24 Marketing Dynamics Copyright Goodheart-Willcox Co., Inc. LO 2.1-2 Situation Analysis To properly prepare a marketing plan, the environment in which the business operates must be evaluated. A business cannot determine where to go or how to get there without knowing where it has been. A situation analysis is a snapshot of the environment in which a business has been oper- ating over a given period of time, usually the last 12 to 16 months. The situation analysis evaluates internal and external environments as they relate to marketing and sales. SWOT Analysis A SWOT analysis identifies strengths, weak- nesses, opportunities, and threats the business faces. It is an internal analysis that helps to explain why the company’s product is different or better than those offered by the competition. • Strengths are internal factors that give a s company a competitive advantage. • Weaknesses are internal factors that place s a company at a disadvantage relative to competitors. • Opportunities are external factors that provide s chances for a company to increase profits. • Threats are external factors, such as the s economy, that can potentially jeopardize a company’s growth or ability to make profits. For example, a SWOT analysis looks at whether the business offers a wider variety, better prices, or better sizing than the competitors. A SWOT analysis can be presented similar to the format in Figure 2-3. Environmental Scan A review should be completed of the external environment that the business will encounter. An environmental scan is an analysis of the external factors that affect the success of business. One way to complete an environmental scan is to conduct a PEST analysis, which is an evaluation of the political, economic, social, and technological factors in a certain market or geographic region that may impact the success of a business. This process identifies potential opportunities and threats to a company’s business plans and strategies. • Political factors affect the stability of the s government and the success of the businesses that operate within it. SWOT Analysis Threats • Downturn in economy imp ctst demand • Potential produ d t redesig by competitiont Str n t s • E tab ished b and n • Con o inued e dem nd for product • E celle t cus ome s rvi e Weaknesses k es • Higher price tha competition i • Online-only availability v l i • Limited capital i to expand xp d di trib tion Opportunities pp • Partner a e w th big box o retailers t to broad o n ava v lability i • Recall ec l of com c etitor’s p oduct d • Promote environmentally n e l responsible n i companyn Goodheart-Willcox Publisher Figure 2-3 A SWOT analysis identifies strengths, weaknesses, opportunities, and threats the business faces.