TOWS Matrix: (Corporate Portfolio Analysis Technique)
The TOWS (Threats-Opportunities-Weaknesses-Strengths) matrix is an important tool that helps managers develop four types of strategies:
- SO Strategies
- WO Strategies
- ST Strategies
- WT Strategies
Matching key external and internal factors is the most tedious part of developing a TOWS Matrix. It requires good judgment. However, there is no one best set of matches.
SO strategies use a firm’s internal strengths to take advantage of external opportunities. All managers would like their organization to be in a position in which internal strengths can be used to take advantage of external trends and events. Organizations generally will pursue WO, ST, or WT strategies in order to get into a situation in which they can apply SO Strategies.
When a firm has major weaknesses, it will strive to overcome them and convert them into strengths. When an organization confronts major threats, it will attempt to avoid them in order to focus on opportunities.
WO strategies focus at improving internal weaknesses by taking advantage of external opportunities. Sometimes a firm may have key external opportunities but it may have internal weaknesses that can prevent it from exploiting them.
For example, there may be a huge demand for electronic devices to control the amount and timing of fuel injection in automobile engines opportunity), but a certain auto parts manufacturer may not possess the technology required for producing these devices (weakness).
The firm may consider one possible WO strategy to acquire this technology by forming a joint venture with a firm having competency in this area. Another WO strategy may be to hire and train internal people with the required technical capabilities.
ST Strategies :
ST strategies make use of firm’s strengths to minimize the impact of external threats.
WT Strategies :
WT strategies are defensive tactics directed at reducing internal weakness and avoiding external threats. An organization faced with numerous external threats and internal weaknesses may indeed be in a precarious position. In fact, such a firm may have to battle for its survival, merge, retrench, declare bankruptcy, or choose liquidation.
Steps of TOWS Matrix
The TOWS matrix involves eight steps:
- List the firm’s key external opportunities.
- List the firm’s key external threats.
- List the firm’s key internal strengths.
- List the firm’s key internal weaknesses.
- Match internal strengths with external opportunities, and record the resultant SO Strategies in the appropriate cell.
- Match internal weaknesses with external opportunities, and record the resultant WO Strategies.
- Match internal strengths with external threats, and record the resultant ST Strategies.
- Match internal weaknesses with external threats, and record the resultant WT Strategies.
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