What is Situation Analysis, and why is it so important?

What is Situation Analysis, and why is it so important?

In the workplace, we tend to prize people who are able to make snappy decisions. But the reality is, while this is a good trait to have when it comes to emergencies, like ‘should you run away from that falling tree?’, it’s not so useful for long-term business decisions. Why? Because gut instinct is based on emotion, rather than logical reasoning. And while it definitely has a place, it shouldn’t be your guiding light.

That’s not to say indecisiveness is a good thing — it just means decisions are better when they’ve been fully thought out. This is where a Situation Analysis comes in.

What is a Situation Analysis?

Situation Analysis is a process that helps you identify opportunities and challenges, both internal and external to your organization/service or product. You can also use it to define the scope of a problem.

Once you’ve worked these out, you can use your findings to help you plan a route from where you are right now to where you want to be.

You can run a Situation Analysis at any time, but it’s especially crucial before you implement a new process or start a new project. It helps you work out the best course of action and move forward, without wasting your efforts repeating things or making false moves.

How to run a Situation Analysis in 5 steps

1. Analyze your customers

Your customers or clients should be your focal point, so start by defining who this group is and what their needs and challenges are.

If this sounds like a big task, then you’re right — it is! But don’t let that scare you. Set some time aside to work this out properly. You may already have a good idea, in which case, it’ll be more a matter of updating and refining your previous findings. If you haven’t, then utilize things like Google Trends, customer surveys and data collection (GDPR-compliant, of course) to learn more about your customers.

As part of this stage, you could also create a customer journey map, like the one below. This will help you work out issues and goals your customers have at specific points during their interaction with your business.

Cacoo - Customer Journey MapCreated in Cacoo using the Customer Journey Map template

2. Analyze your own products and services

It’s always good to take a step back and assess your current offering. Take note of all your products and services, and analyze whether they currently meet the demands of your customers or clients.

Again, a customer journey map can help you identify specific issues and opportunities. You can also collect customer feedback via reviews, surveys, interviews, or focus groups. As part of this, you should also review your suppliers and distributors (if applicable), as well as the tools and software you use.

A SWOT diagram can help you work out your business’ strengths, weaknesses, opportunities, and threats (which, as you’ve probably worked out, is exactly what S-W-O-T stands for).

You can also apply this tool to specific products or services within your business. The beauty of this technique lies in its simplicity. Just create a two-by-two grid (like the one below) and fill in the different sections.

Cacoo - SWOT DiagramCreated in Cacoo using the SWOT Analysis Diagram template

3. Suss out the competition

Run a competitor analysis to see what others in the marketplace are doing, including their strengths and weaknesses. Once you’ve worked this out, you’ll be in a better position to compete.

You can do this stage as part of a 5C Analysis, which is a framework designed to help you assess your environment from five different areas, each of which impact your business decisions.

Cacoo - 5C AnalysisCreated in Cacoo using the Marketing Strategy template

  • Customers (current and potential)
    Note down their key features (so age, hobbies, location and anything else that’s relevant), as well as their needs, channels, and growth.
  • Competitors
    Work out who your closest competition is, as well as their strengths and weaknesses.
  • Company
    Analyze everything to do with your business, including your branding, market share, company culture, strengths, weaknesses (a SWOT chart will come in handy here), products, and services. Note how this compares to your biggest competitors.
  • Collaborators
    Assess your current suppliers or distributors, influencers, marketers — in short, any external ties you have. You can also include technology and tools here.
  • Climate
    Take a closer look at the market, including competitors, growth, recession, trends and opportunities, tech, and culture.

4. Analyze the environment

Take a step back and review the environment you’re working in. Examine external factors, including economic trends that could affect you and/or your customers or clients. Note down any potential or real threats or opportunities.

A PESTLE Analysis gives you insight into your company’s political, economic, sociological, technological, legal, and environmental situation. Again, a diagram can help you organize your thoughts here, like the one below.

Cacoo - PESTLE analysisCreated in Cacoo using the Marketing Mix template

  • Political
    Take note of current trading regulations and government policies — as well as how upcoming elections could influence these things.
  • Economic
    This includes trends and import/export regulations.
  • Sociological
    Including cultural movements and changes to your target demographic’s lifestyle.
  • Technical
    Assess your technology, as well as developments in the wider world. You should also include cybersecurity and changes to legislation here.
  • Legal
    Examine legislation changes, including employment law.
  • Environmental
    Look at how your business impacts the environment on a local scale, as well as a global scale. Look at how climate change could impact your business, and make sure you’re meeting or are able to meet current and upcoming regulations.

5. Map your resources

Before you put your plans in action, you’ll need to know what you have at your disposal. If you have a team or work as part of one, find out who can help you and what their schedules are. Also note down tools and budget available to you — as well as any limitations that could impact these. Once you have that all mapped out, you’re ready to roll.

Final thoughts

Displaying information visually makes it easier to process things like stats and large amounts of text, so get acquainted with the diagrams we’ve mentioned above and use them whenever you can.

If you do plan on creating diagrams as part of your Situation Analysis, make sure you’ve got the right tools for the job. The beauty of things like a SWOT diagram, 5C Analysis, and a PESTLE Analysis is they’re easy to use. No training required — although we do recommend using a dedicated tool here. Online diagramming tools make it easy to draw, edit, and share your creations thanks to premade templates and cloud saving and sharing. This means you can spend less time formatting and file-finding, and more time making good decisions.

Georgina Guthrie Georgina is a displaced Brit currently working in France as a freelance copywriter. Before moving to sunnier climates, she worked as a B2B agency writer in Bristol, England, which is also where she was born. In her spare time, she enjoys old films and cooking (badly).