Situational Analysis or environmental analysis is process of assessing external and internal

environment in which organization is operating:

External environmental scanning includes basically focus on industry and macro environment. While
doing industry analysis we should focus on following factor:

 Market review – Basically the size of the market based on population,

demographics and income level. It includes market current scenario,
historical trends which will help us understand demand cycles and gives us
perspective about future demands of our products.
 Competitive review – Under external audit we focus on what our
competitors are doing and what are their strategies, how they are
performing in terms of market share, sales and profit growth. We should
also look at their strength and weakness which will act threat and
opportunity for us. It also helps us in figuring out the type of competitive
market we are in i.e., monopoly, oligopoly, pure competition.
 Distribution and selling channels review – Understanding the operation style
of distributer and selling partner.
 Customer – Knowing the end user, what, when and where and the
frequency of the purchase.
 Industry Supply – understanding supply side of business, whether industry
will be able to meet the foreseeable demand or not.
o Macro-environment analysis is done using PESTEL
 Political – Stable government and any upcoming polices which may impact
the market.
 Economical –GDP growth rate, inflation, fiscal deficit.
 Social- Demographical change and change in culture.
 Technology- New technology that may affect our products and production
techniques.
 Environmental – Extreme summer or winters impacts may impact business
adversely or favourably.
 Legal - related law and regulator changes (taxation, products

Internal environment scanning is basically understanding the organization through its marketing
goals and objectives, finances, organizational structure, resources and culture.

 Marketing Objective and strategies, its market share and sale no

 Product quality and new product development and product life cycle
 Branding, after sale service, distribution and promotion
 Cost and working capital, cash flow and financial soundness
 Machinery, economies of sales, available capacity
 Workforce skills, leadership mission and vision

Post doing the internal and external reviews outputs we can summarize its to understand the
organization strength, weaknesses, opportunity and threat.

Strengths and weaknesses tend to be internal and have to do with the past or the present scenario.

Opportunities and threats tend to be external to the organization and have to do with the future.