The TOWS MATRIX is an acronym of the words: Threats, Opportunities, Weaknesses and Strengths.
The TOWS Matrix is an effective technique that emphasize on the external opportunities and threats while analyzing the internal strengths and weaknesses of a company. The marketers find a strategic alternative to assist the company to facilitate the external environment in correspondence to the company’s existing internal Strengths and Weaknesses. The TOWS Matrix acts as a valuable method whether you are creating a marketing plan, marketing campaign etc.
With the help of a TOWS Matrix, a company can easily identify how to take advantage of the opportunities, reduce threats, exploitation of the strengths and can prevail over the weaknesses.
In order to formulate different strategic alternatives, a company must consider the fact that a strategy is an art for planning in order to bring about the desired success of an organization. By identifying the strategic alternatives, a company comes across with various questions like:
- How to work effectively with the company’s strengths?
- How to overcome the weaknesses?
- Embrace some advantage of the opportunities?
- How to handle the threats?
The TOWS MATRIX does not only provide a list of strengths ,weaknesses ,threats and opportunities but works as a matching tool that helps to make a pair of internal and external factors to bring out better solutions in the current scenario of a company. The marketers/managers do not only evaluate the four strategies but strives how to match together all the external and internal factors to execute them in a best possible way.
According to Michael Watkins of Harvard Business Review , by focusing on the external factors i.e. the threats and opportunities at first can lead to a more productive outcome that elucidate what’s happening in the external settings rather to lay emphasis on the internal capabilities of a company.
THE TOWS MATRIX can be explained as the following:
Those attributes that makes the company stronger against its competitors and can be effective to achieve the desired objective. For example, a company who has the highest market share or produce the highest quality of a product against its rivals.
Those internal factors that can be risky for the company to achieve success in the future. For example: A company who possess an outdated technology and lacks innovation in products.
Those external conditions that can be helpful towards the attainment of the objective. For example: the new economic growth or the social changes in the environment might be an advantage for a company.
Those external settings that could be risky and harmful towards achieving the objective. For example: Changes in the consumer buying patterns or the competitor may come up with a product which has been more in demand.
The TOWS MATRIX helps to identify the strategic alternatives for a company that works as a matching tool by constructing four types of strategies such as:
- THE SO STRATEGY:
This is also known as Maxi –Maxi Strategy where a firm utilizes most of its internal strengths in order to grab the right external opportunities. For instance: A firm whose financial position is quite strong and posses low market share is able to introduce many innovative products in the market by making investment in the Research & development Department of the firm.
Mercedes Benz takes advantage of the external demand of their lavish vehicles and makes right use of the technical skills and quality of their products.
- THE WO STRATEGY:
The WO STRATEGY is also known as Mini- Maxi Strategy that can be used to overcome the weaknesses of a company by taking advantage of the opportunities, For instance: A firm who lacks skilled workers can utilize the opportunity by updating new technology in order to increase production. The internal weaknesses of any firm can also be improved by recruiting and training employees through learning additional technical skills.
A company who faces a decline in the financial sector can avail the opportunity of merging with a multinational company.
- THE ST STRATEGY:
The ST Strategy / Maxi-Mini Strategy is where a company through its strengths can avoid any kind of external threats. Any organization can refrain from external threats by avoiding any copied ideas, innovation in products of another organization. In a case with an organization that possess good quality of products but is facing threats against competitors who offers low priced products can adopt ST strategy by mass production of the products, therefore it will reduce the unit cost of production.
- THE WT STRATEGY:
However, The WT Strategy is difficult to implement in a situation with a company whose distribution channel tends to be weak, if it gets improved by chance, in that case it will be able to remove many external threats easily.
Following are the steps to construct a TOWS Matrix:
1- You need to identify and make a list of all the existing strengths of the organization.
2- Identify and list down the most important weaknesses of the organization.
3- List down all the external threats that are faced by the organization.
4- Similarly, make a list of all the opportunities that can be advantageous for the organization.
5- Now, to implement the SO strategy in the SO cell, you need to match the appropriate internal strengths with external opportunities.
6- In the same way, match the right internal weaknesses with external opportunities and type the correct WO strategy in the WO cell.
7- Similarly, make a match of internal strengths with external threats to type the right ST Strategy in the respective ST cell.
8- Match all internal weaknesses with external threats to construct the appropriate WT strategy.
The TOWS MATRIX is based on the fact as how a strategy can be implemented, it does not claim which strategy can work best to put into action. While creating the matrix, it’s important to denote each strategy with a notation as (S1, O2) which represents rationalization for each strategy that is being adopted.