What is the TOWS Matrix? And how it is used?

Apple, Amazon, and Google — we all have heard the renowned names of these gigantic companies and are quite familiar with their products. They have been sustaining through the zig-zags of an economy and have successfully created a brand value since their establishment.  All three companies must have done something right which helped them to stay in the game for the long run, unlike other companies that couldn’t sustain or, have fizzled out. In order to find out the answers to such statements, analysts take the help of marketing strategies.  Today, we will discuss one such theory called TOWS Matrix to find out the awaited answers. Well, without further adieu, put on your reading glasses and jump in!

TOWS Matrix can be interpreted as a framework to assess, create, compare, and finally decide upon the business strategies. It is a modified version of a SWOT analysis and is an abbreviation that stands for Threats, Opportunities, Weaknesses, Strength. It was invented by an American business professor called Heinz Weirich in 1982 to examine businesses from a practical approach in reference to administration and marketing. The evaluation is done by amalgamating the external opportunities and threats with a company’s internal strengths and weaknesses.

What is the TOWS Matrix?

TOWS Matrix begins with an audit of external threats and opportunities. Such scrutiny gives a clear insight and helps to adopt long term strategies. Thereafter, the internal strengths and weaknesses of a company are taken into consideration. In the next stage, the internal analysis gets intertwined with external analysis to devise a strategy.

TOWS Analysis goes way beyond the conventional SWOT Analysis and aids organizations to remain one step ahead in the ever-changing competitive landscape. The TOWS Matrix can also help in the generation of amazing ideas in relation to fruitful marketing strategies, decision-making, protection against threats, opportunities, diminishing threats, overcoming weaknesses and awareness regarding potential shortcomings.

Although internal and external factors are incompatible features, there still exists a balance between them. Strengths and Weaknesses fall under internal factors and consist of HR policies, manufacturing processes, goals and objectives, attributes of the products and services offered to the target market, core values, work culture, staff, and fundamentals of the company.

On the contrary, Opportunities, and Threats fall under external factors and consists of government policies, dynamic nature of the market, evolving tastes and preferences of the customers, competition in the market, fluctuation rates of the raw materials required for the production and etcetera.

Now, we will move on to the discussion where we will discuss the four potential strategies of the TOWS Matrix. The four TOWS strategies are :

• Strength/Opportunity (SO)
• Weakness/Opportunity (WO)
• Strength/Threat (ST)
• Weakness/Threat (WT)

Strengths and Opportunities (SO) / Maxi-Maxi Strategy

The aim of a Maxi-Maxi Strategy is to utilize internal strengths to make optimum use of the external opportunities available to the company. In other words, the company has to utilize the strengths by using its resources to cash in on potential opportunities.

For example, if a  company has reasonably established a brand name in the market and has won the hearts of the consumers, there lies a golden opportunity to explore the new market locations or introducing a new line of products and services for the same target market. Such a step can turn out to be the best for the upliftment of the firm.

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Strengths and Threats (ST) / Maxi-Mini Strategy

The aim of a Maxi-Mini strategy is to maximize the strengths of a company while minimizing the threats with the support of these strengths. Thus, a company should take advantage of the internal strengths to avoid massive external threats. This strategy indicates that the management of the organization can employ all the internal strengths to counter any of the possible threats that can come in the way of the business as obstacles.

Example: In the market, there is always a cut-throat competition amongst peers or, between new and old entrants. In such a scenario, to beat the competition, the lagging company needs to take advantage of the internal strengths such as quality, manufacturing techniques, legacy and customer service.

Weakness and Opportunities (WO) / Mini-Maxi Strategy

The Mini-Maxi strategy attempts to minimize the weaknesses and to maximize the opportunities. The aim is to revamp internal weaknesses by making use of external opportunities. The management of the company will detect various alternatives to look past the weaknesses and take control of the opportunities that come up in the course. It is always a wise decision to decline or correct the weaknesses and untap the opportunities.

Example: If the company doesn’t possess any expertise in any of the business domains which is necessary for the growth and is gifted an opportunity to ally with another company that has the needed expertise, it works as a fairly convenient situation for both the companies.

Weakness and Threats (WT) / Mini-Mini Strategy

The aim of the Mini-Mini strategy is to minimize weaknesses and minimize threats. This is definitely the most defensive spot in the TOWS Matrix. It is mostly utilized when a company is in a  deplorable position. In such a scenario, the company operates in an aggressive environment and has little or no development opportunities. The mini-mini strategy is nothing but a pessimistic style of liquidation of a company.

EXAMPLE: A company has lost its shine and glory and has lost the faith of the stakeholders. Thus, there exists a threat of losing out on funding and investment by investors. In this case. it might close down poor-selling products, cut down underperforming employees and build a hostile technique of selling. If optimistic, the company might look for merging with another suitable company to leverage its expertise and resources for hanging on to funding.

TOWS Matrix – Apple INC

Let us now apply these four strategies of TOWS Analysis to a famous company called Apple.

Apple Inc. is an American multinational organization specialized in technology and has its headquarters in Cupertino, California. Apple fabricates, builds and sells computer software, electronic products, and online services. The tech giant was established by Steve Jobs,  Ronald Wayne, and Steve Wozniak in April 1976. It is considered as the world’s largest technology company by means of revenue and is also one of the world’s most valuable companies.

According to statistics, it is the world’s third-largest mobile phone manufacturer after Samsung and Huawei. Apple’s renowned products consist of the iPad tablet computers, HomePod smart speaker, iPod portable media player, iPhone smartphone, Mac personal computer, Apple Watch smartwatch, AirPods wireless earbuds, and Apple TV digital media player. The online services provided by Apple are iTunes Store, Mac App Store, Apple TV+, iCloud, Apple Music, the iOS App Store, and  Apple TV+. In Fiscal YEAR 2018, the worldwide revenue of Apple totaled to $265 billion.

The strengths, weaknesses, opportunities, and threats of Apple are mentioned below. After glancing through them, we will begin performing our TOWS Matrix according to the rule.

— Strengths

1. Apple is known as a Market leader and thus, maintains a high standard across several products and services. It is the most trusted brand in the entire marketplace.
2. It has a strong brand image and thus helps the audience to differentiate Apple from other competitors and positively influences the purchasing decisions.
3. It possesses extensive financial strength and thus has higher profitability and liquidity.
4. Apple has also a highly innovative and highly sophisticated supply chain which helps in maintaining efficiency.
5. It also has High-profit margins because of the consistent sales of its popular products.
6. The premium quality of its products allows Apple to enjoy a large and loyal customer base.

— Weakness

1. Apple Products are not priced by keeping the competition in mind and can be afforded by a certain section or class.
2. There is an availability of a narrow product range compared to its competitors.
3. The products and services are only compatible with Apple products and are incompatible with the products of other brands.

— Opportunities

1. There is a constant rise in demand and craze for mobile devices irrespective of the quoted price.

— Threats

1. In spite of being market leaders, there has been an emergence of competitors.
2. The cost of manufacturing has been constantly on the rise.
3. There has been also a decline in the market share of Apple due to the falling demand of Laptops and Personal Computers.

— Strengths and Opportunities (SO) of Apple:

Since there has been an increase in demand for mobile devices, the company should increase its focus by concentrating on manufacturing and marketing to generate profit. Apple should also leverage its brand value and financial strength to enter into new products and consequently increase their sales and profit. Such a step will aid Apple benefit from its existing customer base and customer loyalty. Further, if it partners with other brands to mass-produce compatible products and create mutually advantageous relationships, it will highly assist Apple in hack into the customer base of other brands.

— Strengths and Threats (ST) of Apple:

Apple should build a diversified range of products to fabricate its customer base and diminish the pressure of competitiveness. Another most important point is to consider the cultural variance to retain the competitive advantage created by  Steve Jobs.

— Weakness and Opportunities (WO) of Apple

Since Apple has only high-end products, it should release a cluster of products at an affordable price to make it feasible for middle-class consumers. Creating a larger product sets and thereby, entering into a new product arena will also help Apple to serve new customer segments.

— Weaknesses and Threats (WT) of Apple

Releasing a range of competitively priced products to attract middle-class customers can change the scenario altogether to reduce the pressure from competitors. It should also widen the product sets and try to cash in on the capability of the existing supply chain to decrease the manufacturing costs.

Also read:

• SWOT Analysis for Stocks: A Simple Yet Effective Study Tool.
• Porter’s Five Forces of Competitive Analysis – What You Need to Learn?
• What is Porter’s Diamond Model of National Advantage?

Advantages & Disadvantages of TOWS Analysis

We will now elaborate on the major pros and cons of TOWS Analysis.

Advantages of TOWS Matrix

1. TOWS Analysis helps to stumble upon strategic ideas by interconnecting the internal and external factors for the organizations.
2. It is cost-effective in nature.
3. It’s user-friendly and can be performed by any layman after learning a few parameters.
4. TOWS Analysis can be applied to any company irrespective of the industries and economies.
5. It helps organizations to upgrade their strategies with changing dynamics.

Disadvantages of TOWS Matrix

1. TOWS analysis becomes tough to handle if we are overloaded with information.
2. On many occasions, TWOS Matrix doesn’t take the ever-changing competitive environment into consideration and can affect the main agenda of finding out strategies for business in attaining elevated profits, higher sales, creation of brand value and etcetera.

Summary

TOWS Matrix is a framework to assess, create, compare, and finally decide upon the business strategies. It is a modified version of a SWOT analysis. The TOWS Matrix helps in the generation of amazing ideas in relation to fruitful marketing strategies, decision-making, protection against threats, opportunities, diminishing threats, overcoming weaknesses and awareness regarding potential shortcomings.

The four TOWS strategies are Strength/Opportunity (SO), Weakness/Opportunity (WO), Strength/Threat (ST), and Weakness/Threat (WT).

TOWS Analysis can be applied to any company irrespective of the industries and economies. It is user-friendly and can be performed by any layman after learning a few parameters. However, the TOWS analysis becomes tough to handle if we are overloaded with information.