The concept of analysis of the situation of the company: to what extent is it a valid tool in business planning?

Typically, a poorly prepared business plan would definitely fail and can be attributed to one or more of the following factors: inadequate information about the industry, lack of competitors, and knowledge about the position of the business unit, i.e. strengths and weaknesses , opportunities, threat and unrealistic goals.

Good business planning could be the means to achieve this. Business planning could be described as the past of an ongoing ongoing activity related to the direction of the entire organization. It contains the mission, objectives, strategies, tactics and policies that will guide the organization to adapt to the environment during a specific period of time. A business plan is considered the backbone of the business unit. And as such, business planning involves vision and trying to follow it to achieve the goal.

Planning must lead to a specific course of action based on the objectives set by the organization. The plans are intended to produce positive results, but there is a possibility that this will not be done due to the constraints that may be inherent in the planning process.

Business planning should not be a blueprint, so to speak, but flexible and accommodating, so that it can be changed from time to time to successfully adapt to the general environment. For example, in the case of problems in a production process, those who run the issues, not necessarily the planners, could easily take corrective action.

Business planning could be done for both a new and an existing organization or business unit; The sequence is to define the mission statement of the company and then thoroughly analyze the situation in which the company is currently. This is the concept of business situation analysis.

Next in sequence is an organizational objective which is how the company should fulfill its mission and clarifies where the company wants to be. These, unlike the mission statement, must be quantified. Next, the choice of strategies follows, which are the concrete ideas that are aimed at achieving the objectives of the company; they are related to how the mission will be carried out.

There are two parts to putting together this analysis. The first entry relates to the macro environment of the organization and these are factors over which the company has little or no control. They are listed under four separate headings: political, economic, sociocultural and technological and are known by the acronym “PEST”. Some planners also add ‘Legal’ (for SLEEP) and environmental (PESTLE). This is the external audit part of what is called a company audit. A series of very brief statements are made regarding each of PESTLE’s subdivisions.

The second part refers to what is called internal audit; this considers the individual capabilities of the company, SBU by SBU, and again brief statements are made. Subsequently, a fundamental valuation process is carried out, the SWOT analysis. This SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is an attempt to translate the company-specific factors from the company audit into corporate strengths and weaknesses plus external environmental factors (from the PESTLE analysis) into external opportunities and threats. It should be noted here that strengths and weaknesses have to do with the internal environmental part of the situation analysis, while opportunities and threats have to do with the external environment. SWOT analysis is a simple tool to audit an organization and its environment and generate strategic alternatives based on the situation analysis. It is the first stage of business planning, it is applicable to the organization on the issues that potentially have the greatest impact and, therefore, it is useful when a very limited amount of time is available.

Internal and external situation analysis can produce a large amount of information and much of it is highly irrelevant, so the SWOT analysis serves as an interpretive filter to narrow the information down to a manageable number of key questions. By understanding these four aspects of its situation, a company can better leverage its strengths, correct its weaknesses, capitalize on opportunities, and remediate potential threats. The organization can also use the understanding of these situation analyzes as an evaluation criterion to judge the current state of the organization. An example of corporate strength can be found in the brand image of a company like Coca-Cola, which can be flawed, as when some newspapers reported that coca was contaminated, sales soared despite the report in Pakistan against Coca-Cola .

Google is reported to lack customer dependency. Your competitors have a much tighter control over customers because they have a lot of information about users. Opportunities are the opportunity to introduce a new product or service, while a threat could be the entry of competitors into the market.

Using as part of a situation analysis tool, corporate strengths and weaknesses can be identified by function area and / or key issues and each is discussed below. An example of issues (by function) to analyze includes marketing (market position) technology (e.g. R&D, product development) Financial (profitability, ROCE), etc. operational (JIT requirements, profitability, etc.) Human resources (skills and flexibility, competence, etc.) Human resources (skills and flexibility, competence, etc.) Human resources (ability and flexibility, competence, etc.) and management (attitudes towards innovation and change). Others are (for key reasons, the ability to achieve and maintain an adequate competitive advantage and market position in the medium and long term; ownership structure and the means of policy formulation, ability to develop and manage international or global activities, etc.

Having considered the internal analysis of the state of the company, a brief consideration of the external analysis through the opportunities and threats through the use of PESTLE analysis; Each word of the acronym is briefly analyzed for example:

Political:
The government in power can make (generally political) decisions that affect economic trends, market and industrial structure, and labor law. These can affect the business directly or indirectly.
Economic factors: exchange rates, interest rates, tax laws, etc. they also have a direct effect on the organization.

Sociocultural factors:
Social and cultural factors also affect the environment in which the organization operates. For example, education, income levels, and skills and competence will affect the organization.

Technological environment:
Analysis of the technological posture of the organization itself or the rate of technological advance prevailing in the industry, for example, the computer, electronics and automotive industries, could indicate the potentials of the company. People are more and more concerned about environmental problems like pollution, noise, destruction in every sense, even to campaign against certain products and, for that matter, interested companies.

Legal environment:
Morden (1993) writes that external environments can be analyzed in terms of the following:

Stability:
Variables within the extension environment show little or no change over long periods of time. This is the maturity stage. It shows a good relationship between the company and the stakeholders.
Moderately dynamic: variables show a limited degree of change over time, for example minor changes in technology.

Turbulent:
The variables show a significant degree of change over time. The situation may worsen with the entry of new participants and the departure of others. An example of the UK’s turbulent environment was the Building Companies Act 1986, which led to the deregulation of Building Companies and increased competition.

Turbulent with increasing exchange rates: Environmental variables show an increasingly rapid rate of change. This threatens the survival of existing operators who are not forward-thinking and therefore not innovative. The computer industry provides a good example when the founders of Google introduced a unique search engine that even took MSN by surprise. Innovation at this stage must be constant.

At the end of this analysis, the inherent threats and opportunities would have been discovered. Threats are the characteristics or variables that directly or indirectly threaten the very survival of the company. Some examples include political uncertainty and the global recession that present bottlenecks to growth. Opportunities may include changes in legislation, removal of barriers to international trade, and the emergence of “gray” markets.

For the business planner, having analyzed the business situation in depth as indicated above, and the corporate strengths and weaknesses, the external environment, environmental stability and the specific threats and opportunities identified, these can be used in the planning aspect. . For example, choosing the right strategy to exploit corporate strengths and external opportunities, as well as those to remedy corporate weaknesses and external threats. This is possible thanks to the knowledge of the general environment available to the planner as a result of the situation analysis.
Since the expected result of business planning is the successful positioning of the company armed with the previous information gathered, the situation analysis largely becomes a valid tool necessary to forge the future position of the company.

Reference:
1. Cole, GA (2000) Strategic Management, 2nd Edition, Continuum, London.
2. Development of chain stores. [http://www.angelfire.com/stars/tkchang/retail.htm] (consulted on 01/11/02).
3. Drucker, PF (1993) the Practice of Management; Butterworth and Heinemann, Oxford.
4. Bigley, AG Porter, L: W; Steers, RM; (1996) Motivation and Leadership at Work, Sixth Edition, McGraw Hill, Singapore