SWOT - TWOS Matrix

SWOT to TOWS
Analysis Tool External Environment

SWOT Analysis
A Company needs to ask itself whether it is in a position to pursue attractive market opportunities and defend
against external threats to its future well-being
The simplest tool for conducting this analysis is known as SWOT Analysis, that represents a company’s
internal Strengths and Weaknesses, market Opportunities, and external Threats
SWOT is a technique developed by Albert Humphrey, at the Stanford Research Institute (SRI) back in the
1960s and early 1970s. It is very often used in Strategic Planning
SWOT Analysis provides the basis for crafting a strategy that capitalizes on the company’s strengths,
overcomes its weaknesses, aims at capturing the best opportunities, and defends against competitive and macro-
environmental threats
SWOT Analysis assesses a company’s strategic situation. The internal environment is assessed through
determining the company’s strengths and weaknesses, while evaluating opportunities and threats helps
to understand the external environment
Management’s goal is to figure out how to make the internal and the external environment fit together
Identifying a Company’s Internal Strengths
A strength is something a company is good at doing or an attribute that enhances its competitiveness in the market place.
Resource strengths can be of the following types:
 A skill, Specialized Expertise, or Competitively important Capability : technical expertise, capabilities in developing
innovative products and solutions, excellent supply chain, customer service, advertising etc.
 Valuable Physical Assets: state-of-the-art plants and machinery, attractive real estate locations, ownership of and/or
access to scarce natural resources
 Valuable Human Assets and Intellectual Capital: an experienced and capable workforce, talented employees in key
areas
 Valuable Organizational Assets: proprietary technology, key patents, proven HSE systems, processes/SOPs
 Valuable Intangible Assets: brand name, reputation for technological leadership, customer loyalty, goodwill
 An Achievement or Attribute that puts the company in a position of market advantage: low overall costs relative to
competitors, superior products
 Competitively valuable Alliances or cooperative ventures: partnership, alliances, JVs

Identifying Company Weaknesses and Competitive Deficiencies
A weakness, or competitive deficiency, is something a company lacks or does poorly (in

comparison to others). A company’s internal weaknesses can relate to …….
(1) inferior or unproven skills, expertise, or intellectual capital in important competitive

areas of the business;
(2) deficiencies in competitively important physical, organizational, or intangible assets; or
(3) missing or competitively inferior capabilities in key areas.
Company weaknesses are thus internal shortcomings that constitute competitive

liabilities. Whether a company’s internal weaknesses make it competitively vulnerable
depends on how much they matter in the marketplace and whether they are offset by the
company’s strengths.
Identifying a Company’s Market Opportunities
Market opportunity is a big factor in shaping a company’s strategy. Strategies can not be
formulated without first identifying the market opportunities and assessing the growth and
profit potential of each one
• A company’s opportunities can be plenty or scarce and can range from very attractive to
unsuitable. Emerging and fast-changing markets sometimes present stunningly big or “golden”
opportunities, but it is typically hard for managers to look into “the fog of the future.
• In mature markets, unusually attractive market opportunities emerge sporadically after long
periods of relative calm. In evaluating a company’s market opportunities and ranking their
attractiveness, managers must guard against viewing every industry opportunity as a company
opportunity as no company has the resource to pursue all available market opportunities
simultaneously
• The market opportunities most relevant to a company offer the best prospects for growth and
profitability, and present the most potential for competitive advantage
Potential Market Opportunities
 Meeting sharply rising buyer demand for  Taking advantage of falling trade barriers
the product/services in attractive foreign markets
 Expanding into new geographic markets  Taking advantage of an adverse change
 Expanding company’s product line to in the fortunes of rival firms
meet a broader range of customer needs  Acquiring rival firms or companies with
 Utilizing existing company skills or attractive technological expertise or
technological knowhow to enter new capabilities
product lines or new businesses  Taking advantage of emerging
technological developments to innovate
 Entering into alliances or joint ventures
to expand the firm’s market coverage or
boost its competitive capability
Identifying the Threats to a Company’s Future Profitability
Certain factors in a company’s external environment pose Threats to its profitability and
competitive well-being. Threats can stem from such factors as the emergence of cheaper or
better technologies, the entry of lower-cost foreign/indigenous competitors into a company’s
market, new restrictive regulations, political upheavals etc.
External threats may pose a moderate to severe degree of adversity (all companies confront
some threats elements in the course of doing business). Rarely, market shocks give a sudden-
death threat that throws a company into an immediate crisis to survive
It is management’s job to identify the threats to the company’s future prospects and to evaluate
what strategic actions can be taken to neutralize or lessen their impact
Major External Threats
 Increased intensity of competition among  Adverse economic conditions that threaten

industry rivals critical suppliers or distributors
 Slowdowns in market growth  Changes in technology–particularly
 Likely entry of potent new competitors disruptive technology
 Growing bargaining power of customers  Restrictive foreign trade policies
or suppliers  Costly new regulatory requirements
 A shift in buyer needs and tastes  Tight credit conditions
 Rising prices on energy or other key inputs
• SWOT analysis is a framework for analyzing your strengths and
weaknesses, and the opportunities and threats you face.
• This will help you to focus on your strengths, minimize weaknesses,
and take the greatest possible advantage of opportunities available.
SWOT analysis becomes a USELESS exercise if it is not extended
TOWS where
• the strengths are used to capitalize on opportunities and to
counter threats,
• the weaknesses are minimized using opportunities and both
weaknesses and threats are avoided
Background
• TOWS Analysis is an extension of the SWOT and was created by Heinz
Weihrich (1982) TOWS Matrix matches the environmental threats and
opportunities with the organization's weaknesses and especially its
strengths
• The TOWS Matrix is aimed at developing strategic options from an
external-internal analysis and is a practical tool, particularly in the fields
of business administration and marketing.
• Whereas SWOT Analysis starts with an internal analysis, the TOWS
Matrix starts the other way around, with an external environment
analysis; the threats and opportunities are examined first.
TWOS Analysis helps in…….
This helps us identify strategic alternatives that address the following

additional questions:
 Strengths and Opportunities (SO) – How can we use our strengths to take advantage of
the opportunities?
 Strengths and Threats (ST) – How can we take advantage of our strengths to avoid real
and potential threats?
 Weaknesses and Opportunities (WO) – How can we use our opportunities to overcome
the weaknesses we are experiencing?
 Weaknesses and Threats (WT) – How can we minimize our weaknesses and avoid
threats?
Few Combinations
• Strengths/Opportunities: Consider all strengths one by one listed in the
SWOT Analysis with each opportunity to determine how each
internal strength can help you capitalize on each external
opportunity.
• Strength/Threats: Consider all strengths one by one listed in the

SWOT Analysis with each threat to determine how each internal
strength can help you avoid every external threat.
Few Combinations
• Weaknesses/Opportunities: Consider all weaknesses one by one listed
in the SWOT Analysis with each opportunity to determine how each
internal weakness can be eliminated by using each external
opportunity.
• Weaknesses/Threats: Consider all weaknesses one by one listed in the

SWOT Analysis with each threat to determine both can be avoided.
TWOS Analysis
TOWS analysis enables organizations to match its internal strengths, and external opportunities (SO) to develop
‘maxi-maxi’ strategies – those with the greatest potential for success. For example, strengths such as high
brand recognition or customer loyalty could be combined with the opportunity to launch a new product or service.
At the other extreme, it highlights the organization's
vulnerability to threats based on its weaknesses and
facilitates the development of strategies that
minimize these and avoid threats (WT) – ‘mini-mini’
strategies. For example, such strategies could
include developing strategic alliances or a more
drastic strategy could be to withdraw from a specific
market altogether. In between, mini-maxi (WO) and
maxi-mini strategies (ST) are designed to strengthen
weaknesses, utilizing opportunities, and minimize
threats utilizing strengths. An example mini-maxi
strategy (WO) is that an organization may have
identified an opportunity to outsource some aspects
of its business operations, overcoming the weakness
of lack of specific skills within the organization.
It’s important to remember that a TOWS analysis will
not point to which specific strategy to adopt, but it
does focus attention the areas where action is
required, and given some indication of the nature of
that action.
Example

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SWOT to TOWS

Analysis Tool External Environment

 Competitively valuable Alliances or cooperative ventures: partnership, alliances, JVs

A weakness, or competitive deficiency, is something a company lacks or does poorly (in

(1) inferior or unproven skills, expertise, or intellectual capital in important competitive

Company weaknesses are thus internal shortcomings that constitute competitive

 Increased intensity of competition among  Adverse economic conditions that threaten

This helps us identify strategic alternatives that address the following

• Strength/Threats: Consider all strengths one by one listed in the

• Weaknesses/Threats: Consider all weaknesses one by one listed in the

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