Situational Analysis: Definition, Types & Examples

situational analysis

Wondering what gives businesses the rapid growth you see within a short frame? It is because they identify opportunities and examine new customers and new clients. Hence, they make better business decisions evaluating the business. Understanding how to do a situational analysis will help you find out whether a company will grow or fail.

To know what this entails, this article will talk about what a situational analysis is, how t execute one, and how it can contribute to the growth of your business.

What is Situational Analysis?

Situational analysis is gathering data to analyze a company’s internal and external operations. It allows you to examine the present health of your business, predicted growth, strengths and weaknesses, and access to your rivals using the data you collect.

It’s critical to assess the internal and external aspects that contribute to organizational growth when conducting a practical situational analysis. The following are the foundations for the analysis, also known as SWOT:

  • Strengths: This relates to what your company excels at, and it is your strength that sets you apart from your competition. Your branding strategies, product or service, or marketing campaigns could all be examples of this strength.
  • Weaknesses: These are the areas where an organization can develop and where your company is at a disadvantage. It’s a good idea to assess your flaws and improve on them.
  • Opportunities: These are mostly determined by external factors. Opportunities may arise as a result of innovations, technology, or government laws, and the ability to recognize and capitalize on them can be extremely beneficial to your company.
  • Threats include anything that could put your business at risks, such as close substitutes or new entrants into the industry.

What are the Benefits of Situational Analysis?

The following are some of the general advantages of situational performance:

  • It helps detect issues and provides remedies
  • Aids in achieving targeted outcomes
  • Assists in the transition from the starting state to the desired state
  • Aids in planning and achieving objectives
  • Outlines the processes to follow when working on a project
  • Outlines the development of your company

Read: DETERMINANTS OF SUPPLY: Meaning and Examples

How to Perform Situational Analysis

The process of using several ways of analysis to get the desired result is known as situation analysis. The steps for conducting a situation analysis are:

#1. Make a 5C analysis

When trying t understand an organization’s environment, the 5C analysis is the greatest technique you should employ. The 5Cs are outlined below alongside what they mean.

  • Company: This examination looks at the company’s vision, strategy, competency, products, services, and values. It aids in the comprehension of current issues and potential solutions,
  • Competitors: This situational analysis aids in the comprehension of the organization’s external environment. The research reveals the strengths, weaknesses, market share, and future advances of your competitors.
  • Collaborators: Stakeholders who collaborate with an organization as partners include agencies, distributors, suppliers, and other businesses. To assist people to perform better, It is critical to understand their skills, abilities, and problems.
  • Customers: Knowing who you’re dealing with is an important part of situational analysis. It entails gaining a thorough grasp of your target market, including their attitudes, purchasing power, and market size.
  • Climate: This part of the situational analysis looks at the macro-environmental elements that affect a company. It is used to investigate social-cultural issues.

#2. Make a SWOT Analysis

This is the most common tool for auditing and analyzing a company’s overall strategic position and its environment. Its main objective is to investigate methods for creating a firm business model that aligns an organization’s resources and competencies with the demands of the environment.

A SWOT analysis can assist firms and businesses in scaling and leading in their specialty or market. SWOT analysis is necessary for an organization’s survival because it helps the organization prepare for any future occurrence.

Through the SWOT analysis, you assess your company’s strengths, such as marketing efforts, unique selling points, and management, throughout this examination. Also, examine the elements of your business that need improvement. Look for possibilities to adopt innovations.

#3. Perform a Five-Force Analysis

The five-force analysis is a tool for assessing competitors and minimizing threats. The goal, therefore, is to distinguish and analyze the company’s profit margins in comparison to its competitors. These five forces will be outlined below.

Rivalry between Competitors

You can assess the strength of your competition using this tool. You may learn who they are, how many there are in your business, and how your products and services vary or are comparable to theirs.

It allows you to see and understand what your competitors are doing in order to decide whether or not to follow their lead.

Providing Energy

Providing power might be a market input at times. If there aren’t many alternatives, suppliers of supplies to an organization can be a source of power. If there are several suppliers, it is simple to switch to a lower-cost provider, refuse to work for some organizations or make the pricing surplus.

Considering a Product Alternative

It may be difficult to estimate prices if your product has a close alternative and buyers may move to the substitute if your price is too high. This gives you the ability to raise pricing for clients.

Purchasing Power

Purchasing power, also known as output, is a process in which customers exert pressure on a company, causing price adjustments. An organization’s total number of consumers, their importance, and the cost of seeking new ones for its output influence it.

A limited and loyal customer base may provide them the leverage to lower costs and negotiate better agreements.

New firms are starting up

New entries entering an industry might put market share under strain. They can use previous company knowledge, profit, and brand entity to put pressure on existing businesses, especially when migrating from an existing business.

#4. Conduct a Customer Analysis

Learn about your target market’s demographics, regions, trends, hobbies, and issues, among other things, by conducting exhaustive research. You can use a client’s profile to help you organize the data properly.

Furthermore, a thorough customer study will aid you in recognizing market trends, client behavior, and expectations and in designing effective means for reaching out to them.

#5. Consider the product and its Distribution

Examine your present products and services to see if they can suit the needs of your customers. You can evaluate distributors based on distributing techniques, distributor requests, and distributor kind and size if you have them.

You might also consider the multiple advantages that the distributors and the corporation reaped.

#6. Examine your surroundings

Examine how internal factors like resources and personnel competencies, as well as external factors like economic and political trends, might affect your company’s performance.

After doing a thorough environmental scan, you can identify the opportunities and challenges that come with new development.

PESTLE analysis aids in the comprehension of political, economic, social, technical, legal, and environmental issues.

Benefits of Situation Analysis

The general advantages of carrying out situational analysis are as follows.

  • Detects issues and provides remedies
  • Achieves targeted outcomes
  • Outlines the recesses t follow when working on a project
  • Outlines the development of your company
  • Helps in planning and achieving objectives.


Situational Analysis in every sense of the word revolves around gathering data to analyze a company’s internal and external operations. It allows you to examine the present health of your business, predicted growth, strengths, and weaknesses, as well as help you find ways t improve your company’s lapses. I hope this article gives you a clue on how to go about that.



Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like