Situational Analysis

Question 1

What does a situational analysis consider?

Answer 1

Market

Company

Competition

Question 2

What are the Three Marketing Environments?

Answer 2

External

Performance

Internal

Question 3

What is the EXTERNAL marketing environment?

Answer 3

Macro factors (big things past the scope of our business that could affect a whole industry, market or country [that may directly or indirectly affect our company])

Question 4

What are the factors affecting the EXTERNAL environment?

Answer 4

PESTLE:
Political
Economic
Socio-cultural
Technological
Legal
Ecological

Question 5

What is the PERFORMANCE marketing environment?

Answer 5

The performance environment consists of those organisations that either directly or indirectly influence an organisation’s operational performance.

Question 6

What are the elements of the PERFORMANCE environment?

Answer 6

1. Companies that compete against the organisation in pursuit of its objectives (Competitors that are usually representing threats.)
2. Suppliers of different resources, and distributors, which add value to the company’s products.
3. Companies that have the potential to indirectly influence the performance of the firm, by supplying services such as…
   ○ Consultancy
   ○ Financial services
   ○ Market research
   ○ Communication agencies

Question 7

What is the framework for analysing the PERFORMANCE environment?

Answer 7

Porter’s Five Forces

Question 8

What are Porter’s Five Forces?

Answer 8

1. New entrants
2. (Bargaining power of) Buyers
3. (Bargaining power of) Suppliers
4. Substitutes
5. (Intensity of rivalry between current) Competitors

Question 9

What are the factors to consider for New Entrants?

Answer 9

Economies of scale

Government policy

Capital requirements

Proprietary products/services/technologies

Question 10

What are the factors affecting the bargaining power of Buyers?

Answer 10

Price/total purchases

Buyer concentration vs firm concentration

Ability to backward integrate

Price sensitivity

Question 11

What are the factors affecting the bargaining power of Suppliers?

Answer 11

Differentiation of inputs

Supplier concentration

Threat of forward integration

Switching costs

Question 12

What are the factors to consider for Substitutes?

Answer 12

Switching costs and propensity to substitute

Relative price performance of substitutes

Question 13

What are the factors to consider for Competitors?

Answer 13

Market volumes/shares

Market sectors/product/service type

Market responses

Question 14

What is the INTERNAL marketing environment?

Answer 14

The internal environment of an organisation is concerned with understanding and evaluating the capabilities and potential of the company’s products, human, marketing, financial and other resources.

Question 15

What is the framework for analysing the INTERNAL environment?

Answer 15

The BCG Matrix (referred to as product portfolio or product matrix)

Question 16

What are the two key variables of The BCG Matrix?

Answer 16

1. Rate of market growth
2. Relative market share

Question 17

Based on the combination of two variables, the products in a portfolio can be divided into four categories.

What are these categories?

Answer 17

1. Question marks
2. Stars
3. Cash cows
4. Dogs

Question 18

What are Question marks?

Answer 18

Products that exist in growing markets, but have low market share.
- As a result, they do not generate enough revenue and they are unprofitable.

Question 19

What are Stars?

Answer 19

Most probably market leaders, but their growth has to be financed through fairly heavy levels of investment.

Question 20

What are Cash cows?

Answer 20

Products that exist in fairly stable, low growth markets and require little ongoing investment.
- Their high market share suggests higher levels of profitability.

Question 21

What are Dogs?

Answer 21

Products that experience low growth, low market share and are not profitable.
- Many of them are operating in declining markets, and they have no real long term future.
- In most cases, such products are divested.

Question 22

Portfolio analysis are executed by asking a range of questions.

What are these questions?

Answer 22

1. How fast will the market grow?
2. What will be our market share?
3. What investment will be required?
4. How can a balanced portfolio be created from this point?

Question 23

What is a SWOT Analysis and what are its components?

Answer 23

The result of the situational analysis is summarised in SWOT analysis.

Strengths
Weaknesses
Opportunities
Threats

Question 24

What do Strengths and Weaknesses relate to?

Answer 24

Strengths and weaknesses relate to the internal resources and capabilities of the organisation as well as customer perceptions.

Question 25

What do Opportunities and Threats relate to?

Answer 25

Opportunities and threats are externally orientated issues that can potentially influence the performance of an organisation or product.

(Information about these elements is normally generated through PESTLE analysis).

Question 26

What is a Weakness?

Answer 26

A weakness is something that an organisation lacks or performs in an inferior way in comparison to others.

Question 27

What is a Strength?

Answer 27

A strength is something that an organisation is good at doing or something that gives it particular credibility and market advantage.

Question 28

What is an Opportunity?

Answer 28

An opportunity is the potential to advance the organisation by the development and satisfaction of an unfulfilled market need.

Question 29

What is a Threat?

Answer 29

A threat is something that at some time in the future may destabilise and/or reduce the potential performance of the organisation.