TOWS matrix is the application of SWOT analysis. TOWS Matrix illustrates how the external opportunities and threats facing a particular corporation can be matched with that company’s internal strengths and weaknesses to result in four sets of possible strategic opportunities.
| Internal Factors ______________ External Factors | Strength (S) | Weaknesses (W) |
| Opportunities (O) | SO Strategies Generate strategies here that use strengths to take advantage of opportunities | WO Strategies Generate strategies here that take advantage of opportunities by overcoming weaknesses |
| Threats (T) | ST Strategies Generate strategies here that use strengths to avoid threats | WT Strategies Generate strategies here that minimize weaknesses and avoid threats |
The TOWS Matrix is very useful for generating a series of alternatives that the decision makers of a company or business unit might not otherwise have considered. There are internal and external factors which are incompatible in feature. Strengths and Weaknesses are the under internal factors such as HR policies, internal functions, objectives and goals, product attributes, core values. Work culture, and fundamentals of the company.
Opportunities and Threats are the external factors which include government policies, dynamic nature of the market, evolving tastes and preferences of the customers, competition in the market, and fluctuation rates of the raw materials required for the production.
Strengths and Opportunities (SO) Strategy (Maxi-Maxi Strategy)
SO Strategy aims to utilize internal strengths to make the best use of the external opportunities for the firm. The firm uses the strength factors by using the available resources to cash in on potential opportunities.
Weaknesses and Opportunities (WO) Strategy (Mini-Maxi Strategy)
WO strategy is about maximizing the opportunities by minimizing the weakness factors. The companies revamp the internal weaknesses by making the use of external opportunities. It is always strategically opportune for the company to decline or correct the weakness and tap the opportunities.
Weaknesses and Threats (WT) Strategy (Mini-Mini Strategy)
The aim of the Mini-Mini Strategy is to minimize the weaknesses and decline the future threats. WT Strategy is considered as the defensive strategy in the TOWS Matrix. This strategy is applicable when there are less opportunities to explore and the company is in a downfall stage. The mini-mini strategy is a pessimistic style of liquidation of a company.
Strengths and Threats (ST) Strategy ( Maxi-Mini Strategy)
ST Strategy is to maximize the strength of a company while declining the threat to the company with the support of the strength factors. Companies take advantage of the internal strengths to avoid the external threats.
Advantages of TOWS Matrix
- TOWS Matrix interconnects the internal and external factors of the organization.
- TOWS Matrix is cost-effective in nature.
- TOWS Matrix is user friendly and it can be performed by anyone with basic learning about parameters.
- TOWS Matrix helps organizations to upgrade strategies with changing dynamics.
- TOWS Matrix is applicable to any industry and economies.
Disadvantage of TOWS Matrix
- TOWS Matrix is not effective and difficult to handle when there are overwhelming internal and external factors or information.
- TOWS Matrix only states the strategies using SWOT factors, it doesn’t assist in creating a strategic advantage.
- TOWS Matrix is the static assessment in time i.e. circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment are for the time being only.
- TOWS Matrix may lead firms to overemphasize a single internal and external factor in formulating strategies.
Illustrations
Strengths and Opportunities (SO) Strategies
- Walmart is a well recognized brand (strength) and a retail market leader (strength) and it can attract customers (opportunity) through bargains and offers discounts while other retailers cannot or do not do this so often.
- Apple has good financial condition (strength) and brand image (strength). Apple can use this position to diversify new product areas and generate sales and profits (opportunity).
- Starbucks has a well managed supply chain system and a good brand image (strengths) and it can work on these factors to expand its service in emerging markets.
- Xiaomi has a strong marketing and distribution channel (strength) and this can be used to attract new market and customers (opportunity).
- Reliance Industries has a low-cost structure (strength) and this can be used to increase sales volume and explore the new business perspective (strength).
Weaknesses and Opportunities (WO) Strategies
- Walmart lacks employee empowerment (weakness) therefore can work for employee empowerment and development to boost up the morale of the employees and lead towards the sustainable growth of the organization (opportunity).
- Apple is very selective with the products (weakness). Apple can create a larger product range and attract the middle class and serve new customer segments. (opportunity)
- Starbucks is highly priced (weakness) therefore, reducing the price or releasing medium priced products will let Starbucks to explore new customer segments and hence sales are increased (opportunities).
- Xiaomi is not considered good at product demand forecasting (weakness) and using innovation and investment in technology it can be efficient in demand forecasting and increase the sales of the company (opportunities).
- Reliance industries lack investment in new technology given the scale of expansion possibility of the company (weakness). Increasing investment in innovation and technology can provide opportunities for Reliance Industries to enter a new market.
Strengths and Threats (ST) Strategies
- Walmart has a strong brand image (strength) and it can get competition from its competitors (threats). This can be avoided by offering differentiated products at affordable prices.
- Apple is innovative and highly sophisticated (strength) and can use innovation to reduce the competitive pressure (threats).
- Starbucks has competitive and effective marketing and advertising activities (strength). Marketing to the millennial generation can help to capitalize on changing demographic trends (weakness).
- Xiaomi has a strong financial position (strength) and investment on intellectual property rights will help the company to have benefits against competitors (threats).
- Reliance Industries has a strong distribution network (strength) which can reach out more customers and help to fight off the threat from new entrants and other competitors(threats).
Weaknesses and Threats (WT) Strategies
- Walmart is facing tough times in operating in some countries. Therefore understanding and studying of the foreign market and adapting according to their culture to establish itself in such markets.
- Apple has limited product compatibility (weakness) and working on product compatibility can help minimize the competition (threat).
- Starbucks serves premium products (weakness) therefore serving medium price range products can help to compete in price from competing brands (threats).
- Xiaomi has high employee turnover (weakness) and providing incentive and increasing engagement will ensure employees do not leave and join competitors (threats).
- Reliance Industries has declining production in gas production (weakness) which has caused intense competition (threat). Restructuring of gas production could minimize the risk in production and provide tough competitions.
GENERATING ALTERNATIVE STRATEGIES BY USING A TOWS MATRIX CLICK!!!
Reference
- Wheelen, T. L., Hunger, J. D., Wheelen, K. E., & Hoffman, A. H. (2012). Strategic Management and Business Policy (13th ed.). United States of America: Prentice Hall.
- David, F. R. (2011). Strategic Management (13th ed.). Prentice Hall
- Schooley, S. (2019, June 23). SWOT Analysis: What It Is and When to Use It. Retrieved April 14, 2020, from https://www.businessnewsdaily.com
- Cuofano, G. (n.d.). What Is A SWOT Analysis And Why It Is Important. Retrieved April 12, 2020, from https://fourweekmba.com