SWOT analysis is a framework to examine a firm’s competitive position and strategy. By examining a firm’s Strengths, Weaknesses, Opportunities and Threats, SWOT evaluates a firm’s strategies to exploit its competitive advantages or defend against its weaknesses. Strengths and Weaknesses involve identifying the firm’s internal abilities or disadvantages, while Opportunities and Threats involve identifying external factors such as competitive forces, development of new technology, governmental intervention and/or domestic and international economic trends that influence a firm’s financial performance and business operations.
Any firm has strengths and weaknesses in the functional areas of business. No firm is equally strong in all areas. Internal strengths and weaknesses combined with external opportunities and threats created the grounds for establishing successful objectives and strategies.
The strengths of a firm provide a company a comparative advantage. A firm’s strengths that cannot be matched or imitated by competition are widely referred to as distinctive competencies. Generally, perceived strengths that build competitive advantages by exploiting distinctive competencies can include superior customer service, high-quality products, strong brand name, customer loyalty, innovative R&D, market leadership, and/or strong financial resources. To remain strengths, they must continue to be developed, maintained and defended.
The weaknesses of firm occur when competitors have potentially exploitable advantages over the firm. Generally, perceived weaknesses can include lack of marketing expertise, poor customer service, poor-quality products, poor reputation, undifferentiated products or services in relation to competition, an/or poor financial resources. Once weaknesses are identified, the firm can select strategies to mitigate or correct them. For instance, a domestic producer in a global market would rather invest in markets...
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