Writing a Business Plan: Situational Analysis (Market Research)

Situational analysis is all about conducting market research for drawing a strategic plan and a marketing plan. After conducting market research, you expect to understand the structure of your company’s customer, the company itself, and your current and future market/industry/competitors. As you go through your market research, use and cite sources to support your claims.

Customer Analysis

Customer Analysis describes the customers. Naturally, to know your customers, you should clarify what product/service your firm offers. Then, you ask the following questions in the mentioned order:

  • Who are your customers? (think STP of marketing)
    • What are the characteristics of your customer segments?
    • Who are your target customers?*
  • What is the market size for your product?**
  • What is the market growth?
  • What are other market trends?

* Your target customers are your best customers. These are the people who most need your product, who see the most value in your product, and are willing to spend money on your product.

** Typically, in a business plan, you should use figures to summarize lots of information. Also, draw figures based on factors that define sale (e.g. pregnant population for birth control pills, not general population)

Industry Analysis

Industry analysis is a description of the industry in which your firm operates. It contains (1) your firm’s background information, (2) industry overview, and (3) competitor insight.

Background Information describes how you will market and operate your company. It leads you to the kind of industry you operate in.

Industry Overview is a description of your industry. It describes your industry, how it works, its value chain, its history, its current and future profitability landscape (see Business Strategy: External Analysis), and the implications for your company. Industry analysis involves thorough research and insight gathering into your competitors (a.k.a. competitor insight), including identification and description of who you competitors are and educated predictions of where they would invest their time and effort in the future.

Internal Analysis

Internal Analysis is a description and an analysis of your company’s strengths and weaknesses in a particular industry. It is described in detail in my post on Business Strategy: Internal Analysis.

Strategy Formulation

While the firm’s business strategy is not necessarily covered in business plans, I think it is important to include a SWOT table and a PESTLE analysis summarizing your market research and then to lay out a brief description of the strategic position you hope to occupy in your industry. There are many online resources available that teach you how to conduct a SWOT table and PESTLE analysis. I have covered strategy formulation here in my blog.