The 5C analysis is a situation analysis tool that helps you identify and evaluate the environment in which your company operates. 5C analysis is named by the first letters of its main elements: Company, Collaborators, Customers, Competitors, and Climate.
The 5C analysis is an extended version of the 3C’s model which was developed by Kenichi Ohmae, a Japanese specialist in strategic management. The 3C’s model includes only three elements: Company, Customers, and Competitors.
The internal environment is the factors that determine the technical and organizational conditions of the company and are the result of management decisions. These factors can be controlled by the organization. In other words, we can say that the internal environment of the company is everything that is located and occurs within the organization itself.
In the 5C model, the Company element belongs to the internal environment.
The company’s analysis includes an assessment of the company’s capabilities, aimed at determining the current state of the business, its strengths and weaknesses, and identifying strategic problems. This category may include the following types of analyses:
- Company goals: mission statement, vision statement, financial, long-term, and etc.
- Marketing strategy: product, price, promotion, distribution.
- Resources: people, finance, information, technology, and so on.
- Image on the market
- Corporate culture
The external environment is the factors that arise independently of the organization’s activities and have a significant impact on it. The external environment is divided into two types: Micro-environment и Macro-environment.
The micro-environment includes the following elements of 5C analysis: Collaborators, Customers, and Competitors.
Collaborators are people with whom your company works to maintain its functioning. These are the people who work with you to improve and expand your capabilities. In this category, usually, analyze:
- Service providers
- Partners and investors
You can increase your company’s profit if you get a clear idea of who your customers are, what they want, and how well your product meets their needs. This category includes analysis in the following areas:
- Target audiences
- Customer motivations and behaviors
- Communication channels
- Customer perceptions
- Market size, segments
- Customer satisfaction
Knowing your competitor’s position in the market, its strengths and weaknesses will give you a huge advantage. Your company will not be able to compete effectively if you don’t know who your competitors are.
In this category, as a rule, the following aspects are considered:
- Current and potential, direct and indirect competitors
- Competitor‘s strengths and weaknesses
- Competitor’s strategies and tactics
- Competitor’s opportunities and threats
- Products and market share
The macro-environment is an uncontrolled factor that affects all participants in the micro-environment, including your company. The macro-environment includes the element of 5C analysis – Climate.
Another name for this element of 5C analysis is Context. This is about analyzing external factors that, regardless of your efforts, can affect the performance of your company. To analyze Climate, you can use the PEST analysis or its extended version, the PESTEL analysis.
The PEST analysis consists of Political, Economic, Social, and Technological factors.
The PESTEL analysis:
- Political state: taxation policy, trade regulations, unemployment policy, etc.
- Economic state: inflation rate, interest rate, the proportion of pensioners, etc.
- Social-cultural state: values, beliefs, religion, education, etc.
- Technological state: social media, Internet, research and development, etc.
- Environmental state: waste disposal, energy consumption, pollution, etc.
- Legal state: labor law, advertising regulations, product safety, etc.
By performing the 5C analysis and identifying your company’s strengths and weaknesses, you can make better informed and more profitable decisions.