Developing a strategy starts with a complete evaluation of a company's situation--both internal and external. This evaluation is called a SWOT Analysis. The acronym SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The S and W refer to the company's internal environment; its own strengths and weaknesses. The O and T refer to the external environment. The company's external environment is composed of both the macro and the micro environment.
It is important for the company to analyze the entire external environment to find attractive opportunities and identify threats. The goal is to align the company's strengths to seize the opportunities and eliminating or minimizing weaknesses to overcome threats. The SWOT Analysis then serves as an input for strategy development.
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