- How is a situational diagnosis made?
- - Analysis of competitive forces
- Rivalry between competitors
- Substitute product threat
- Threat of entry of new competitors
- Bargaining power of clients
- Bargaining power of suppliers
- - SWOT analysis
- Internal analisis
- External analysis
- - Critical factors of success
- - Identification of problems
- Importance What is it for?
- Check the effectiveness of processes and strategies
- Better understand business performance
- Identify weaknesses and strengths
- Identify threats
- Identify and seize opportunities
- Goal development
- Identify skills in the workforce
- Improve employee engagement
- Example of a situational diagnosis of a company
- - Analysis of competitive forces
- Substitute product threat
- Threat from new competitors
- Bargaining power of clients
- Bargaining power of suppliers
- - SWOT analysis
- Internal analisis
- External analysis
- - Critical factors of success
- - Identification of problems
- References
The situational diagnosis of a company is a procedure carried out to understand the scenario in which a company finds itself in the present, in order to identify the different problems that exist and their respective importance.
After identifying the problems, we proceed to analyze the factors or causes that establish them, in addition to the perspective of the organization if these problems continue. It is used to make decisions and to carry out tasks that guarantee a sustainable and healthy development of the company.
Source: pxhere.com
The situational diagnosis also serves to identify the needs for strengthening and opportunities for improvement to facilitate the evolution of the company. In this case, it is usually done by consulting companies.
It is a simple instrument, as well as great utility for planning and management. Its purpose is to know the current situation of the company or business, and the inconveniences that prevent its survival, growth, expansion and development.
The situational diagnosis of a company not only encompasses internal analysis but also an external analysis, because the organization is deployed in an environment that influences its operation.
How is a situational diagnosis made?
The situational diagnosis is structured in the analysis of:
- Competitive forces.
- SWOT analysis.
- Success factors.
- Problems.
- Analysis of competitive forces
Rivalry between competitors
It consists of knowing the level of competition within the sector. It allows comparing the competitive advantages of the company with those of emp
opposing resas.
Substitute product threat
It refers to the potential income of companies that sell alternative products to those of the industry. It allows to state strategies to stop the entry of these companies or to be able to compete with them.
Threat of entry of new competitors
It refers to the potential income of companies that sell the same kind of product. It allows formulating strategies to reinforce entry barriers or face competitors who manage to enter.
Bargaining power of clients
It refers to the power that buyers have to obtain good commercial conditions. It allows setting strategies to attract more customers and also achieve greater loyalty.
Bargaining power of suppliers
It refers to the power that suppliers have to make fewer concessions and thus increase their prices. It allows to enunciate strategies to improve the conditions.
- SWOT analysis
Personal SWOT analysis scheme or personal SWOT
Evaluation carried out on the company to record strengths, opportunities, weaknesses and threats. It is useful for making decisions about improving the situation of the company and also for defining strategies.
Internal analisis
Detect the weaknesses and strengths of the company that cause disadvantages or competitive advantages.
External analysis
It is used to identify and analyze both threats and opportunities in the market.
- Critical factors of success
They are the aspects that guarantee the competitive performance of the business. If they fail they could lead to the failure of the company. The company can control these factors and if it excels at them to achieve a long-term competitive advantage.
- Identification of problems
Problems are those factors that hinder the achievement of objectives, thus hindering the development of the company's operations. Therefore, they must be resolved gradually, concentrating efforts on the most vulnerable and important.
Importance What is it for?
Situational diagnosis is important for several reasons:
Check the effectiveness of processes and strategies
Each company has a series of processes and also strategies to guide its activities. The only way to evaluate the effectiveness of these is by diagnosing the business, thus allowing you to discover what is working and what should be modified or removed from the system.
Better understand business performance
Business diagnostics helps to better understand the functioning and performance of an organization. Before you can design a more effective business, you must understand the current state of the business.
Identify weaknesses and strengths
The situational diagnosis will identify the strengths and weaknesses, thus helping to determine the possible courses of action to follow.
Identify threats
Threats need to be identified before they become serious problems for the business to function optimally.
Identify and seize opportunities
The business diagnosis will help to identify new opportunities and also the best way to capitalize on them.
Goal development
After assessing the situation, you can create goals that help your business grow. These stated objectives will be more feasible, as they are formulated with knowledge of the prevailing conditions.
Identify skills in the workforce
The diagnostic can be used to assess employee potential as well as business needs to help plan career management and training activities.
Improve employee engagement
The diagnosis gives a clear idea of the extent to which employees are engaged. Employees who are not fully engaged are less productive and are also more likely to leave the company.
Example of a situational diagnosis of a company
- Analysis of competitive forces
Substitute product threat
For example, mineral water is a substitute for soft drinks and jam is a substitute for butter. This threat happens by:
- Insufficient advertising of existing products.
- The price of the substitute product is lower than that of the existing product.
- Low cost for consumers to exchange a product for another substitute.
- Low consumer loyalty.
Threat from new competitors
When new companies can easily enter, competitive momentum increases. However, there are entry barriers such as:
- Need to obtain specialized knowledge and technology.
- Great need for capital.
- Strong consumer loyalty to certain brands.
- Market saturation.
- Lack of access to materials.
Bargaining power of clients
The fewer buyers, the greater your negotiating capacity. It also happens when:
- Consumers buy in volume.
- There is no differentiation in the products.
- Consumers are well informed about the products.
- Consumers can easily switch to substitute products or also competing brands.
- Sellers suffer a decrease in demand.
Bargaining power of suppliers
While there are fewer suppliers, the greater your bargaining power. It also happens when:
- Companies make low-volume purchases.
- The cost of changing from one raw material to another is high.
- There are few substitute raw materials.
- SWOT analysis
Internal analisis
- Positioning and market share, prices and advertising.
- Costs and manufacturing capacity, quality.
- Training, selection and remuneration of personnel.
- Organizational structure, control process of the company.
- Level of financial debt, liquidity and profitability.
External analysis
Define the segmentation and size of the market, consumer wishes and evolution of demand. In addition, analyze political, economic, legal, technological factors, etc.
- Critical factors of success
Define the products and also the processes, customers, suppliers, competitors, distribution channels, etc. Determine the conclusive factors for the business to be successful and those that would cause the business to fail.
- Identification of problems
- Directly, through signs in the environment.
- Analyzing variations in the historical behavior of the company.
- Anticipating the trends of the indicators.
- Cause-effect analysis.
References
- Gustavo Samaniego (2020). Situational Diagnosis for Business Growth. My Company grows. Taken from: growmycompany.com.
- National Polytechnic School (2020). Thesis Economic and Financial Sciences (ICEF). Taken from: bibdigital.epn.edu.ec.
- Mglobal Marketing (2020). Reasonable Marketing Notes. Taken from: mglobalmarketing.es.
- CDL Insight Consulting (2020). 10 Reasons Why Business Diagnostics Are Important. Taken from: cdlinsight.com.au.
- Rafael Ávila (2016). What is and how to make a business diagnosis. Light. Taken from: blog.luz.vc.