Given that the shift to the marketing concept now requires firms to consider customer needs before designing a product, it is clear that no firm can consider itself in isolation. As such, it needs a clear understanding of the situation it finds itself in, from both the internal and external perspective. This includes considering customer tastes, the market environment, the behaviour and capabilities of the firm’s competitors, and the firm’s own capabilities and resources. Also, all these factors must be considered as dynamic and changing, and the firm thus needs to forecast any changes which may occur in its environment and situation.
The main framework which has been developed for analysing a situation is termed the 5 C framework. This is because it focuses on five key areas which are a critical part of the firm’s situation, and all of which begin with the letter C. The five areas are the company, its collaborators, its customers, its competitors and its climate.
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When considering the company, it is important to consider the existing product line, the company’s existing brand and market image, its key areas of technological advantage and experience, its internal culture and its ultimate goals. Collaborators is a catch all term for the company’s relationships with its distributors, suppliers and partner firms, and their capabilities and experience. The analysis of the customers primarily involves considering the various segments of the market, which are defined as specific sets of customers with similar needs that can be served by a single product. The firm must consider the needs of these customers, any motivation behind their purchasing decisions, which retail channel they will use, how they will obtain information and how they will make a decision as well as any relevant trends. The company must also consider any actual or potential competitors, both those with a directly competing product and one which could be considered a substitute, as well as their relevant positioning, market shares and strengths and weaknesses.
Climate analysis is a wide ranging term referring to the overall macro-environmental factors affecting the market. As such, it has a framework of its own: the so called PESTEL framework. This framework refers to the political, economic, social, technological, ecological and legal factors affecting the company. For example, a company looking to develop a new pharmaceutical product to treat a disease would need to consider the need to obtain regulatory approval from government bodies; the ability of customers to afford the treatment; the level of social concern around the disease it treats and the method of treatment; whether the technology exists to develop manufacture the drug; and any potential legal implications if the drug is found to be harmful.
Another useful framework for analysing a company is the SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats. This is primarily used for analysing the company and the climate: the company analyses its own strengths and weaknesses and how they relate to the opportunities and threats in the market. Ideally, the company wants to align its strengths with the opportunities in the market, whilst making sure that its weaknesses are not exposed to any potential threat.