The SWOT Framework is useful to understand a company’s internal and external environment.
SWOT Analysis provides a broad assessment into the competitive forces facing a company. “SWOT” is an acronym for Strengths, Weaknesses, Opportunities and Threats.
Strengths and Weaknesses correspond to the company’s internal capabilities and disadvantages in meeting the forces in the environment. Opportunities and Threats correspond to the company’s external environment.
The company should formulate and execute a strategy that takes into account the company’s internal company characteristics. In other words, the company is focused on what it can deliver. The environment poses potential disruptions, and includes the areas of opportunity and threats.
Strategy sits at the nexus between a company and its environment and provides a value proposition and market positioning. Strategy is about balancing these forces, and should be a fit with the company’s advantages and weaknesses. If, for example, a company has strengths in one area that are irrelevant to looming threats, that strategy is not a “fit.” In developing strategy, it is important to have clear objectives.
The SWOT framework should also be updated and conscious of time and changing dynamics, especially in today’s fast-paced global and digital economy.