Posted: December 27th, 2015

The structure of the company – ask yourself whether the structure is hierarchical or flat? Where does real power lie? What is the mission? Has the company any underlying philosophies

1. Situation analysis

This will provide you with a thorough understanding of the situation in which a business operates.  So you will need to assess:

• The structure of the company – ask yourself whether the structure is hierarchical or flat? Where does real power lie? What is the mission? Has the company any underlying philosophies? What are its key characteristics? Is managerial activity based on functions? Who are the key decision-makers? Are there any informal power bases?
• The financial position – balance sheets, income statements, ratios showing profitability (e.g. gross profit margin, net profit margin, return on assets, return on net worth), liquidity (e.g. current ratio, quick ratio, inventory to net working capital), leverage (debt to assets ratio, debt to equity ratio, long-term debt to equity ratio) and activity ratios (e.g. Total assets turnover, fixed assets turnover, inventory turnover).
• The company’s marketing organisation – evaluating marketing research processes, marketing information systems, maintenance of the product portfolio (including new product development), pricing strategies, distribution policy and all aspects of marketing communications.
• Market analysis –size and trends of the market; market segments and which customers/segment is the company targeting.  Customer analysis – who? What are their characteristics? What are their needs? What is the buying process? What influences their demand? What do they feel about the product/service? What do they reckon of competing products/services?
• The external market – PEST analysis, 5 Forces, opportunities and threats. Understanding the competition (the key players; share of market; the competitive positions held by the players – leader, challengers, followers, nichers; levels of aggression; the basis of competition)