If you have stumbled upon this article, chances are you have somewhat of a brief clue about TOWS analysis. Most of you are already familiar with what a SWOT analysis is but just to refresh your memories, it stands for strengths, weaknesses, opportunities, and threats and these are the factors that this tool takes into consideration whilst evaluating the position of an entity, typically a business, organization, industry or a country.
Strengths and weaknesses are called internal factors and threats and opportunities are called external factors because the former can easily be controlled and influenced by the entity under consideration whereas the latter is out of the bounds of control; they occur on their own and can only be adapted to. We can use an example here.
A company has great brand equity; this is a strength because it is achieved by their constant efforts and hard work and hence is an internal factor. Consequently, a new political policy at the national level might impose certain regulations for the business; this is a threat as it is out of all influence of the company and is completely external.
So what is a TOWS analysis then? You must be thinking that it is simply a rearrangement of the letters in SWOT because some people like to pronounce it this way. This is a fair assessment, but it is incorrect, unfortunately. The easiest way to understand what TOWS is to know that it serves as an extension to the SWOT analysis. It combines all of these four factors into sets of two in order to make the framework more practical in terms of forming strategies.
What is the Difference Between SWOT and TOWS?
Before moving on and understanding how TOWS works and is used by businesses, we should get to the point of discussing the basic differences between the two concepts.
See, a SWOT is primarily concerned with analyzing a particular entity, usually a business or organization in order to have a better understanding of its position within the market it operates in.
A TOWS on the other hand is more actionable and practical because it takes the information from the SWOT and uses it to formulate strategies for improvement.
In SWOT, the four factors are considered individually but TOWS actually combines internal and external factors into combos of four in order to utilize the information for something beneficial for the company. One can say that SWOT is the primary step and TOWS is the secondary action that follows, building on the information retrieved.
It enhances the SWOT in a way that enables companies to better use opportunities, amplifying their strong points, reducing weaknesses, and moving forward despite emerging threats.
How Does a TOWS Analysis Work?
The first step into conducting this analysis is to jot down a SWOT analysis first because the factors highlighted over here will be used in our process of formulating strategies.
Keep in mind that TOWS is an acronym for the same factors that are in SWOT, but the application is different because here we deal with combinations of these factors. Basically we combine the two internal factors with the two external factors in order to come up with four separate strategies for future growth and development.
The goal is to take maximum advantage of strengths, mitigate weaknesses, exploit good opportunities, and get rid of the threats using these four strategies. Here they are:
Strengths and Threats (ST)
Here you go through every single strength which is mentioned in the SWOT and then map out how they can be used to get rid of or at least minimize the threats which exist outside.
Suppose a corporation produces many different products under their umbrella name and one of the product lines does not perform well especially in light of the competition to said product. The company can choose to either get rid of that line altogether or they can spend more on good marketing to make it a good seller.
The strengths that the company has here are the diverse portfolio of offerings and huge revenues that can be invested as capital to mitigate the external threat of competition.
Weaknesses and Threats (WT)
In this portion, the aim is to come up with different strategies that mitigate both the internal weaknesses of an organization along external threats. These strategies are also known as defensive strategies because they essentially defend the organization from deterioration and potential collapse.
Let’s take the above example again. Suppose that the company is not doing well and several of the product lines are suffering immensely leading to severe losses. The company can in this case form a merger with a similar company that is performing better to share the burden and to avoid bankruptcy.
Strengths and Opportunities (SO)
Here, our goal is to formulate strategies that employ the use of all of our internal strengths to make the most of the external opportunities that present themselves. A company might have some very talented content writers as a part of their communications team who can use an opportunity of gaining a huge investor by working on a top-notch business proposal.
Weaknesses and Opportunities (WO)
This portion is all about coming up with strategies to get rid of as many weaknesses on the inside as possible by using external opportunities which find their way towards us.
We can use the same example here as well. Suppose that the content writers did not do too well and the investor was not interested in the proposal. The company can choose to invest in training their writers to do better or they could even outsource this job to someone who can do it better if they are in a time crunch.
This is how external opportunities can be exploited to get rid of internal weaknesses.
The TOWS Framework
|Opportunity 1||Threat 1|
|Opportunity 2||Threat 2|
|Strengths||S-O Strategies||S-T Strategies|
|Strength 1||S-O Strategy 1||S-T Strategy 1|
|Strength 2||S-O Strategy 2||S-T Strategy 2|
|Weaknesses||W-O Strategies||W-T Strategies|
|Weakness 1||W-O Strategy 1||W-T Strategy 1|
|Weakness 2||W-O Strategy 2||W-T Strategy 2|
As you can see, this framework is made after the SWOT has been conducted. Once all the main factors are plotted down in their main SWOT quadrants, you can start working on the appropriate strategies.
Strength 1 is combined with opportunity 1 and is written in the S-O Strategy 1 quadrant of the matrix and so on.
Keep in mind that 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 to eliminate threats and weaknesses.
We will understand how a TOWS is accurately done using an example of our own. Suppose you are the proud owner of a multinational company called XYZ and you want to exploit more opportunities all the while reducing your threats. You already have a SWOT carried out and now want to work on making strategies.
|O1 More Markets||T1 Competition|
|O2 Companies for Sale||T2 Changes in Trends|
|Strengths||S-O Strategies||S-T Strategies|
|S1 Brand Equity||S-O Strategy 1: use brand equity to increase market share.||S-T Strategy 1: Use brand equity to differentiate from competitors.|
|S2 International Reach||S-O Strategy 2: Use global status to stay ahead by purchasing similar companies.||S-T Strategy 2: Use international access to stay on top of emerging trends.|
|Weaknesses||W-O Strategies||W-T Strategies|
|W1 Not Sustainable||W-O Strategy 1:Enter new markets to stay relevant and in business.||W-T Strategy 1: Enter countries with low/no competition.|
|W2 Prices too high||W-O Strategy 2: Expanding Business to other areas around the world will help in achieving economies of scale.||W-T Strategy 2: Invest in R&D in newer markets to understand consumer preferences.|
By combining your strength of brand equity, you can easily use the opportunity to expand to newer markets. Similarly, you strategize to improve your sustainability by using the opportunity of having newer markets to step into to get rid of a big weakness.
Your international status which is a huge strength has enabled you to be on top of emerging consumer trends thereby getting rid of the threat of changing times.
You can be proactive. In the last quadrant of your defensive strategies, you can improve the sustainability issue by entering into a country where the threat of competition is low or even negligible. This will allow you a chance to grow.
Obviously, this is a very generic take on a TOWS analysis but we have kept it very simple and precise so that each and every one of you are able to grasp the concept fully.
As long as you get the idea behind the analysis, you’ll be down to working on TOWS of your own. Practice is the key to perfecting something.
Why You Should Know How to do TOWS Analysis
Learning the mechanisms of a TOWS analysis can actually help you a lot. If you are an employee, it can enable you to contribute more to your organization; if you are a business owner it can enable you to improve your work drastically.
This analysis also requires some serious brainstorming which ultimately becomes a great exercise for your brain. Even if you are a student or someone who is not related to the business field directly, it won’t hurt you to be in touch with how businesses actually implement various strategies.
Every company forms and uses various strategies over the course of its existence. Only the ones who know what strategies are the best ones for their given sets of circumstances at a given point in time are able to prevail in the long run.
SWOT Analysis or TOWS Analysis: Final Word
Well readers, first of all, congratulations for sticking to the very end of this article in order to read because now you know something new.
Everyone has a brief idea of what a SWOT is; you all probably have read plenty of our work here on SWOT analysis of various companies and countries. The TOWS analysis on the other hand is a bit more uncommon than the predecessor it was built upon.
This might be because it is slightly harder to conduct because of all the strategizing that goes into it and because it is a more hands-on approach used only when a company needs an action plan. Nevertheless, it is an important tool that you should know the hang of.
We have learned how it is an extension of the humble SWOT analysis and the four different natures of strategies it helps us in formulating for making sure that a business not only survives but also thrives.
Hopefully, you had fun reading this and are looking forward to practicing your hand on more TOWS analysis. We wish you the best of luck!