There is a close and continuous interaction between business and its environment. So it is essential to understand and scan the environment to ensure effective utilization of resources. SWOT analysis is an analysis undertaken by business firms to understand their external and internal environment.

The term SWOT consists of four words:

SWOT analysis is applied to formulate effective organizational strategies. Through SWOT analysis, the business firms can match Strengths and Weaknesses existing with an organization with the Opportunities and Threats existing in the external environment.