A SWOT analysis summarizes key external issues from the business environment and the internal strategic capabilities of an organization. The SWOT analysis can therefore be used for strategy development, and be used as a basis for generating strategic options. Likewise, a SWOT analysis can be used to asses future courses of strategic actions.
In short, a SWOT analysis tries to evaluate whether or not a company's strengths and weaknesses are relevant to the business environment, and whether or not the company's strengths and weaknesses are balanced, so that the company can handle the changes taking place in the marketplace.
A SWOT analysis groups key pieces of information into two main categories:
Internal factors are presented as the strengths and weaknesses internal to the organization. These factors may shed light upon which processes the company masters, and which processes are not being handled satisfactorily to be competitive.
External factors are presented as the opportunities and threats presented by the external environment to the organization. These external factors may be evaluated using the
PESTEL Framework that tries to evaluate macroeconomic factors affecting the company and its strategies. Likewise, companies should monitor its competitors, and their relative strength and importance.
An example of a SWOT analysis is presented at the bottom of this article.