Situational Diagnosis Of A Company: How It Is Done, Importance, Example

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.

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

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.

– Little loyalty in consumers.

Threat of 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 demand evolution 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.


  1. Gustavo Samaniego (2020). Situational Diagnosis for Business Growth. My Company grows. Taken from:
  2. National Polytechnic School (2020). Thesis Economic and Financial Sciences (ICEF). Taken from:
  3. Mglobal Marketing (2020). Reasonable Marketing Notes. Taken from:
  4. CDL Insight Consulting (2020). 10 Reasons Why Business Diagnostics Are Important. Taken from:
  5. Rafael Ávila (2016). What is and how to make a business diagnosis. Light. Taken from:

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