If you are looking to develop an effective business growth strategy the TOWS Matrix can be a useful tool to help you to identify and analyse the strengths, weaknesses, opportunities, and threats of your organisation.
If it sounds familiar then that is because it is an extension of the well-known SWOT analysis. Both tools can be used together to evaluate and improve your organisation's or team's plans. You can also use them to analyse a procedure, marketing strategy, and even your career. You can read more about using a SWOT Analysis for your career here.
TOWS and SWOT analyses are both tools used for strategic planning, but they differ in their approach and focus.
SWOT analysis is an acronym for Strengths, Weaknesses, Opportunities, and Threats. This analysis is used to identify and evaluate the internal and external factors affecting an organization. In a SWOT analysis, strengths and weaknesses are considered internal factors, while opportunities and threats are external factors. The purpose of the SWOT analysis is to identify areas where the organisation can improve and take advantage of opportunities, as well as to identify potential threats that need to be addressed.
TOWS analysis, on the other hand, is a tool that builds on the SWOT analysis by combining the internal and external factors to generate strategic options. TOWS stands for Threats, Opportunities, Weaknesses, and Strengths. In a TOWS analysis, the external factors are identified first, followed by the internal factors. The purpose of the TOWS analysis is to develop strategies that take advantage of strengths and opportunities, while addressing weaknesses and threats.
In essence, TOWS analysis is a more action-oriented approach, building on the insights generated by the SWOT analysis to develop strategies and action plans. It emphasises the need for proactive responses to both external and internal factors, while SWOT analysis is more focused on identifying areas for improvement and potential risks.
TOWS analysis process
When conducting a TOWS analysis, it is important to first identify your organisation’s external environment, including the competitive landscape, customer needs, and the external forces that may impact your organisation. Once you have identified the external environment, you can create a TOWS matrix, which can help you identify potential strategies.
Step 1: Identify the objective
Determine the main objective for conducting the TOWS analysis. This could be a general goal or a specific issue that needs to be addressed.
Step 2 - Do a SWOT analysis
Identify the internal and external factors affecting the organisation by conducting a SWOT analysis. This involves listing the organisation's strengths, weaknesses, opportunities, and threats.
Step 3: Translate your findings using a TOWS matrix
Once the SWOT analysis is complete, the next step is to match the internal and external factors. This involves taking the strengths and weaknesses identified in the SWOT analysis and matching them with the opportunities and threats identified. After answering these questions, match external opportunities and threats with internal strengths and weaknesses.
The TOWS matrix consists of four rows and four columns. The rows represent the external environment (threats, opportunities), and the columns represent your internal environment (weaknesses, strengths). Each combination of rows and columns represents a particular strategy. For example, if you have a strength that can be used to capitalise on an opportunity, it would be listed in the Strengths x Opportunities quadrant.
Strength 1 is combined with Opportunity 1 and is written in the S-O Strategy 1 quadrant of the matrix and so on.
The order does not matter. What matters is that each external factor is combined with each internal one in order to improve strengths and opportunities and eliminate threats and weaknesses.
Step 4: Link & assess your strategic options
Using the matched internal and external factors, generate a list of strategic options that address the organisation's weaknesses and threats while taking advantage of their strengths and opportunities. Consider multiple options for each quadrant of the TOWS analysis, as this will help to identify the most effective strategies.
For each combination of internal and external environmental factors, consider how you can use them to create good strategic options:
Strengths & Threats (ST)
This quadrant suggests how to use strengths to overcome threats. Go through every strength identified in the SWOT and then map out how they can be used to eliminate or at least minimise the threats that exist externally.
Weaknesses & Threats (WT)
This quadrant highlights the weaknesses that need to be addressed to avoid threats. In this part, the aim is to come up with different strategies that mitigate both the internal weaknesses of an organisation along external threats. These strategies are also known as defensive strategies because they essentially defend the organisation from deterioration and potential collapse. Put these into place to protect yourself from loss. However, don't rely on them to create success.
Strengths & Opportunities (SO)
This quadrant highlights the strengths that can be used to take advantage of opportunities. Here, the goal is to formulate strategies that employ the use of all internal strengths to make the most of the external opportunities that present themselves
Weaknesses & Opportunities (WO)
This quadrant suggests ways to overcome weaknesses by taking advantage of opportunities. This quadrant is about coming up with strategies to get rid of as many internal weaknesses as possible by using external opportunities.
The alternatives you identify in this step are your strategic options.
Step 4: Evaluate your strategic options
Evaluate the options you've generated, and identify the ones that will have the greatest benefit, and that best achieve the mission and vision of your organisation.
Example so far:
By combining your strength of brand equity, you can use the opportunity to expand into newer markets. Similarly, improve your sustainability by using the opportunity of having newer markets to step into to eliminate a significant weakness.
International status, which is a huge strength, has enabled the organisation to be at the forefront of emerging consumer trends, thereby getting rid of the threat of changing trends.
In the last quadrant of defensive strategies, the sustainability issue can be improved by entering into a country where the threat of competition is low. This will provide the opportunity for growth.
Here is another example:
Company XYZ is a medium-sized online retailer that sells clothing and accessories. They have recently noticed a decline in sales and are looking to revamp their strategy. Here's an example of a TOWS analysis they could use:
Increased competition from other online retailers
Changes in consumer preferences
Growing market for sustainable and eco-friendly products
Increased use of social media for advertising
Expanding into international markets
Limited product range
Inconsistent product quality
Lack of brand awareness
Strong customer service
Quick and reliable delivery
Established customer base
Based on this analysis, Company XYZ can use the following strategies:
SO strategies (leverage strengths and opportunities):
Expand product range to include sustainable and eco-friendly products
Use social media to increase brand awareness
Explore opportunities to expand into international markets
WO strategies (address weaknesses and leverage opportunities):
Improve product quality and consistency, while emphasizing eco-friendliness
Increase marketing efforts through social media to improve brand awareness
Expand into international markets to increase revenue and improve brand recognition
ST strategies (leverage strengths and address threats):
Offer high-quality and sustainable products to differentiate from competitors
Emphasize the reliable and quick delivery to compete on service
Enhance customer service to retain loyal customers during an economic downturn
WT strategies (address weaknesses and threats):
Improve product quality to better compete against other retailers
Diversify product range to adapt to changing consumer preferences
Reduce costs to offset potential economic downturn
By using TOWS analysis, Company XYZ is able to generate a range of potential strategies that consider both internal and external factors, and identify opportunities for growth while addressing potential challenges.
Step 5: Evaluate and prioritise options
Once you have generated a list of strategic options, evaluate each one and prioritise those that are most likely to be successful. Consider factors such as the feasibility of the strategy, the resources required, the potential return on investment, and risks.
Step 6: Develop an action plan
After identifying and prioritising the most effective strategies, develop an action plan that outlines the steps needed to implement the strategies. This should include specific actions, timelines, and responsibilities for each step.
Step 7: Monitor and adjust
Finally, monitor the implementation of the action plan and make adjustments as needed. Regularly review the TOWS analysis and action plan to ensure that they remain relevant and effective in achieving the organisation's goals.
TOWS analysis is an effective tool for strategic planning, as it allows organisations to identify potential strategies from both the external and internal environments, prioritise, and then plan how to implement them. In addition, TOWS analysis is a more positive approach to strategic planning than SWOT, as it focuses on the external environment and its potential opportunities.