Monday, 23 January 2012

Essential Components of a Situational Analysis

The Situational Analysis is the single most important component of the 2012 CMA Case Exam. If you get this wrong and don't complete a proper and complete situational analysis, your entire case report will be based on incomplete or erroneous information. The analysis of the strategic alternatives as well as the recommendations are both based on the situational analysis - you will need to integrate the pros, cons and recommendations to the situational analysis. If you get it wrong, your integration, pros, cons and recommendations will all be poor.

The following are the essential components that make up a good situational analysis:

List in point form, and under the appropriate headings, every single Strength, Weakness, Opportunity and Threat that you can identify in the 2012 CMA Case Exam Additional Information and Backgrounder. A preliminary SWOT has already been provided so there is no need to repeat points that were already included in the provided SWOT, but make sure to add a comment stating that this SWOT analysis is in addition to the one already provided.

Make sure you understand the difference between Strengths, Weaknesses, Opportunities and Threats:
  • Strengths are internal (i.e. Experienced management, established brand, good reputation)
  • Weaknesses are internal (i.e. High Employee turnover, poor morale, declining sales)
  • Opportunities are external and relate to the industry as a whole (i.e. Strong economy, increasing incomes within the relevant demographic group, weakening competitors, bigger market)
  • Threats are external and relate to the industry as a whole (i.e. Increasing competition, poor economy, changing consumer tastes)
Internal Analysis
  • Briefly discuss the Strengths and Weaknesses that were identified in the SWOT and what this means to the company.
  • Stakeholder Preferences - Identify every single stakeholder and their respective preferences. List them in order of importance.
  • Constraints - Identify all relevant constraints. Two main types of constraints: Financial - i.e. maintain a certain Debt to Equity ratio, meet specified bank covenants. Non-financial - i.e. limited production capacity, limited shipping capacity
  • Goals - i.e. sales levels to achieve, market share to capture
  • Uncertainties - i.e. unstable economy, weather
  • Risks - i.e. potential key employee resignations, strikes
  • Mission and/or Vision Statement - If it is implied, put it into a proper Mission Statement format. If it is stated - don't just copy it into your report, be should to critique it.
  • Internal Financial Analysis - Do not spend too much time on this. It is easy to get lost in calculating dozes of ratios and discussing them but you will be loosing precious time and gaining minimal marks for such a thorough analysis – focus only on financial analysis that will help with the main issues. Do a thorough financial analysis on the backgrounder and use these result to help you decide which ratios/areas to focus on once you get the 2012 CMA Case Exam Additional Information.
  • Financing Available - Identify the financing available - list the amounts, conditions and sources of such financing (i.e. $2,000,000 through a line of credit at 2%, or $500,000 Bank Loan for capital projects)
External Analysis
  • Briefly discuss the Opportunities and Threats that were identified in the SWOT and what this means to the company.
  • Identify both the Key Success Factors (KSF) and the Key Risk Factors (KRF)
  • Industry Assessment - provide a brief assessment of the Industry and what this means to the company (i.e. Industry financial performance trends, key competitors, potential replacement products, changing trends)


  1. are we supposed do outside research to get more info on the industry for the assessment?

    1. Hi Jen, the for case exam you should focus on the info provided in the 2012 CMA Case Exam backgrounder and Additional info.

  2. How much time do we have to spend on situation analysis?

  3. I do not recommend spending more than 75 minutes on the situational analysis or you may run out of time at the other critical case exam components.

  4. Can you explain what Key Risk Factors should cover?

    1. I understand KRF as something that if it occurs it can have a significant adverse impact on the business. The emphasis here is a significant adverse impact, not just a minor adverse impact.

      For example in the automobile industry a change in interest rates can have some impact on the industry and subsequently on a car company but having a major safety issue/safety recall is something that I would classify as a key risk factor as it can be detrimental to a car company.

  5. Hi Case Master,
    For the financial analysis-ratios ,we need to benchmark them against industry average(i got this comment from the markers),but how do we know industry average if we can't do outside research?
    Thank you!

  6. I used the industry info provided in the case exam itself to calculate the industry ratios and to benchmark. If you are not allowed to do outside research and no industry quants are given, then I do not see how you could compare to industry averages.

  7. Can you please explain what Key Success Factors are

    1. you may want to check out this link, i personally found it very helpful in understanding KSF:

  8. Can someone provide a bit of commentary about KSF and KRF please. Thanks a million!

  9. My understanding is that KSF and KRF are external to the organization and would impact the entire industry.

    A key success factor for a restaurant would be "efficient pleasant service" or "consistent quality of food and service"

    A key risk factor would be "Canadians experience a significant decrease in disposible income".

    Each would impact all businesses in the industry not only the one you're preparing the case for.


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