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Strategic Management

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Strategic Management ­ MGT603
VU
Lesson 24
THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTHS (TOWS) MATRIX
Learning object
After understanding this chapter you are able to understand TWOS matrix and also understand how to scan
internal and external environment of the organization
The Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix
The Threats-Opportunities-Weaknesses-Strengths (TOWS) is also named as SWOT analysis. A TWOS Analysis is
a strategic planning tool used to evaluate the Threats, Opportunities and Strengths, Weaknesses, involved in
a project or in a business venture or in any other situation requiring a decision.
This is an important tool in order to formulate strategy. This Matrix is an important matching tool that
helps managers develops four types of strategies: SO Strategies (strength-opportunities), WO Strategies
(weakness- opportunities), ST Strategies (strength-threats), and WT Strategies (weakness-threats).The most
difficult part of TOWS matrix is to match internal and external factor.
Once the objective has been identified, TOWS are discovered and listed. TOWS are defined precisely as
follows:
Strengths are attributes of the organization that are helpful to the achievement of the objective.
Weaknesses are attributes of the organization that are harmful to the achievement of the objective.
Opportunities are external conditions that are helpful to the achievement of the objective.
Threats are external conditions that are harmful to the achievement of the objective.
Strengths and weaknesses are internal factors. For example, strength could be your specialist marketing
expertise. A weakness could be the lack of a new product.
Opportunities and threats are external factors. For example, an opportunity could be a developing
distribution channel such as the Internet, or changing consumer lifestyles that potentially increase demand
for a company's products. A threat could be a new competitor in an important existing market or a
technological change that makes existing products potentially obsolete.
it is worth pointing out that SWOT analysis can be very subjective - two people rarely come-up with the
same version of a SWOT analysis even when given the same information about the same business and its
environment. Accordingly, SWOT analysis is best used as a guide and not a prescription. Adding and
weighting criteria to each factor increases the validity of the analysis.
SO Strategies: Every firm desires to obtain benefit form its resources such benefit can only be obtained if
utilize its strength to take external opportunity. Resources (Assets) an important firm's strength to get
opportunity for external resources. For example the firm enjoying a good financial position which is
strength for a firm and externally opportunity to expand business. The strong financial position provides an
opportunity to expand the business. The matched strategy is known as SO strategy.
WO Strategies:
WO Strategies developed to match weakness with opportunities of the firm. WO strategy is very useful if
the firm take advantage to external resources in order to overcome the weakness. For example the firm is in
the critical financial problems that is weakness and firm is availing merger with Multinational Corporation.
ST Strategies
ST Strategies is an important strategy to overcome external threats. This does not mean that a strong
organization should always meet threats in the external environment head-on. This strategy is adopted by
various colleges by opening new branches in order to overcome competitive thereat. These threats also
explain by the Porter in its competitive model.
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Strategic Management ­ MGT603
VU
WT Strategies
Every firm has a desire to overcome its weakness and reducing threats. This type of strategy helpful when
weaknesses are removed to overcome external threats. It is difficult to target WT strategy. For example
weak distribution network creating many problems for the firm if it strong many external threats can be
removed.
Steps for developing strategies:
There are eight steps involved in constructing a TOWS Matrix:
1. Rank external opportunities
2. Rank external threats
3. Rank internal strength
4. Rank internal weaknesses.
5. Match internal strengths with external opportunities and mention the result in the SO Strategies
cell.
6. Match internal weaknesses with external opportunities and mention the result in the WO Strategies
cell..
7. Match internal strengths with external threats and mention the result in the ST Strategies cell.
8. Match internal weaknesses with external threats and mention the result in the WT strategies cell.
Strengths­S
Weaknesses ­ W
List Weaknesses
List Strengths
Blank
Opportunities ­ O
SO-Strategies
WO-Strategies
List Opportunities
Use strength to obtain
Overcome weaknesses by
opportunities
taking advantage of
opportunities
Threats ­ T
ST-Strategies
WT-Strategies
List Threats
Use strengths to avoid
Minimize weaknesses and
threats
avoid threats
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Table of Contents:
  1. NATURE OF STRATEGIC MANAGEMENT:Interpretation, Strategy evaluation
  2. KEY TERMS IN STRATEGIC MANAGEMENT:Adapting to change, Mission Statements
  3. INTERNAL FACTORS & LONG TERM GOALS:Strategies, Annual Objectives
  4. BENEFITS OF STRATEGIC MANAGEMENT:Non- financial Benefits, Nature of global competition
  5. COMPREHENSIVE STRATEGIC MODEL:Mission statement, Narrow Mission:
  6. CHARACTERISTICS OF A MISSION STATEMENT:A Declaration of Attitude
  7. EXTERNAL ASSESSMENT:The Nature of an External Audit, Economic Forces
  8. KEY EXTERNAL FACTORS:Economic Forces, Trends for the 2000ís USA
  9. EXTERNAL ASSESSMENT (KEY EXTERNAL FACTORS):Political, Governmental, and Legal Forces
  10. TECHNOLOGICAL FORCES:Technology-based issues
  11. INDUSTRY ANALYSIS:Global challenge, The Competitive Profile Matrix (CPM)
  12. IFE MATRIX:The Internal Factor Evaluation (IFE) Matrix, Internal Audit
  13. FUNCTIONS OF MANAGEMENT:Planning, Organizing, Motivating, Staffing
  14. FUNCTIONS OF MANAGEMENT:Customer Analysis, Product and Service Planning, Pricing
  15. INTERNAL ASSESSMENT (FINANCE/ACCOUNTING):Basic Types of Financial Ratios
  16. ANALYTICAL TOOLS:Research and Development, The functional support role
  17. THE INTERNAL FACTOR EVALUATION (IFE) MATRIX:Explanation
  18. TYPES OF STRATEGIES:The Nature of Long-Term Objectives, Integration Strategies
  19. TYPES OF STRATEGIES:Horizontal Integration, Michael Porterís Generic Strategies
  20. TYPES OF STRATEGIES:Intensive Strategies, Market Development, Product Development
  21. TYPES OF STRATEGIES:Diversification Strategies, Conglomerate Diversification
  22. TYPES OF STRATEGIES:Guidelines for Divestiture, Guidelines for Liquidation
  23. STRATEGY-FORMULATION FRAMEWORK:A Comprehensive Strategy-Formulation Framework
  24. THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTHS (TOWS) MATRIX:WT Strategies
  25. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  26. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  27. BOSTON CONSULTING GROUP (BCG) MATRIX:Cash cows, Question marks
  28. BOSTON CONSULTING GROUP (BCG) MATRIX:Steps for the development of IE matrix
  29. GRAND STRATEGY MATRIX:RAPID MARKET GROWTH, SLOW MARKET GROWTH
  30. GRAND STRATEGY MATRIX:Preparation of matrix, Key External Factors
  31. THE NATURE OF STRATEGY IMPLEMENTATION:Management Perspectives, The SMART criteria
  32. RESOURCE ALLOCATION
  33. ORGANIZATIONAL STRUCTURE:Divisional Structure, The Matrix Structure
  34. RESTRUCTURING:Characteristics, Results, Reengineering
  35. PRODUCTION/OPERATIONS CONCERNS WHEN IMPLEMENTING STRATEGIES:Philosophy
  36. MARKET SEGMENTATION:Demographic Segmentation, Behavioralistic Segmentation
  37. MARKET SEGMENTATION:Product Decisions, Distribution (Place) Decisions, Product Positioning
  38. FINANCE/ACCOUNTING ISSUES:DEBIT, USES OF PRO FORMA STATEMENTS
  39. RESEARCH AND DEVELOPMENT ISSUES
  40. STRATEGY REVIEW, EVALUATION AND CONTROL:Evaluation, The threat of new entrants
  41. PORTER SUPPLY CHAIN MODEL:The activities of the Value Chain, Support activities
  42. STRATEGY EVALUATION:Consistency, The process of evaluating Strategies
  43. REVIEWING BASES OF STRATEGY:Measuring Organizational Performance
  44. MEASURING ORGANIZATIONAL PERFORMANCE
  45. CHARACTERISTICS OF AN EFFECTIVE EVALUATION SYSTEM:Contingency Planning