Importance of Situation Analysis: To build a successful online business, a perfect online business system is required, and to create a successful online business system it is imperative to...Analyze the current situation of your business,
Set achievable goal,
Develop strategy/tactic,
Organize for the online presence (Action, Control & Form resources)
Situation Analysis helps you identify “Where Are You Now”, and from there on it will help you identify, “Where Do You Want To Go?” (Vision/Mission and Goals)
How to conduct a situation analysis before starting an online business?
Situation analysis is one form of business analysis. It further boils down to two categories - Internal (within your organization) and External (outside your organization).
- General Business Analysis
- Defining KPIs (Key Performance Indicators)
- SWOT Analysis
- Competitor Analysis
- Market Research and Demand Analysis
- Technology Analysis
- Online Intermediary Analysis (Online Distributors)
Internal analysis-(Factors that affect your internal business environment)
If you do not own any offline business, but interested to start an internet business then you should consider exploring internet business models
Ok, let's begin...
What is your online business idea?
Is it about selling products or delivering services?
Is it a new/innovative concept?
Let us consider that you currently own an offline business & here are the following areas for analysis...
General Business Analysis
What is your current offline business model? Retailer or Wholesaler or Manufacturer or an Agent...
What products you sell offline? Tangible or Non-Tangible...
Analyze your KPIs/Metrics
What are the key performance indicators that will identify online business’s success (This purely depends upon your business model and online business objective
Sample KPIs/Metrics
- Sales Conversion – Online product purchase
- Enquiries - That lead to offline purchase
- Online Registrations
- Cost per visitor
- Average order value
- Cost Per Page Views
- Average order size
- Toll-free number calling
- Awards – Win high profile award for any of the business functions like customer care
- Costs – Lessening the cost of particular business function
- Reach (New Visitors) – Reaching untouched customers. Are they qualified?
- New vs. Returning – How are the behavior of new and returning visitors? Who purchased online? Etc,
There could be many other KPIs/metrics that will define the success of your business, but remember KPIs must reflect your business goals. It has to be measurable and quantifiable. To know more about KPI Visit here and here
SWOT ANALYSIS: SWOT is a tool to explore business Internal Strength/Weaknesses and External Opportunities/Threats.
Definition: SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. Source: Wikipedia
What are your Internal – Strengths and weakness?
Strengths could be your specialization and expertise; Weaknesses could be lack of particular expertise
Examples for...
Strengths could be…
Unique product/services (with extra benefits/features)
Good offline reputation
Large clean and qualified customer database
Weaknesses could be…
No technical team to assist
Financially not very sound
Lack of ecommerce market knowledge.
External analysis: Outside your organization that will affect your business.
What are external – Opportunities and Threats
Opportunities are external factors that could help organization to trap the market.
Threats are changes in the environmental factors that could trash the business.
Opportunities:
Customer buying preferences
Not too much of competition
Threats:
Rapid change in technology
Two major competitors are online
Competition Analysis:
Under competition analysis you have to analyze how many of your competitors are online?
What is their business model? Click and mortar or Pure play online retailer?
What is their website strategy?
What extra benefits do they provide to their customers?
Market Research and Demand Analysis:
Market research is a powerful tool for any company to understand about the market they deal with. We all know that internet is loaded with full of information and resources. You can easily utilize these resources to define an unambiguous marketing strategy.
So, before taking your business online consider doing online market research….
The components of online market research
Who are your target audience? Understand your target market’s need and define who they are.
Where are they based? Your target audiences' geographic location
Are they buying products online? If not, why not?
If they buy products Online, What makes them to buy?
Segment your market
Define an online consumer buying process
Demand analysis includes - Does your product have demand over internet? You can do this by simply conducting keyword research.
How many of your customers prefer buying online? You also need to consider understanding, how many are cross-channel buyers (Search Online and Purchase offline)?
Technological Analysis: Examine what technology is needed to run and manage online business?
Intermediaries – Online and Offline:
How many online intermediaries (distributors) are available on internet?
Are your competitors are already working with them?
How to make partnership with these online intermediaries?
Conclusion:
Situation analysis is worth doing as this would further help you in deciding “Where you want to go?” (Your online business objective)
Business Analysis is definitely the best place to start. I think from there an internet business, or any business for that matter should come up with a plan of action for marketing, some would call this a marketing blueprint. This allows you to develop customer relations and increase business.
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