The 5C analysis is considered to be the most useful and common method in analyzing the market environment due to the extensive information it provides to a business.
Source: Boundless. “Conducting a Situational Analysis.” Boundless Marketing Boundless, 26 May. 2016. Retrieved 01 Feb. 2017 from https://www.boundless.com/marketing/textbooks/boundless-marketing-textbook/marketing-strategies-and-planning-2/steps-to-creating-a-marketing-plan-28/conducting-a-situational-analysis-151-7221/
The company analysis involves evaluation of the company's objectives, strategy, and capabilities. These indicate to an organization the strength of the business model, whether there are areas for improvement, and how well an organization fits the external environment.
- Goals & Objectives: An analysis on the mission of the business, the industry of the business and the stated goals required to achieve the mission.
- Position: An analysis on the Marketing strategy and the Marketing mix.
- Performance: An analysis on how effectively the business is achieving their stated mission and goals.
- Product line: An analysis on the products manufactured by the business and how successful it is in the market.
The competitor analysis takes into consideration the competitors position within the industry and the potential threat it may pose to other businesses. The main purpose of the competitor analysis is for businesses to analyze a competitor's current and potential nature and capabilities so they can prepare against competition. The competitor analysis looks at the following criteria:
- Identify competitors: Businesses must be able to identify competitors within their industry. Identifying whether competitors provide the same services or products to the same customer base is useful in gaining knowledge of direct competitors. Both direct and indirect competitors must be identified, as well as potential future competitors.
- Assessment of competitors: The competitor analysis looks at competitor goals, mission, strategies and resources. This supports a thorough comparison of goals and strategies of competitors and the organization.
- Predict future initiatives of competitors: An early insight into the potential activity of a competitor helps a company prepare against competition.
Customer analysis can be vast and complicated. Some of the important areas that a company analyzes includes:
- Advertising that is most suitable for the demographic
- Market size and potential growth
- Customer wants and needs
- Motivation to buy the product
- Distribution channels (retail, online, wholesale, etc...)
- Quantity and frequency of purchase
- Income level of customer
Collaborators are useful for businesses as they allow for an increase in the creation of ideas, as well as an increase in the likelihood of gaining more business opportunities. The following type of collaborators are:
- Agencies: Agencies are the middlemen of the business world. When businesses need a specific worker who specializes in the trade, they go to a recruitment agency.
- Suppliers: Suppliers provide raw materials that are required to build products. There are 7 different types of Suppliers: Manufacturers, wholesalers, merchants, franchisors, importers and exporters, independent crafts people and drop shippers. Each category of suppliers can bring a different skill and experience to the company.
- Distributors: Distributors are important as they are the 'holding areas for inventory'. Distributors can help manage manufacturer relationships as well as handle vendor relationships.
- Partnerships: Business partners would share assets and liabilities, allowing for a new source of capital and skills.
Businesses must be able to identify whether the collaborator has the capabilities needed to help run the business as well as an analysis on the level of commitment needed for a collaborator-business relationship.
To fully understand the business climate and environment, many factors that can affect the business must be researched and understood. An analysis on the climate is also known as the PEST analysis. The types of climate/environment firms have to analyse are:
- Political and regulatory environment: An Analysis of how active the government regulates the market with their policies and how it would affect the production, distribution and sale of the goods and services.
- Economic Environment: An Analysis of trends regarding macroeconomics, such as exchange rates and inflation rate, can prove to influence businesses.
- Social/cultural environment: Interpreting the trends of society, which includes the study of demographics, education, culture etc...
- Technological analysis: An analysis of technology helps improve on old routines and suggest new methods for being cost efficient. To stay competitive and gain an advantage over competitors, businesses must sufficiently understand technological advances.