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I would like to learn everything about the following Business Process; TOWS (Threats, Opportunities, Weaknesses, Strengths)
OVERVIEW
The TOWS Matrix is the situational analysis modeling of threats, opportunities, weaknesses and strengths developed by Professor Heinz Weihrich, whilst a professor at the University of San Francisco. Published in 1982, his book “The TOWS Matrix — A Tool for Situational Analysis” took a new-look at existing variables and applied an analytic framework much broader in scope and which emphasized external factors and how they fit within the internal capabilities of an enterprise (Pg 1).
Please note that TOWS Matrix thought leaders and/or influencers will be covered in a separate report.
PROFESSOR HEINZ WEIHRICH
Weihrich has had an extensive career history in the field of organizational management and behavioral science and is extensively published, an author of both books and journal articles. Weihrich also developed a new paradigm TOWS Matrix for situational analysis and famously used his methodology in an article titled Analyzing the competitive advantages and disadvantages of Germany with the TOWS Matrix — an alternative to Porter’s Model. Weihrich felt that Professor Michael Porter’s model lacked the requirement of “responsible alternative strategies” to be created by the government, though he noted the usefulness of Porter’s framework in producing quality analysis of the economic environment of a country.
THE TOWS MATRIX
The model is for the strategic review of threats and opportunities that are external to a business entity and the analysis of those against an entity’s current situation including weaknesses and strengths. Weihrich determined that other existing models did not go far enough in identifying ways in which weaknesses could be overcome. He also felt that his model would also be able to “serve as a conceptual framework” in developing strategies to help businesses achieve their goals and maximize their growth. Weihrich’s framework comprises 9 elements which are discussed below.
Quite simply, this relates to an organization’s resources including its staff, management, stakeholders, customers, suppliers and government. Weihrich recognized that claimants’ own goals do not necessarily reflect those of the organization and he cites employees who wish for greater benefits and job stability whilst a government expects taxes to be paid correctly and on time (Pg 3).
Typically, this looks at the basic building blocks of the organization including what its goals are, who it services and the regions it services, what it offers its customers, its mission and values.
In essence this is where the organization reviews its position in the competitive marketplace. It should drill down to all factors on which they compete with their opposition including product, quality, innovation, supply chain and customer service. It also assesses the external environment more broadly, including economic climate, technology opportunities, demographics, government policies and other “social and political factors” (Pg 4).
To offer a realistic forecast of the future environment, Weihrich’s model looked to a study undertaken by Jerry Wall using publicly available financial and annual statements, market research, brokers as well as looking to sourcing information from informal networks, both personal and professional, to gain a greater understanding of competitors. It also asks who are the customers it wants to attract.
Any business analysis will be lacking if the same level of due diligence is not undertaken on its internal environment. The quality of the data input determines the quality of the analysis and strategies developed from it. Therefore, this audit is critical in robustly identifying weaknesses and realistically identifying strengths and should cover staff, management, knowledge base and skill set, employee development, production routines, customer experience, finances including capital, assets and liabilities as well as organizational culture. There are other factors as well though these may be less common but could include short and long term debt or length of time remaining under patent protection (Pg 6).
Alternatives should be realistic and targeted. By being clear about its purpose the organization has a greater likelihood of seeing a positive return on its action plan. If an organization sets itself unrealistic expectations, there is a greater likelihood that it won’t be able to achieve the success it was desiring. Strategies could be to diversify, innovate or concentrate (Pg 7).
Before making a choice on which strategy to proceed with, an organization needs to look at “external realities and internal capabilities”. In essence, this step is about assessing risk and recognizing that whilst every effort may have been made to analyze its circumstances and potential future, that the future itself is fluid and “subject to change” (Pg 8).
Is the proposed strategy feasible? This is where this question is considered in Weinrich’s model and it includes assessing the goals of the organization’s claimants along with those of the executive or management. Weihrich further advises that the strategy should be looked at in terms of feasibility, can it be achieved and when can it be achieved.
As Weinrich noted when determining a strategy, the future is “dynamic”. Contingency should be built in should the forecast not go according to plan.
The goal of the Weaknesses/Threats Strategy is “mini-mini” where both elements are minimized as much as possible (Pg 11).
Weaknesses/Opportunities Strategy has a goal of “mini-maxi” where an organization is looking to minimize weaknesses and build on opportunities and to take a lead position in the competitive marketplace (Pg 11).
The goal of the Strengths/Threats Strategy is “maxi-mini”, so inversely to Weaknesses and Opportunities, an organization is looking to enhance its strengths and solidify its position in the marketplace whilst removing or reducing as many threats as possible (Pg 11).
Finally, the last strategy is Strengths/Opportunities and is the win-win or “maxi-maxi” where the organization is hoping to position itself in capturing the prime position in its competitive marketplace (Pg 11).
The TOWS Matrix looks to putting a time frame around the strategic plan whilst acknowledging that some factors will be more stable than others. In doing so the matrix assesses the past, the present and continuing into the short term and then long term future. Whilst it offers a way to assess the level of each strategy by qualifying their impact, Weihrich cautions that weighting strengths and opportunities needs to be evaluated robustly (Pg 12).
ITS USE IN BUSINESS
Businesses often use the Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis to review the current position of their organization. Whilst it does give that analytic overview it lacks what the TOWS Matrix brings, which is the ability to establish an action plan to move forward and maximize their strength and opportunities whilst minimizing any weaknesses and threats. Figure 4 in this article gives a graphical overview of how an analyst can convert their SWOT analysis into the TOWS Matrix in order to build their forecast planning. The author believes that combining a SWOT analysis with a TOWS Matrix strategy is a balanced approach to future planning. They note that other analytic models may focus too much on the external factors such as Professor Porter’s Five Forces whilst other frameworks spend more time looking the internal capabilities.
CURRENT TRENDS
In business today the TOWS Matrix is often used in conjunction with other “models and frameworks” and, as with all of them, the quality of the data input determines the quality of the analysis and strategies developed from it.
KIWIFRUIT IN PIEDMONT
This case study for Improving Production Chains and Environmental Sustainability of Kiwifruit and Baby Kiwi in Italy used a Life Cycle Assessment of the product and potential replacements before undertaking a SWOT analysis. They then used the TOWS Matrix to formulate a strategic plan that would “shape the future”. The purpose in undertaking these detailed assessment was multifaceted as Piedmont was experiencing a combination of issues around environment, society and economy. Piedmont is a major region in the global community for the production of kiwifruit with a long history of success over the past 20 years. However, a plant bacteria had meant that the cultivation areas of the region were being negatively impacted.
In order to help the region, this study was conducted to provide a strategic plan for the industry, community and region moving forward. With the aid of the mentioned analytical tools, the study looked for an industry that would not impact the current kiwifruit industry whilst offering an alternative fruit product that would enhance and build on the existing industry and allow all industry stakeholders to “work harmoniously” together and they predict a successful management program for A. arguta. By “integrating the results” of the three models the study was able to highlight “development strategies” to reshape the future of industry in the Piedmont region and bring on board large-scale berry fruits which would be able to be exported whilst filling an organic and niche oriented marketplace.
AMERICAN EAGLE OUTFITTERS
In undertaking a strategy analysis of American Eagle Outfitters (AEO), Office Space Consulting used Internal Factor Analysis Summary (IFAS), External Factor Analysis Summary (EFAS), TOWS and SWOT to look for and develop a strategic plan for the future of AEO.
The TOWS Matrix was used to analyze the “highest rated opportunities” that has been identified from the IFAS and EFAS analysis. They identified that AEO’s greatest threat as their cost to do business. By using TOWS they also found that this was where they had their biggest opportunity. AEO sourced all of its product from China, however, 88.2 percent of AEO’s 2015 revenue came from sales within the US. The opportunity identified through the TOWS Matrix was the relocation of 80 percent of its manufacturing to Mexico in order to leverage a shorter and cheaper supply chain by sourcing business partners through a North American Free Trade Area. Lead times would reduce by 40 percent or between 2 to 3 months (Pg 28).
CONCLUSION
The TOWS Matrix is a robust methodology for determining strategic opportunities for the future of an individual business or organization. TOWS show the relationships between internal and external factors and allows an analyst to make a clearer assessment of the importance of threats and weaknesses in developing appropriate strategies to leverage opportunities and exploit strengths. As a model it has been in use since 1982 and is still considered a major tool for strategic planning. Since it was developed as a stand-alone model it is often now being used in conjunction with other tools which allow for a more complex and developed analysis and proposal for future opportunities.