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By analyzing external and internal environments, businesses can identify their threats, opportunities, weaknesses and strengths. They can learn to use techniques to devise strategies effective for a team, department or the entire organization. Big firms such as Apple and Nestle have used the TOWS matrix to sustain their businesses and navigate rough patches, increasing their brand value.
Here we discuss the TOWS matrix in strategic management as a strategic option for business managers and leaders. We’ll look at the TOWS matrix meaning and TOWS matrix example to help explain TOWS matrix to professionals.
TOWS Matrix Meaning
TOWS matrix can be defined as a framework to create, compare, decide and access business strategies. It stands for Threats, Opportunities, Weaknesses and Strengths. It examines a business from an approach that references marketing and administration. Most people wrongly assume that the difference between SWOT and TOWS matrix is just a rearrangement of the letters of the two acronyms. Although not huge, the difference between SWOT and TOWS from a practical standpoint comes down to the fact that SWOT emphasizes the internal environment (strengths and weaknesses) while a TOWS matrix analysis focuses on the external environment (opportunities and threats).
The external environment has factors such as the nature of a market, competition, government policies, changing preferences and fluctuating rates. The internal environment consists of processes, HR policies, goals and objectives, core values and other factors. The amalgamation of an organization’s internal weaknesses and strengths with external threats and opportunities is integral to the evaluation process of TOWS matrix in strategic management.
A TOWS matrix example will show that there are four main strategies involved. They are:
1. Strength And Opportunity SO
SO or Maxi-Maxi strategy utilizes internal strengths to maximize or optimally use external opportunities available to an organization.
2. Strengths And Threats ST
ST or Maxi-Mini strategy maximizes the strengths of a business and minimizes the threats using those strengths.
3. Weakness And Opportunity WO
WO or Mini-Maxi strategy’s aim is to minimize weaknesses of an organization and maximize opportunities. This strategy revamps internal weaknesses by using external opportunities.
4. Weakness And Threats WT
The WT strategy, also known as the mini-mini strategy, aims to minimize threats and weaknesses. A TOWS matrix example will show that it’s a defensive spot in the matrix that is utilized by businesses in adverse situations.
These strategies are laid down in a 2×2 matrix by listing all elements of strengths, weaknesses, threats and opportunities to develop a TOWS matrix in strategic management.
TOWS Matrix Example Of Apple
Here’s a representation of all the elements from a TOWS matrix example of Apple:
Strengths
- Apple has high standards of products and services, which makes it the most trusted brand
- It can be differentiated by its strong brand image
- The organization has high liquidity and profitability owing to its massive financial strength
- The supply chain is highly sophisticated and innovative
- Premium and efficient products guarantee high sales, high profit margins and a loyal customer base
Weaknesses
- Prices are high and don’t aim to compete with other brands
- Range of products is narrow
- Products and services are exclusive and hence non-compatible with other brands
Opportunities
- The demand for newer electronic gadgets, especially smartphones, is constantly growing, irrespective of the prices
Threats
- Competitors keep emerging and challenging Apple
- Manufacturing costs are constantly rising
- Personal computer sales have fallen which has affected Apple’s market share
The TOWS matrix of Apple will put all these elements in the matrix to analyze each strategy of the matrix.
TOWS Matrix Example of Nestle
The TOWS matrix of Nestle had these elements listed:
Strengths
- Nestle has a vast network of supply and distribution across the country
- A low-cost structure ensures affordable products
- Its large asset base provides Nestle with better solvency
- It has huge profit reserves to finance capital expenditures
- It has a diversified workforce in manufacturing and qualified professionals in management
Weaknesses
- Nestle spends less on research and development compared to a few big industry rivals
- It has a high cost of inventory
- Nestle faces a cash flow problem due to inadequate management of cash
- The organization is experiencing high employee turnover
Opportunities
- Nestle can use technology to automate operations and reduce costs
- They can use the internet and social media to tap into e-commerce
- Increasing population means more demand for milk and milk products
Threats
- There’s a growing threat from competitors who have a technological advantage over Nestle
- High bargaining power of suppliers has added to costs
- Changing consumer tastes put pressure on the organization to evolve constantly
TOWS matrix is a relatively simple yet useful tool when it comes to generating strategic options. Understanding the meaning of TOWS analysis can allow managers to make intelligent decisions in seizing opportunities and minimizing the impact of weaknesses and threats.
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