Today strategy designers have been aided by a number of matrixes showing the relationships of critical variables. For example the Boston Consulting Group developed the Business Portfolio Matrix. More recently the TOWS Matrix has been introduced for analyzing the situation.
The TOWS Matrix has a wider scope and it has different emphasis from those of the Business Portfolio Matrix. The former does not replace the latter. The TOWS Matrix is a conceptual frame work for a systematic analysis that facilitates matching the external threats and opportunities with the internal weaknesses and strengths of the organization.
It has been common to suggest that companies identify their strengths and weaknesses as well as the opportunities and threats in the external environment. But what is often overlooked is that combining these factors may require distinct strategic choices. To systematize these choices the TOWS Matrix has been proposed. â€œTâ€? stands for threats, â€œOâ€? for opportunities, â€œWâ€? for weaknesses and â€œSâ€? for strengths. The TOWS model starts with the threats because in many situations a company undertakes strategic planning as a result of a perceived crisis, problem, or threat.
Internal strengths (S):
Management, operations, finance, marketing, R&D. engineering
Internal Weaknesses (W):
Anyone or some shown in (S)
External opportunities (O):
Current and future economic conditions, political and social changes, new products, services and technology
External threats (T):
Lack of energy, competition, and areas similar to those in (O)
Four Alternative Strategies
The strategies are based on the analysis of the external environment that is threats and opportunities and the internal environment is on weaknesses and strengths.
1. The WT strategy aims to minimize both weaknesses and threats. 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 certain 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 the outside, making it possible to take advantage of opportunities in the external environment.
3. The ST strategy is based on the organizationâ€™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 new products introduced by the competitors.
4. The most desirable situation occurs when a company can use its strengths to take advantage of opportunities (the SO strategy). Indeed it is the aim of enterprises to move from other positions in the matrix to this one. If they have weaknesses they will drive to overcome them, making them strengths. If they face threats they will cope with them so that they can focus on opportunities.