SWOT and TOWS Analysis

SWOT analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It involves specifying the
objective of the business venture or project and identifying the internal and external factors that are
favorable and unfavorable to achieve that objective. The technique is credited to Albert Humphrey, who
led a convention at Stanford University in the 1960s and 1970s using data from Fortune 500 companies.

A SWOT analysis must first start with defining a desired end state or objective. A SWOT analysis may be
incorporated into the strategic planning model. Strategic Planning, has been the subject of much
research.[citation needed]

• Strengths: characteristics of the business or team that give it an advantage over others in the
industry.

• Weaknesses: are characteristics that place the firm at a disadvantage relative to others.

• Opportunities: external chances to make greater sales or profits in the environment.

• Threats: external elements in the environment that could cause trouble for the business.

Identification of SWOTs are essential because subsequent steps in the process of planning for
achievement of the selected objective may be derived from the SWOTs.

First, the decision makers have to determine whether the objective is attainable, given the SWOTs. If the
objective is NOT attainable a different objective must be selected and the process repeated.

The SWOT analysis is often used in academia to highlight and identify strengths, weaknesses,
opportunities and threats.[citation needed] It is particularly helpful in identifying areas for development.

Matching and converting

Another way of utilizing SWOT is matching and converting.Matching is used to find competitive
advantages by matching the strengths to opportunities.

Converting is to apply conversion strategies to convert weaknesses or threats into strengths or

opportunities.An example of conversion strategy is to find new markets.If the threats or weaknesses
cannot be converted a company should try to minimize or avoid them.

Evidence on the use of SWOT

SWOT analysis may limit the strategies considered in the evaluation. J. Scott Armstrong notes that
"people who use SWOT might conclude that they have done an adequate job of planning and ignore
such sensible things as defining the firm's objectives or calculating ROI for alternate strategies." Findings
from Menon et al. (1999) and Hill and Westbrook (1997) have shown that SWOT may harm
performance. As an alternative to SWOT, Armstrong describes a 5-step approach alternative that leads
to better corporate performance.

Internal and external factors

The aim of any SWOT analysis is to identify the key internal and external factors that are important to
achieving the objective. These come from within the company's unique value chain. SWOT analysis
groups key pieces of information into two main categories:

• Internal factors – The strengths and weaknesses internal to the organization.

• External factors – The opportunities and threats presented by the external environment to the
organization. - Use a PEST or PESTLE analysis to help identify factors

The internal factors may be viewed as strengths or weaknesses depending upon their impact on the
organization's objectives. What may represent strengths with respect to one objective may be
weaknesses for another objective. The factors may include all of the 4P's; as well as personnel, finance,
manufacturing capabilities, and so on. The external factors may include macroeconomic matters,
technological change, legislation, and socio-cultural changes, as well as changes in the marketplace or
competitive position. The results are often presented in the form of a matrix.

SWOT analysis is just one method of categorization and has its own weaknesses. For example, it may
tend to persuade companies to compile lists rather than think about what is actually important in
achieving objectives. It also presents the resulting lists uncritically and without clear prioritization so
that, for example, weak opportunities may appear to balance strong threats.

It is prudent not to eliminate too quickly any candidate SWOT entry. The importance of individual
SWOTs will be revealed by the value of the strategies it generates. A SWOT item that produces valuable
strategies is important. A SWOT item that generates no strategies is not important.

Use of SWOT analysis

The usefulness of SWOT analysis is not limited to profit-seeking organizations. SWOT analysis may be
used in any decision-making situation when a desired end-state (objective) has been defined. Examples
include: non-profit organizations, governmental units, and individuals. SWOT analysis may also be used
in pre-crisis planning and preventive crisis management. SWOT analysis may also be used in creating a
recommendation during a viability study/survey.

SWOT - landscape analysis

The SWOT-landscape systematically deploys the relationships between overall objective and underlying
SWOT-factors and provides an interactive, query-able 3D landscape.

The SWOT-landscape grabs different managerial situations by visualizing and foreseeing the dynamic
performance of comparable objects according to findings by Brendan Kitts, Leif Edvinsson and Tord
Beding (2000).[6]
Changes in relative performance are continually identified. Projects (or other units of measurements)
that could be potential risk or opportunity objects are highlighted.

SWOT-landscape also indicates which underlying strength/weakness factors that have had or likely will
have highest influence in the context of value in use (for ex. capital value fluctuations).

Corporate planning

As part of the development of strategies and plans to enable the organization to achieve its objectives,
then that organization will use a systematic/rigorous process known as corporate planning. SWOT
alongside PEST/PESTLE can be used as a basis for the analysis of business and environmental factors.[7]

• Set objectives – defining what the organization is going to do

• Environmental scanning

o Internal appraisals of the organization's SWOT, this needs to include an assessment of the
present situation as well as a portfolio of products/services and an analysis of the product/service life
cycle

• Analysis of existing strategies, this should determine relevance from the results of an
internal/external appraisal. This may include gap analysis which will look at environmental factors

• Strategic Issues defined – key factors in the development of a corporate plan which needs to be
addressed by the organization

• Develop new/revised strategies – revised analysis of strategic issues may mean the objectives
need to change

• Establish critical success factors – the achievement of objectives and strategy implementation

• Preparation of operational, resource, projects plans for strategy implementation

• Monitoring results – mapping against plans, taking corrective action which may mean amending
objectives/strategies.

Marketing

In many competitor analyses, marketers build detailed profiles of each competitor in the market,
focusing especially on their relative competitive strengths and weaknesses using SWOT analysis.
Marketing managers will examine each competitor's cost structure, sources of profits, resources and
competencies, competitive positioning and product differentiation, degree of vertical integration,
historical responses to industry developments, and other factors.

Marketing management often finds it necessary to invest in research to collect the data required to
perform accurate marketing analysis. Accordingly, management often conducts market research
(alternately marketing research) to obtain this information. Marketers employ a variety of techniques to
conduct market research, but some of the more common include:

• Qualitative marketing research, such as focus groups

• Quantitative marketing research, such as statistical surveys

• Experimental techniques such as test markets

• Observational techniques such as ethnographic (on-site) observation

• Marketing managers may also design and oversee various environmental scanning and
competitive intelligence processes to help identify trends and inform the company's marketing analysis.

Using SWOT to analyse the market position of a small management consultancy with specialism in HRM.

Strengths Weaknesses Opportunities Threats

Reputation in marketplace Shortage of consultants at operating level rather than partner level Well
established position with a well defined market niche Large consultancies operating at a minor level

Expertise at partner level in HRM consultancy Unable to deal with multi-disciplinary assignments
because of size or lack of ability Identified market for consultancy in areas other than HRM Other
small consultancies looking to invade the marketplace

TOWS Analysis for Strategic Decision Making

How does a firm decide to pursue one course of action over another? Along with SWOT analysis, TOWS
analysis is a process that requires management to think critically of its operations. By identifying several
action plans that could improve the company's position, TOWS analysis allows management to choose
those strategies that most effectively capitalize on the available opportunities.

For companies to develop adequate and successful business strategies, they must sufficiently analyze
their internal and external environments.

One helpful strategic development tool entails SWOT analysis, which identifies the strengths,
weaknesses, opportunities, and threats facing a company.

However, a major shortcoming of this method involves its focus on the company's internal environment
at the expense of its external situation. Subsequent to the SWOT model, organizations should conduct a
TOWS analysis, a procedure that focuses more on the external environment. Although the acronym is
simply SWOT reversed, TOWS analysis takes a different approach to linking a company's internal
strengths and weaknesses with its external opportunities and threats. This approach allows a business to
clearly identify and evaluate the options it could pursue.
To perform a proper TOWS analysis, the company must first conduct a SWOT analysis to identify its
internal strengths and weaknesses and external opportunities and threats. The rest of the procedure
involves dividing and linking the appropriate classifications into four categories:

• Maxi-Maxi

• Maxi-Mini

• Mini-Maxi

• Mini-Mini

Creating a TOWS matrix is an easy and visually helpful way to aid in this process.

"Maxi-Maxi" Strategy

Under the Maxi-Maxi classification, an organization identifies the appropriate strengths it can use to
take advantage of its opportunities. The firm needs to distinguish and list the strengths that could aid in
the maximization of each one of its listed opportunities. For example, possible strengths that could help
a company penetrate a new market could include high-brand recognition, high-brand loyalty, large
levels of research and development spending, and superior customer service.

"Maxi-Mini" Strategy

The Maxi-Mini category identifies the strengths the company can exploit to minimize its external
threats. For instance, a potential threat to a firm could be the loss of market share to a new competitor
entering the market. One way the firm could protect its position involves developing a marketing
campaign emphasizing its superior customer service or its competitor's inferior customer service.

"Mini-Maxi" Strategy

With the Mini-Maxi strategy, a company wants to use its external opportunities to minimize its internal
weaknesses. To illustrate, consider a company that faces rising labor costs in its home country.
Simultaneously, it has identified an attractive opportunity to outsource some of its operations to
another country where the cost of labor is far cheaper. This outsourcing prospect reduces the
company's threat of rising labor expenses.

"Mini-Mini" Strategy

Mini-Mini strategies attempt to minimize the company's weaknesses and prevent external threats. This
section matches the firm's threats and weaknesses in order for the company to recognize the potential
situations that could harm its operations. Once these possible conditions are realized, the company can
conceive of ways to protect its business. For example, a firm can enter into a strategic alliance or merge
with one of its competitors to protect its operations from a rival firm. Moreover, the options to
withdraw from a market or suspend operations are always present.
Gregory Steffens is a talented writer with a strong interest in business strategy and strategic
management. He is currently completing his MBA degree, with an emphasis in finance, at the University
of Missouri.

SWOT/TOWS Matrix Analysis

It is not enough to identify strengths, weaknesses, opportunities, and threats of a unit. In applying the
SWOT analysis it is necessary to minimize or avoid both weaknesses and threats. Weaknesses should be
looked at in order to convert them into strengths. Likewise, threats should be converted into
opportunities. Lastly, strengths and opportunities should be matched to optimize the potential of a unit.
Applying SWOT in this fashion can obtain leverage for a unit (Marketing Strategy, 1998).

When dealing with complex situations in a limited amount of time, trying to address all the issues
involved often does not pay off. Rather, strategic planners limit their efforts to those issues that have
the most impact on the situation. SWOT analysis provides a framework for identifying these critical
issues.

Strength Capitalization Strategies

• S-O Strategies pursue opportunities that are a good fit to the unit’s strengths.

• S-T Strategies identify ways that the unit can use its strengths to reduce its vulnerability to
external threats.

Weakness Mitigation Strategies

• W-O Strategies overcome weaknesses to pursue opportunities

• W-T Strategies establish a defensive plan to prevent the organization’s weaknesses from making
it highly susceptible to external threats.

Formulating Strategies: Questions to Ask & Answer

• What are the barriers to realizing these strategies?

• What options should be pursued to achieve the goals or overcome barriers?

• What major actions must be taken in the next 1-3 years to implement these options?

• What specific steps must be taken within the next 6 months – 1 year to implement these
options? Who is responsible?

In general, an effective strategy is one that takes advantage of the opportunities, avoids the threats (or
turns them into opportunities), builds on the strengths and minimizes the weaknesses (or takes action to
eliminate them).

Criteria for formulating and adopting strategies and plans:

• Acceptability (decision makers, stakeholders, consumers)

• Customer or user impact

• Relevance

• Consistency with vision, mission, and values

• Integration/coordination with other strategies, programs, and activities

• Technical feasibility

• Cost feasibility

• Cost effectiveness

• Long-term impact

• Risk assessment

• Staff requirements

• Flexibility/adaptability

• Timing

• Facility requirements

• Training requirements

SWOT is the acronym for strength, weakness, opportunities and strengths whereas TWOS is the
acronym for threats,weakness,opportunities and strengths both refers to the same thing. SWOT or
TWOS analysis use by the firm to develop strategies or we can say possible set of strategies. Strategist
prefer SWOT or TWOS because it gives alternative set of strategies which help the firm to choose the
strategies suit the firm in terms of available resources.

SWOT analysis is not only the part of strategic management, it’s also the part of marketing, human
resource and other business areas. In this tutorials we will discuss the way to develop TOWS matrix and
its attributes in detail and also give examples to show firm develop strategies using TOWS or SWOT
matrix.

What are the things need to be included in TOWS or SWOT matrix?

TOWS or SWOT matrix as discussed above consist of strength, weakness opportunities and threats, using
these variety of strategies are developed. The most common tabular form of the SWOT or TWOS is
shown in the figure below.

Strengths
Strengths are the strong areas or attribute of the company, which are used to overcome weakness and
capitalize to take advantage of the external opportunities available in the industry.

Weakness

Weakness are painful for the company means these are the weak factors which needs to be improve in
future otherwise if they exposed to the competitors they can take the advantage of it.

Opportunities

Opportunities are the chances exist in the external environment, it depends firm whether the firm is
willing to exploit the opportunities or may be they ignore the opportunities due to lack of resources.

Threats

Threats are always evil for the firm, minimum no of threats in the external environment open many
doors for the firm. Maximum number of threats for the firm reduce their power in the industry.

How to identify strengths,weakness,opportunities and threats for TWOS Matrix?

Well, if you have same question them its a good one, finding strengths, weakness, opportunism and
threats is deep thinking process. The best thing to do ask the decision maker,employee, strategic
partners and customer as well about your good and bad points. The other way out to use some
statistical and mathematical tool.In strategic management strengths and weakness are extracted from
IFE matrix, opportunities and threats from EFE matrix.

Example of Wal-Mart Strengths,Weakness,Opportunities and Threats

Wal-Mart Strengths

• Customer oriented

• SAM’S Club customers able to buy in bulk

• Super centers offer one stop shopping

• Satisfaction guaranteed programs promoting customer goodwill

• Buy from local merchants when possible

• Stock ownership and profit-sharing with employees

• Leads industry in information technology

• Ongoing development of its employees

• Strong community involvement

Wal-Mart Weakness
• No formal mission statement

• Membership only for SAM’S Club

• Keep poor performing employees on hand

• Old fashioned store policies

• Few women and minorities in top management

Wal-Mart Opportunities

• Consumers want ease of shopping

• Internet shopping growing

• Dollar value increasing

• Similar shopping patterns worldwide

• Retail sales expected to increase

• Environment conscious consumers

• Elderly population growing

• Asian market virtually untapped by retail

• European Market untapped by retail

Wal-Mart Threats

• Regulation of Wal-Mart pharmacies

• Small towns do not want entry of Wal-Mart

• Bad media exposure for Kathie Lee Brand

• Variety of competition nationally, regionally and locally

• Substitute products more easily because of intense competition

What type of strategies are the part of TOWS Matrix?

The SWOT Matrix is an important matching tool that helps managers develops four types of strategies:

1. SO strategies—use a firm’s internal strengths to take advantage of external opportunities.

2. WO strategies—are aimed at improving internal weaknesses by taking advantage of external

opportunities.
3. ST strategies—use a firm’s strengths to avoid or reduce the impact of external threats.

4. WT strategies—are defensive tactics directed at reducing internal weaknesses and avoiding

external threats.

The above TWOS matrix show the four type of strategies, SO strategies are developed using PSO
strengths to exploit the external opportunities, WO strategies are developed to overcome weaknesses
by utilizing the opportunities. ST strategies are developed by PSO to minimize or eliminate the threats
using the internal strengths and last WT strategies are developed to avoid threat and minimize
weaknesses.