SWOT analysis is the scan of internal and external environment of a company. It is the analysis that companies/organizations do to look into their strengths, weaknesses, opportunities and threats. Strengths and weaknesses are internal whereas the opportunities and threats are external. For the purpose of strategic planning the SWOT analysis is done. The information gathered from the analysis helps in matching the firm’s capabilities and resources necessary for survival and success in the competitive environment in which it operates.
These are the factors that help the firm gain competitive advantage over others players in the similar industry. Strengths include patents, first mover advantage, cost advantage, extensive distribution network, brand image etc.
These are the lacking’s that the firm has. Examples include inability to keep up with the technology, lack of patent protection, and lack of access to best natural resources and high cost structure etc.
These are the opportunities that are present in the external environment on which the company can cash upon for growth and success. Some opportunities include, changing trends, latent demand, arrival of new technology etc
The SWOT analysis then helps the firm with the SWOT matrix which is also known as TOWS. Through this the firm tries to cash upon the opportunities through the strengths it possess (S-O), overcomes the weaknesses through the opportunities (W-O), ways the firm can use its strengths to reduce its vulnerability to overcome threats (S-T), and establish a defensive plan to prevent the firm’s weaknesses from making it highly susceptible to external threats (W-T). (Anja, 2009)
Anja Böhm, (2009), The SWOT Analysis, GRIN Verlag, page 20-24.