The analysis of the internal assessment and external environment of an organization can be summarized into a Strengths, Weaknesses, Opportunities, Threats (SWOT) matrix. When distinguishing between an organizational weakness and an organizational threat to the organization, one should know that a threat is an external danger, while a weakness is an internal vulnerability. A threat is another organization’s ability to negatively impact your company’s ability to achieve its goals. For example, another company may have just announced the launch of a new product that performs better and costs less than your product does, thus making it difficult for your company to achieve its desired sales targets. We see this frequently in the automobile industry, less expensive car brands are now adding features to make their cars comparable to luxury brands. An example of a weakness within a company might be that little research and development funds are available, making upgrades to products more difficult to match your competitor’s new product.
By knowing the difference in strengths and opportunities, we can distinguish between an organizational strength and an organizational opportunity to an organization. Strengths are a company’s capabilities and resources that allow it to engage in activities to generate economic value and at times gain a competitive advantage. Strengths of a company can be its ability to create unique products, to provide high-level customer service, or to have a presence in multiple retail markets. Opportunities provide the organization with a chance to improve its performance and its competitive advantage. The best example of opportunities for companies would be the Internet. The Internet has provided numerous opportunities for companies to expand their product sales.
The SWOT matrix illustrates what the firm is doing well, where it can improve, what opportunities are available, and what environmental factors threaten the future of the organization. If a company were to use this matrix correctly, they will have more opportunities to bring more highly valued products to the market, improve productivity, and raise profitability.