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Also known as situational analysis, situation analysis is the process of identifying and evaluating all relevant factors connected with a particular situation. This type of approach may take place as a means of uncovering something that is not working right within a project or production process, or as a way of projecting the potential outcome of an action, given the circumstances that prevail at the present time. When used effectively, the process of situation analysis can minimize financial losses, boost marketing efforts, and generally make it possible to achieve and even exceed the expectations for a project.
One common application of situation analysis has to do with the marketing process. Here, the emphasis of the process has to do with looking at core factors that determine the success or failure of a given marketing campaign. In order to maximize the potential of the campaign, marketing professionals will consider the specifics of the intended customer base, and evaluate which methods can be used to reach those customers to best effect. The cost of the goods or services sold to consumers is also looked at closely, since the idea is to earn a profit from selling those products. Last, the marketing professional will look closely at the competition and determine what can be done to prompt consumers to turn away from competitors and favor the products marketed in the campaign instead. This process is often referred to as the “Three C’s” and can be applied to just about any type of marketing plan.
Situation analysis also works very well when looking at internal procedures within a business. For example, if the cost of production is higher than management believes it should be, examining the situation in detail can yield clues as to what can be done to lower the overall cost. As part of the analysis, factors such as labor, the cost of raw materials, the efficiency of any equipment used in the production process, and even the cost of packaging will come under scrutiny. If conducted properly, the analysis will identify any areas where improvements can be made, and what effect they will have on the overall cost of production.
One form of situation analysis that is commonly used in many different situations is known as SWOT analysis. With this model, the goal is to identify and evaluate all strengths, areas of weakness, potential opportunities, and possible threats associated with a given project or process. This basic approach can be used for everything from reworking operational processes to gaining a competitive advantage in an aggressive market.
Most companies I've worked for tend to do the opposite -- think up the most optimistic situation and then budget accordingly. The trouble that results from that analysis is, I think, predictable.
However, some companies are simply infested with people who view the world with rose colored lenses and frown upon those who don't do the same thing.