Looking inside for competitive advantage

Abstract

Executive Overview Strategic managers and researchers have long been interested in understanding sources of competitive advantage for firms. Traditionally, this effort has focused on the relationship between a firm's environmental opportunities and threats on the one hand, and its internal strengths and weaknesses on the other. Summarized in what has come to be known as SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis, this traditional logic suggests that firms that use their internal strengths in exploiting environmental opportunities and neutralizing environmental threats, while avoiding internal weaknesses, are more likely to gain competitive advantages than other kinds of firms.1 This simple SWOT framework points to the importance of both external and internal phenomena in understanding the sources of competitive advantage. To date, the development of tools for analyzing environmental opportunities and threats has proceeded much more rapidly than the development of tools for analyzing a firm's internal strengths and weaknesses. To address this deficiency, this article offers a simple, easy-to-apply approach to analyzing the competitive implications of a firm's internal strengths and weaknesses.