SWOT analysis is the analysis of an analysis of an Organisation's Strengths, Weaknesses, which are internal and Opportunities and Threats which are external in nature to an organisation. The objective of SWOT analysis is to examine within and around, important factors that influence business decisions. SWOT analysis is generally performed when an organisation is exploring new initiatives, revamping internal policies, considering opportunities to pivot or altering a plan midway through its execution. SWOT analysis is important because the Strategic direction of an organisation should be inline with its ability to successfully execute as wars are not won from the board rooms but on the battle ground.

Strengths:

Strengths as the name suggests are those aspects, which enhance the value of the products and services offered by the Organisation and provide a clear advantage over the competition. For example, if high-quality products are a norm in the industry or the customer segment that an Organisation caters to, then a high-quality product is not a strength but a necessity.

Weaknesses:

Weakness as the name suggests are those aspects, which hamper the growth of the Organisation or put them in a dis-advantaged position over the competition. Weakness could also be termed as limitations, which could arise from the business model. For example a contractor might be light on assets, but successfully executing projects by finding the right supplier and delivery partner. Not having an internal capability to execute the core business of the Contractor can be a weakness, but the ability to successfully create an ecosystem of delivery partners and successfully manage them is a strength and helping the Contractor to overcome the weakness. Context is very important in analysing the strengths and weaknesses. What is strength could turn into a weakness based on the circumstance and what is a weakness could be a strength. In the above example, if the ecosystem of delivery partners is shaken by circumstances such as bankruptcy of some of the partners due to market conditions, or unavailability due to excess workload or other reasons would hamper the organisation’s ability to deliver the project.

Opportunities:

Opportunities are scope for an organisation to enhance its market presence, value to customers, brand presence and similar aspects that would eventually result in an increase in Profit and / or Sales.

Threats:

Threats are factors external to the organisation which can negatively affect the business. These could be factors such as problems with supply chain, a shift in Customer needs and taste. An organisation with a strong risk management framework, strategy and team usually foresees such threats and has a contingency plan to tackle such situations. Threats are a result of the nature of the business, geographies the Organisation operate in as well as the business model. Often, threats could arise from an organisation's systems, policies and culture which are internal to the organisation that we discussed as strengths and weaknesses. For example an Organisation has a weakness of not being able to collect receivables intime from its customers, it might lead to the Organisations financing its operations from its capital instead of Customers revenue thus eroding profits or hampering growth as it is not able to invest its cash in growth. A worse threat could be the Organisation not being able to meet its debt obligations and falling behind in its repayment schedule leading to a series of bad cash management policies.

Summary:

The analysis of strengths and weaknesses works only when the organisation has an open culture that truly reflects into their systems, practices and listens to the feedback from the stakeholders such as suppliers and Customers. Without an open culture, it's very likely that organisations are blind to their true strengths and weakness resulting in an improper assessment leading to adopting a strategy not suitable for the Organisation. The Organisation would need a strong strategy and Risk Management team to spot Opportunities and Threats that arise from time to time. Frameworks such as PESTEL analysis can be used to evaluate the Opportunities and Threats.