The TOWS Matrix is an acronym for Threats, Alternatives, Weaknesses, and Strengths. The matrix is a variation on the SWOT Evaluation, and it seeks to handle criticisms of the SWOT Evaluation relating to its lack of ability to indicate relationships between the assorted classes.
Understanding the TOWS Matrix
The TOWS Matrix was developed by administration guide Heinz Weihrich.
He acknowledged that the SWOT Evaluation – though extremely profitable in its personal proper – had important shortcomings.
Whereas the SWOT Evaluation identifies Strengths, Weaknesses, Alternatives, And Threats, it doesn’t make any try and make hyperlinks between them.
For instance, a enterprise with a perceived weak spot could then see it as a menace.
One other enterprise that identifies a chance could possibly match it to one among their present strengths.
The TOWS Matrix, then, is a way more helpful graphical illustration of a SWOT Evaluation.
Inner strengths and weaknesses are in comparison with exterior alternatives and threats. Each one of many 4 particular person components can affect and influence one another.
The 4 technique mixtures of a TOWS Matrix
On this quadrant of the TOWS Matrix, a enterprise should assess its strengths on a case by case foundation to find out if it might use them to capitalize on alternatives.
For instance, a automotive producer working in a luxurious automotive market (alternative) with a robust R&D tradition (power) could design a feature-packed line of premium automobiles.
Right here, the enterprise ought to assess every power based mostly on its potential to counteract or keep away from exterior threats.
Returning to the automotive producer instance, unfavorable alternate charges (the menace) could also be counteracted by the corporate utilizing its R&D experience to construct a manufacturing facility in a rustic with a better-valued foreign money.
Within the WO quadrant, a corporation should decide how its weaknesses could be eradicated or offset by exterior alternatives.
For instance, inexperience in coping with international labor unions (weak spot) could be overcome by hiring managers with the related expertise (exterior alternative).
Within the ultimate technique mixture, the enterprise assesses every weak spot and menace and determines if they are often averted.
The automotive producer with little expertise working in international markets (weak spot) can keep away from coming into that market altogether.
One other maker with a heavy reliance on a single automotive mannequin (weak spot) can cut back the specter of competitors by growing a spread of various fashions.
Advantages of the TOWS Matrix
The advantages of making a TOWS Matrix embody:
- A extra versatile choice than another strategies which might be glorified brainstorming classes. It permits a enterprise to hyperlink exterior and inner components and their potential influence on enterprise operations.
- Easy to know by means of all ranges of administration and is comparatively easy to execute. This will increase worker focus and cohesiveness.
- The TOWS Matrix additionally facilitates the invention of unknown facets of a enterprise. Whether or not they’re unquantified strengths or hidden threats, newfound insights into operations assist an organization plan for the longer term, and facilitate development.
Amazon TOWS matrix
Here’s a have a look at a pattern TOWS matrix for Amazon.
Strengths and alternatives (SO)
Amazon’s customer-centrism, glorious model fairness, engaging expertise, and appreciable sources imply it’s well-positioned to broaden into further markets.
One among these markets is the bricks-and-mortar house in america.
Whereas the corporate’s acquisition of Entire Meals has been properly publicized, it has additionally launched a series of supermarkets often called Amazon Go.
Early variations of those supermarkets had been small and extra like comfort shops, but a new 6,150 square foot, 1300-product outlet was recently opened in Seattle.
Along with containing no checkouts, the grocery store provides contemporary espresso or kombucha on faucet and a line of made-to-order meals ready by in-house cooks.
With Amazon Go shops growing in prevalence and measurement, Amazon is utilizing its expertise to broaden into bricks-and-mortar retail with a extra seamless and handy procuring expertise.
Strengths and threats (ST)
The convenience with which Amazon can broaden into new markets is spectacular, however this power is typically offset by the presence of native opponents and markets with low entry boundaries.
Within the Indian market, for instance, the corporate has skilled stiff competitors from the Walmart-backed Flipkart and fellow eCommerce platform Snapdeal.
Establishing a presence within the essential and profitable Indian market has not been simple for Amazon.
With a $200 million funding in 2019, the company wanted to take a 49% stake in Future Coupons, the reward voucher arm of India’s second-largest retailer.
Greater than three years later, the deal has but to be finalized. The corporate has spent this time in a protracted authorized battle with Reliance Retail which India’s richest man heads.
The significance of closing the deal within the burgeoning Indian market is clear, with simply 4% of its over 1 billion residents shopping for objects on-line.
However with Walmart’s acquisition of Flipkart for $16 billion, Indian authorities have turn out to be cautious of international funding. Amazon’s deep pockets is probably not sufficient to counter this menace to its enlargement.
Weaknesses and alternatives (WO)
The corporate’s poor efficiency in China isn’t in contrast to its efficiency in India, with established opponents reminiscent of Alibaba hindering Amazon’s potential to stay aggressive.
Amazon pulled its Chinese language market in 2019 and in June 2022, introduced it will even be pulling its Kindle e-bookstore and app within the close to future.
In saying the transfer, an organization spokesperson famous that “With our portfolio of companies in China, we are going to proceed to innovate and make investments the place we are able to present worth to our prospects.”
Shifting ahead, these alternatives will probably be present in parts of the enterprise Amazon is selecting to retain in China.
These embody cross-border eCommerce and in addition cloud and promoting providers.
Weaknesses and threats (WT)
How can Amazon decrease its weaknesses and handle its threats? Amazon’s reliance on the North American market may very well be thought of a weak spot, with virtually 60% of its 2021 income attributed to prospects in that area.
The corporate’s dedication to quick and handy supply additionally noticed it spend $77 billion on worldwide transport in 2021 – an increase of $16 billion over 2020 and a 100% improve from 2019.
For the reason that firm outsources many of those providers to 3rd events, it has much less management over this expense than it will in any other case want.
This leaves the corporate extra weak to will increase in the price of transportation and labor which have risen considerably in 2022.
With reliance on the US market and transportation prices consuming into earnings, it’s clear that Amazon could have to extend the price of its Prime membership program.
Latest enlargement into Brazil, Europe, and Japan has elevated income considerably, however because the attain of Amazon’s logistics platform will increase, so too do Amazon’s logistical prices.
In August 2022, the company raised its fees for sellers who utilize its Fulfilment by Amazon (FBA) service to counter rising inflation.
The specter of inflation will should be rigorously managed, nevertheless, since Amazon won’t wish to alienate its cohort of 1.9 million energetic sellers who’re responsible for around $80.5 billion in annual sales.
The Boeing Firm TOWS matrix
Under is a TOWS matrix instance for The Boeing Firm with respect to the 4 technique mixtures outlined above.
Boeing has a number of strengths that it might flip into alternatives to keep up or improve market share. These embody:
- Established, dependable provider community – over time, Boeing has constructed a sturdy community of suppliers that enable it to beat bottlenecks.
- Buyer satisfaction – regardless of latest setbacks with the 737 MAX, Boeing’s intensive clientele within the type of airways and authorities are glad with its merchandise. Boeing enjoys intensive model fairness world wide which it makes use of to drive gross sales.
- Free money circulation – for This fall 2021, Boeing reported a free cash flow of $494 million. The corporate is utilizing a few of this money to place itself as a protected and sustainable airline because the world returns to air journey after COVID-19.
Here’s a have a look at the strengths that can be utilized to keep away from exterior threats:
- Analysis and growth – Boeing has a robust historical past of analysis and growth, with a number of pioneering plane in each the business and protection industries. Immediately, the corporate is partnering with scientific organizations to make air journey extra sustainable and cut back its environmental influence.
- International and strategic companions – whereas Boeing has a robust presence in America, roughly 70% of commercial aircraft revenue is derived from customers outside the United States. This contains many rising markets the place there has additionally been a speedy improve in protection, house, and safety income. What’s extra, the corporate has over 20,000 suppliers and companions and collaborates with over 50 worldwide universities. Taken as a complete, this helps Boeing counter the specter of Airbus and preserve and even improve its market share.
How is Boeing turning its weaknesses into alternatives?
- Unsafe plane – the discharge of the 737 MAX was rushed to counter the same new plane launched by Airbus. Two 737s crashed killing all on board, with each experiencing the identical malfunction. In late 2021, the corporate admitted full accountability for the disasters which paved the best way for compensation to be paid to the victims’ households. Boeing is now utilizing this weak spot to enhance its software program growth, technical documentation, and pilot coaching procedures.
- Anti-union stance – some 35% of Boeing’s 162,000 employees are union members. The corporate’s anti-union stance is well-known, with manufacturing of the 787 Dreamliner moved from Seattle to South Carolina to cut back worker group. A lot of Boeing’s most senior or expert workers had been additionally terminated for his or her union affiliations, whereas others had their workloads elevated considerably or had been reprimanded for high quality management points. Shifting ahead, Boeing has a chance to undertake a much less inflammatory stance and improve its productiveness within the course of.
Lastly, let’s have a look at a weak spot that will turn into a menace:
- Home workforce – with a robust home workforce in america, Boeing is weak to latest, substantial will increase within the minimal wage. This has seen a lot of plane element manufacturing transfer abroad, with a devoted 737 completion manufacturing facility opened in China in 2018. Off-shore manufacturing to counter rising wages is a transparent development, with 30% of the 787 Dreamliner made abroad in comparison with simply 5% of the older 747 jumbo jet. Whereas rising minimal wages don’t influence Boeing’s senior engineers, it stays to be seen whether or not the corporate will proceed to outsource extra of its plane meeting.
Procter & Gamble TOWS matrix
On this instance, let’s check out a TOWS matrix for dominant client packaged items firm Procter & Gamble.
Procter & Gamble has a number of strengths that it could possibly flip into alternatives:
- Model leverage and diversification – a few of Procter & Gamble’s manufacturers have been in client houses for greater than 180 years and immediately, the corporate boasts over 20 billion-dollar manufacturers reminiscent of Gillette, Olay, Tide, Pantene, and Oral-B. Whereas the corporate offered its snack meals model Pringles to Kellogg’s in 2012, Procter & Gamble may leverage its model fairness to diversify into associated industries and improve gross sales.
- Rural enlargement – the corporate can be utilizing its international presence to broaden into rural markets in growing nations. In 2021, it invested round $5 billion in India to companion with farmers and stall homeowners to ship superior merchandise and improve their retail and communication expertise. Retailers had been additionally skilled on stock administration greatest practices and tech-enabled options.
Listed below are two methods Procter & Gamble can use inherent strengths to counter threats:
- Personal-label grocery store manufacturers – grocery store chains world wide reminiscent of Tesco, Walmart, and Woolworths are more and more introducing private-label manufacturers of their shops that compete straight with P&G merchandise. Whereas it’s unlikely that Procter & Gamble can compete on worth, it might compete in different methods reminiscent of product differentiation, perceived worth, and present client developments. The corporate can even benefit from its model fairness to create a superior buyer expertise and reinforce model loyalty.
- Counterfeit merchandise – like different profitable corporations, Procter & Gamble’s has seen lots of its merchandise counterfeited in elements of the world. In 2011, the corporate possessed a 350-strong crew of legal professionals with a selected deal with counterfeit on-line gross sales. Extra just lately, P&G partnered with U.S. Customs and Border Safety to stop pretend merchandise from coming into its North American provide chain.
Procter & Gamble is popping the next weaknesses into alternatives:
- Palm oil deforestation – Procter & Gamble dedicated to no deforestation stemming from palm oil plantations by 2020. To make sure that the palm oil it sourced was sustainable, the corporate made a number of enhancements to its provide chain. It established a traceability system for all palm oil merchandise and labored with farmers, NGOs, friends, and tutorial consultants to advertise sustainable requirements throughout the business.
- Low entry boundaries – Procter & Gamble constantly encounters new market entrants as a result of the segments through which it operates have low boundaries to entry. The corporate has used economies of scale to stay worth aggressive to some extent, nevertheless it has additionally relied on many years of inner innovation at international analysis services which might be stocked with one of the best expertise on provide. This tradition dissuades new entrants and permits P&G to capitalize on new or unexplored market segments and merchandise.
Within the ultimate quadrant, we’ll think about a weak spot that has the potential to boost or work together with a menace:
- Rising prices – In July 2021, the corporate introduced that its input costs rose to nearly $2 billion as commodity and transportation bills elevated resulting from COVID-19. With the costs of every thing from plastic to palm oil growing, the corporate was compelled to cross the added bills on to shoppers. This measure has the potential to exacerbate the 2 threats we talked about earlier. In response to rising costs, the prevalence of counterfeit merchandise at extra engaging worth factors could improve. Shoppers can also be extra inclined to buy cheaper private-label manufacturers over P&G merchandise.
Disney TOWS Matrix
On this TOWS instance, let’s analyze the leisure firm Disney.
How does Disney make the most of its strengths and switch them into alternatives?
- Expanded product combine – in 2022, Disney was the 19th most beneficial model on the earth with an estimated worth of $57.06 billion. The corporate’s place in client childhoods for over a century and tales that resonate with youngsters and adults alike are virtually unimaginable for a competitor to duplicate. Disney has leveraged its model worth to broaden its product combine to incorporate extra media networks and branded theme parks. The identical can be obvious in studio leisure reminiscent of musical recordings and stage performs.
- Acquisition competency – Disney additionally has a robust historical past of profitable acquisitions, with Pixar Animation Studios (2006), Marvel Leisure (2009), Lucasfilm (2012), and twenty first Century Fox (2019) simply 4 examples which have pushed constant income and revenue will increase. To keep up its place out there and facilitate development, it’s possible the corporate will proceed to bolster its portfolio with additional acquisitions sooner or later.
What are a few of the threats Disney can keep away from or mitigate with its strengths?
- Growing older inhabitants – Disney’s robust model attraction to kids could also be a menace as its whole addressable market declines. This decline is because of an growing older inhabitants with many mother and father – notably in developed nations – having fewer kids. To keep away from this menace, Disney may use its robust manufacturing heritage to launch content material for grownup audiences.
- International recession – one other menace to the corporate is a recession, with leisure typically one of many first areas shoppers in the reduction of on to save cash. Disney’s power right here lies in its opinion of recessions themselves, with Walt Disney as soon as quipping that “I’ve heard there’s going to be a recession, I’ve determined to not take part.” This doesn’t infer that Disney’s management doesn’t consider in recessions. Moderately, it means the corporate finds methods on a micro degree to offset no matter happens on the macro degree. For instance, Disney provides inventive and aggressive reductions, promotions, and celebrations in its theme parks in periods of low visitation. When financial instances are higher and attendance rises, the corporate responds by growing its costs.
On this quadrant of the TOWS matrix, we check out a technique Disney can rework its weaknesses into alternatives.
North American dependence
In 2021, round 83% of Disney’s whole income of $65.39 billion got here from North America regardless of the corporate’s globally dominant model.
This dependence makes the corporate weak to financial downturns, however the drivers of this case are complicated.
Makes an attempt to broaden exterior of North America up to now have failed, amongst different causes, as a result of Disney didn’t respect cultural norms.
Working example is the enlargement of Disneyland into Paris and Hong Kong.
Whereas lots of Disney’s characters and tales have common attraction, it should have the ability to produce content material that balances the native (American) and international facets of its viewers.
Lastly, let’s describe one among Disney’s weaknesses that will turn into a menace.
Disney tends to function in borderline hyper-competitive markets reminiscent of parks and resorts, media, and interactive leisure.
Many of those industries are dynamic and alter quickly in response to new developments or applied sciences.
Disney’s reliance on the North American market the place it additionally experiences robust competitors is a menace.
A few of the firm’s opponents can present area of interest merchandise at a extra inexpensive worth than Disney and could also be extra attentive to new developments.
Different opponents could also be in a stronger place as a result of a bigger share of their income comes from exterior america.
One may additionally categorize the recording and sharing of copyrighted materials as a type of competitors that Disney should additionally do its greatest to counter.
Hertz TOWS matrix
On this further TOWS matrix case examine, we’ll check out the rental firm Hertz.
Hertz holds 36.1% of the car rental market in the United States forward of opponents reminiscent of Enterprise (33.2%) and Avis (26%). Hertz can be the second-largest firm of its kind on the earth by gross sales, location, and fleet measurement. It operates in over 160 nations and because it was based in 1918, has amassed important model worth.
These traits allow Hertz to place itself as a frontrunner within the EV market. In 2023, the Hertz Electrifies public-private partnership (PPP) was launched in Colorado to rework the rental business and speed up the mainstream adoption of electrical automobiles. The corporate plans to supply 5,200 rental EVs to both consumers and ride-share drivers alike.
Hertz may even improve charging capability and infrastructure at Denver Worldwide Airport and, along with BP Pulse, develop a world high-speed charging community beginning with varied neighborhoods within the metropolis.
One of many main threats to Hertz is the business through which it operates. Within the period of ride-hailing, automotive rental and fleet administration corporations have fallen out of favor to some extent. Many are related to sluggish turnaround instances, automobile availability points, and prohibitive costs in peak demand durations.
Shoppers now want (and certainly count on) extra seamless and clear options, with mobility-as-a-service (MaaS) some of the standard. Along with the myriad carpool, ride-share, and bike-share decisions, demand for MaaS has additionally been pushed by on-demand bus providers and higher integration between a number of modes of transport.
Hertz is now obtainable inside apps like Whim the place customers who aren’t essentially vacationers can hire automobiles as the necessity arises. Whim is particularly designed to make city mobility extra handy, sustainable, and versatile.
Hertz additionally makes its rental automobiles obtainable to Uber and Lyft drivers who wish to keep away from the prices related to sustaining their very own automobiles. An identical MaaS product is out there by way of Hertz My Automotive, a month-to-month automotive subscription service the place customers can hire automobiles for a wide range of completely different functions with versatile preparations.
In both case, Hertz has used its model fairness and huge automobile fleet to make itself extra related to the shoppers of immediately.
Only a few months into the COVID-19 pandemic, Hertz was compelled to file for chapter citing a pointy decline in income and bookings. The corporate’s weak spot was that it relied on airport areas for two-thirds of its income. When pandemic restrictions reduced air travel patronage by 94%, Hertz misplaced nearly all of its income virtually in a single day.
Nevertheless, simply twelve months after the chapter declaration and bloated with debt, Hertz re-emerged after buyers had been buoyed by journey returning to pre-pandemic ranges. Buyers discovered themselves in a bidding struggle to revive the corporate, with victor Knighthead Capital providing the company with $5.9 billion within the capital.
Hertz’s extra stock was a weak spot as journey was halted, nevertheless it turned a chance thereafter as soon as provide chain points induced new automotive manufacturing to lower. With many shoppers turning to second-hand automobiles as an alternative, Hertz was able to sell 200,000 vehicles over the second half of 2020 and earn money on the transactions.
The corporate later used the funds to make a $4.2 billion purchase of 100,000 Teslas and kickstart EV ambitions.
Hertz has been capable of keep away from or a minimum of overcome lots of its weaknesses. It invested in EVs and MaaS to handle the inherent shortfalls of conventional automotive rental and has used its cloud to not solely turn out to be a participant however a frontrunner within the new period.
Within the course of, Hertz has decreased its reliance on airport areas and unhindered journey which was its Achilles heel over the pandemic.
One weak spot that is still at Hertz is excessive worker turnover on account of poor firm tradition and demanding senior administration. In 2018, 24/7 Wall St famous that Hertz “has a few of the most dissatisfied workers of any giant American firm” with simply a 35% employee approval rating on Glassdoor.
Turnover and an undesirable tradition pose a menace to the corporate’s long-term viability – regardless of how efficiently it might pivot in response to exterior components.
- The TOWS Matrix builds on the success of the SWOT Evaluation by permitting a enterprise to establish applicable strategic actions.
- The TOWS Matrix consists of 4 methods that assist a enterprise perceive, plan, and put together for the attainable interplay between threats and weaknesses with strengths and weaknesses.
- The TOWS Matrix creates cohesion within the workforce and helps a enterprise unearth hidden strengths or weaknesses that can affect future decision-making.
TOWS matrix vs. SWOT evaluation
Organizations use the SWOT evaluation to match exterior alternatives and threats with their inner strengths and weaknesses.
Nevertheless, it doesn’t present directions on what to do with the resultant info.
The TOWS matrix additionally compares exterior alternatives and threats with inner strengths and weaknesses.
The matrix, a variation of the SWOT evaluation, clarifies the actions a corporation can take to learn from its findings.
What are a few of the key similarities and variations?
- The SWOT evaluation is utilized by organizations to match exterior alternatives and threats with their inner strengths and weaknesses. The TOWS matrix analyses the identical 4 components however offers actionable insights.
- The TOWS matrix seems to be on the particular relationship between every of the 4 components, with a technique for every relationship outlined in one among 4 quadrants.
- The SWOT evaluation is a straightforward however efficient means for a corporation to evaluate its strengths, weaknesses, alternatives, and threats. Its restricted potential to offer actionable insights means it’s typically paired with one other evaluation.
TOWS and Porter’s 5 Forces
The TOWS matrix is likely to be helpful in assessing the exterior and inner context.
Nevertheless, for a deeper understanding of the enterprise panorama, you should utilize the 5 forces mannequin, which can assist you to assess the context based mostly on the next:
A variation of it’s the six forces mannequin, which is extra related for the digital enterprise world.
TOWS and BCG Matrix
After you have assessed the enterprise panorama by way of the TOWS Matrix, it’s essential to begin prioritizing the merchandise which may make your organization profitable.
Thus, it will assist in the event you evaluated allocate capital towards merchandise which have a excessive potential for the group whereas enabling to maintain sustaining the merchandise which might be the core of the group.
For that sake, the BCG Matrix is a good companion, as it would inform you if merchandise could be categorized as under:
And it’ll assist construct a so-called Success Sequence vs a Catastrophe Sequence.
TOWS and Ansoff Matrix
One other nice companion to the TOWS matrix is the Ansoff Matrix, which can assist decide whether or not the enlargement technique you’re utilizing is related or not.
Certainly, the Ansoff Matrix, will assist you to decide which of the 4 methods under is likely to be simpler to additional develop the enterprise!
What do you imply by TOWS matrix?
The TOWS Matrix is a strategic framework that appears at 4 facets: Threats, Alternatives, Weaknesses, and Strengths. The matrix, a variation of the SWOT evaluation, clarifies the actions a corporation can take to learn from its findings, thus enabling the SWOT evaluation to be applied.
What’s the distinction between TOWS and SWOT?
Whereas a SWOT Evaluation focuses on understanding the market panorama by ranging from the inner setting, the TOWS matrix flips the logic by ranging from exterior environmental forces first. As well as, the TOWS additionally helps execute the SWOT evaluation.
What’s the significance of TOWS?
One of the difficult elements of implementing a profitable enterprise technique is execution. What typically makes execution not efficient is the shortage of prioritization. Strategic frameworks like TOWS assist organizations prioritize the following steps of the enterprise technique to easily inform the execution and implementation of the enterprise technique.
Related Evaluation Frameworks
Failure Mode And Results Evaluation
Agile Enterprise Evaluation
Paired Comparability Evaluation
Monte Carlo Evaluation
Put up-Mortem Evaluation
Root Trigger Evaluation
Exercise-Primarily based Administration
Related Enterprise Matrices
Hoshin Kanri X-Matrix
Motion Precedence Matrix
GE McKinsey Matrix
Product-Course of Matrix
Mendelow Stakeholder Matrix
Necessities Traceability Matrix
Money Circulation Assertion Matrix
Grand Technique Matrix
Associated Technique Ideas: Go-To-Market Technique, Advertising Technique, Enterprise Fashions, Tech Enterprise Fashions, Jobs-To-Be Finished, Design Considering, Lean Startup Canvas, Worth Chain, Worth Proposition Canvas, Balanced Scorecard, Enterprise Mannequin Canvas, SWOT Evaluation, Progress Hacking, Bundling, Unbundling, Bootstrapping, Enterprise Capital, Porter’s 5 Forces, Porter’s Generic Methods, Porter’s 5 Forces, PESTEL Evaluation, SWOT, Porter’s Diamond Mannequin, Ansoff, Expertise Adoption Curve, TOWS, SOAR, Balanced Scorecard, OKR, Agile Methodology, Worth Proposition, VTDF Framework, BCG Matrix, GE McKinsey Matrix, Kotter’s 8-Step Change Mannequin.
Most important Guides: