A situational analysis is a critical look at the present state of a business for the purpose of evaluating the current product offered, the present market, and the challenges in the way of the business' future plan. The analysis is important for strategic planning.
The situational analysis is conducted to develop the SWOT, or "strengths, weaknesses, opportunities and threats" framework, to guide future planning. In the process of performing a situational analysis, it is important to determine which areas of the company are performing at or above expectations and which areas are lacking. It is also important to evaluate market patterns and changes in customer preferences.