SWOT analysis is a management tool used for analyzing the internal and external business environment. The term SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. While strengths and weaknesses are used to analyze the internal environment of the business, opportunities and threats are utilized for the external environment analysis. SWOT analysis provides crucial information that plays part in matching organizational resources and capabilities to the competitive environment in which the company operates.
Strengths refer to internal characteristics that provide the company a competitive edge over its rivals. Some of examples of strengths include:
• Patents
• Strong brand names
• Management skills and resources
• Good reputation among customers
• Exclusive access to high grade natural resources
• Favorable distribution channels
• Production quality
• Technological skills
Weaknesses are internal characteristics that could affect adversely the performance of the company and impact on its level of productivity. In some cases absence of certain strengths can be considered as a weakness. Examples of weaknesses include:
• Absence of critical skills
• Weak brands
• Lack of patent protection
• Poor access to distribution channels
• Low customer retention
• Unreliable products and services
• Sub-scale
Opportunities are used to denote factors within the economy that present prospects for increased production, competitiveness and overall profitability. Examples of opportunities include:
• Unfulfilled customer needs
• Change in population age-structure
• Liberalization of geographical markets
• Technology advancement
• Lower personal taxes
• Loosening of government regulations
• New distribution channels
• Removal of international trade barriers
Threats refer to factors in the external environment of a business that could affect production and consequently influence survival and profitability. Some examples of threats include:
• Changes in consumer tastes away from the firm's products
• Increase in taxes
• Closing of geographical markets
• Emergence of substitute products
• New government regulations and policies
• Increased trade barriers
