SWOT analysis is an organized method of assessing a company's internal strengths and weaknesses and its external opportunties and threats. SWOT analysis relies on the basic premise that developing a critical internal and external view of reality will lead the manager to select the appropriate strategy for accomplishing the organization's mission, and thus, the goals. SWOT analysis allows managers to formulate a practical approach to planning based on a realistic assessment of a company’s situation. Any company can be assessed through SWOT analysis at any point in its history.

 When strengths and opportunities mesh, a company has leverage in the marketplace. As a hypothetical example, take a skin-products manufacturer with an extensive
inventory of high-strength sunscreen products when TV weather reports start announcing UV ratings regularly. On the other hand, when external threats assail a company's weaknesses, the company has a problem to address. This would occur if, when weather reports began to publicize UV ratings, the manufacturer had already decided to focus (and advertise and promote) suntan products rather than sunscreen products. In this case, the regular UV ratings would constitute a threat rather than an opportunity.