The Tows Matrix: A Modern Tool for Analysis of the Situation

The TOWS Matrix: A Modern Tool for Analysis of the Situation

Today strategy designers are aided by a number of matrices that show the relationships of critical variables, such as the Boston Consulting Group’s business portfolio matrix, which will be discussed later. For many years, the SWOT analysis has been used to identify a company’s strengths, weaknesses, opportunities, and threats. However, this kind of analysis is static and seldom leads t the development of distinct alternative strategies based on it. Therefore, the TOWS Matrix has beer introduced for analyzing the competitive situation of the company or even of a nation that leads to the development of four distinct sets of strategic alternatives)

The TOWS Matrix has a wider scope and a different emphasis from the business portfolio matrix. The former does not replace the latter. The TOWS Matrix is a conceptual framework for a systematic analysis that facilitates matching of the external threats and opportunities with the internal weaknesses and strengths of the organization.

It is common to suggest that companies should identify their strengths and weaknesses, as well as the opportunities and threats in the external environment; hut what is often overlooked is that combining these factors may require distinct strategic choices. To systematize these choices, the TOWS Matrix has been proposed, where T’ stands for threats, 0 for opportunities, W for weaknesses, and S for strengths. The TOWS model starts with the threats (Tin TOWS) because in many situations a company undertakes strategic planning as a result of a perceived crisis, problem, or threat,

Four Alternative Strategies

Figure 5-2 presents the four alternative strategies of the TOWS Matrix. The strategies are based on the analysis of the external environment (threats and opportunities) and the internal environment (weaknesses and strengths):

1. The WT strategy aims to minimize both weaknesses and threats and may be called the Mini—Mini (for “minimize—minimize”) strategy. It may require that the company, for example, form a joint venture, retrench, or even liquidate.

2. The WO strategy attempts to minimize the weaknesses and maximize the opportunities. Thus, a firm with weaknesses in some areas may either develop those areas within the enterprise or acquire the needed competencies (such as technology or persons with needed skills) from outside in order to enable it to take advantage of opportunities in the external environment.

3. The ST strategy is based on using the organization’s strengths to deal with threats in the environment. The aim is to maximize the former while minimizing the latter. Thus, a company may use its technological, financial, managerial, or marketing strengths to cope with the threats of a new product introduced by its competitor.

4. The SO strategy, which capitalizes on a company’s strengths to take advantage of opportunities, is the most desirable. Indeed, it is the aim of enterprises to move from other positions in the matrix to this one. If they have weaknesses, they will strive to overcome them, making them