What is Situational Analysis? Tips and How-To for Your Next Analysis

What is Situational Analysis?

Situational analysis provides a reference point for business planning by analyzing the internal and external factors that affect your business’s performance. 

These factors could be good or bad, creating opportunities or limiting your ability to reach important goals.

Read on to learn more about the describing your business’s competitive environment or jump ahead to one of the following sections:

The 5 Components of a Situational Analysis

A thorough situational analysis requires that you step back from your business and consider multiple perspectives to capture the full picture. To get a bird’s-eye view, use the 5 Cs approach and think through your business’s environment by considering the company, customers, competitors, collaborators, and climate. 

Some elements within each of these lenses will support your business as it grows, while other elements will make it more difficult to reach your goals. It’s important to include everything significant, good or bad, so that you can work to mitigate risks and leverage your company’s strengths. 

The Company

When considering “the company” for your analysis, you’ll take into account the vision, culture, and goals for the organization. These can impact your company positively by attracting best-in-class talent or positioning your organization as a leader. On the other hand, a lack of strong vision can make it harder to motivate employees. 

Also articulate what you’re selling. Defining your product offering helps ground your organization into a specific industry or vertical. For some industries, intellectual property like patents are extremely important in establishing a competitive advantage.

The Customer

While diving into “the customer,” you’ll articulate your target market and any exciting marketing opportunities. 

What are your customers saying about your products or services? Great feedback, reviews, and advocacy from your customers will go a long way. Note any strengths or weaknesses in brand awareness in this section, too.

The Competitors

“The competitors” section will provide context on external forces within your industry. Within a SWOT analysis, these external factors would show up as either threats or opportunities. One competitor’s weakness is your brand’s chance to shine! 

In this section, be sure to note their intellectual property, differentiators, and any major investments within the market. For example, they may be expanding their brick-and-mortar footprint or have just launched a new way to shop online. These may be a sign that you should adjust your strategy to better compete.

The Collaborators

Formal and informal partnerships fall into “the collaborators” section. These are the external businesses or organizations that you can’t reach your goals without. For example, if you sell your product through a third-party marketplace like Amazon, note it here. 

Collaborators could be your manufacturers, shipping services, advertising or marketing agencies, or suppliers. Your relationship with these providers can help your organization grow, but it can also expose you to external risks that fall far beyond your control. It’s important to consider these in your analysis because you may decide to bring a function in-house or work with a different provider based on the pros and cons of each.

The Climate

Macroeconomics and political forces fall into “the climate.” Your day-to-day business is affected by rules and regulations set on the local, state, and national levels. A more strict set of safety regulations could increase costs for your company, while tariffs and taxes may affect your international business strategies.

Economic downturns or broad customer sentiment can also change how your population prioritizes their spending. How would your company be affected by a recession? Understanding these factors can help you create long-term strategies that protect your business.

Is Situational Analysis the Same as SWOT Analysis?

Situational Analysis refers to a broader set of activities, but if you’re familiar with SWOT analysis, the 5 Cs listed above may sound familiar. Both have the goal of describing the business environment, but SWOT sets up a particular framework of categorizing your findings into strengths, weaknesses, opportunities, and threats.

Learn more about out using SWOT to complete your situational analysis:

• 📝 Blog: How to do a SWOT Analysis
• 🎥 Video: What is SWOT Analysis?

How to Write a Situational Analysis

Writing a thorough situation analysis takes time, research, and input from experts within your organization or industry. The following steps will help you organize ideas, collect feedback, and identify recommendations. 

Step 1: Engage With Your Organization’s Experts

You don’t have to complete your analysis alone, and you shouldn’t! By collecting feedback from other leaders and strategists across your organization, you can complete a well-rounded analysis.

How you engage with these leaders is up to you. You could conduct interviews or host discussions and take notes, or you could ask them to fill out their thoughts and ideas on the 5 Cs listed above. You could also ask them to independently build their own SWOT charts with their business unit in mind, then collect this feedback to inform your holistic report.

You could also host workshops and use brainstorming techniques to identify and discuss important factors to your business. 

Step 2: Compile, Validate, and Prioritize Factors

Depending on how you collected feedback on what items are important to understanding your current situation, you may have a loooong list at the end of your initial dive into the details. But, not all these ideas can or should make the final cut for your situational analysis.

Review your list and rank each item on its potential impact for the business. You could use a scale from 1 to 5 or simply bucket each factor into “high impact,” “low impact,” and “unlikely to impact.” 

For example, if a regulation is currently going through the lawmaking process and would affect your industry, that factor should definitely be included in your analysis. If someone generally suggests that regulations could affect your business model, but nothing is on docket, you don’t need to include this suggestion in your analysis.

You may also have some opinions or generalizations included in your list. If your main competitor has “more locations,” do a quick search to determine how many more. If their food is “higher quality,” how? Is this an opinion or can you back it up with data about their brand perception? 

Remove any factors that are unlikely to impact your business’s outcomes or can’t be proven with data.

Step 3: Summarize Your Findings

While you may have removed or consolidated your list in Step 2, your full situational analysis could still be several pages in writing. For busy executives and leadership teams, that level of detail might not be appropriate.

Create a 1-page summary of the factors you ranked as most important. This summary could continue to use the 5 Cs framework to organize everything, or you could input the factors into a SWOT analysis to create an easy-to-share visual. 

Step 4: Dig into the Details

Along with your summarization, create a document that outlines your remaining factors and provides details for each. 

For example, your summary page may say “Competitor A has a larger presence in the Midwest, with 50% more locations.” Within your detailed report, you may include a map of competitor locations, estimations of revenue coming from the midwest, or a recommendation to research expansion in the region. 

Step 5: Share Your Analysis and Create an Action Plan

Once you’ve compiled a high-level summary and detailed report, it’s time to share your understanding of the environment. Whether this exercise was part of the strategic planning process or you just wanted to take a fresh look at the competitive landscape, make sure to communicate your insights to your teammates. 

You likely identified some opportunities or risks that your organization should address. Maybe the marketing team needs to update their messaging to be more competitive. One of your competitors could be using a process or manufacturer that you’d like to test or investigate. Whatever ideas you have based upon your analysis, share them throughout your organization to ensure the relevant teams can address them.

In addition to sharing with the leaders who could immediately take action, it could be helpful to publish or share this report with a broader audience. A strong situational analysis can help with onboarding and can help workers throughout your organization feel more connected to the business and strategy. Consider conducting a stakeholder analysis to determine a detailed communications plan.

Step 6: Revisit and Revise

Your business’s competitive environment and position in that environment is going to change over time. This means that the data and analysis covered in your report will be outdated in a matter of months. 

Depending on your goals, it’s a good idea to revisit or redo a situational analysis before any major long-term planning. Include a “last revised” date in your report and be sure to revisit it at least once each year to reflect the latest and greatest of your industry.

When to Conduct a Situational Analysis

There are a few times when conducting a situational analysis is particularly valuable. In general, any time you or your team needs an overview of the competitive environment or the organization’s position, this exercise can help. You can conduct this analysis as part of the strategic planning process or for more specific initiatives, like:

• Product development research
• Marketing planning or campaign development
• Merger or acquisition opportunities
• Strategic partnership development

Any time you’re trying to balance your organization against your competitors — in marketing, investment decisions, processes, and more — a situational analysis can help. 

Use Gliffy to Capture and Organize Your Ideas

Whether you decide to present your analysis as a SWOT chart or need a quick way to organize ideas into the 5 Cs of situational analysis, Gliffy can help! Our online diagramming tools make it easy to quickly capture ideas in a digital format, sort of like a whiteboard. 

Get started with a free trial of Gliffy Online or learn more about our Atlassian diagramming apps today. 

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