SWOT (strengths, weaknesses, opportunities, and threats) analysis posits that to compete successfully in the market place, organizations need to consider concurrently both internal and external factors – some of which may be favorable to the organization while others may not. In the SWOT analysis, internal factors that drive firm performance are broadly classified into strengths and weaknesses. Businesses derive their strengths from superior skills and tangible and intangible resources that help them to perform better in the market place and thwart competition. Weaknesses are deficiencies and constraints that prevent a firm from performing optimally or succeeding in the market place. SWOT analysis also places emphasis on identifying relevant external factors that impact firm performance, and it broadly classifies them into opportunities and threats. Opportunities are trends and events outside the business that can significantly improve firm performance if appropriate actions are taken by the organization. Threats are environmental factors, which, in the absence of proper strategic response, are likely to result in significant decrease in firm performance and erode its competitive advantage
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