analysis, you’ll think about your business from each of those standpoints and document your findings on a SWOT chart—four quadrants corresponding to each part of the acronym.
SWOT analysis is best done as a team. You’ll need a variety of perspectives to get a well-rounded view of your business. Like most team activities, SWOT analysis requires collaboration and communication. Enter Lucidspark. If you create your SWOT chart using Lucidspark, team members can participate in the meeting no matter where they’re based. Edit in real time as you brainstorm with your team. If you’ve shared the chart with your team, each team member will have access to the current version at all times.
