TOWS Matrix: A Step Ahead of SWOT Analysis

The TOWS Matrix focuses on threats and opportunities from a company's external environment. There are some similarities to SWOT Analysis of a business. However, the TOWS Matrix takes an external approach and applies strategic planning techniques while SWOT Analysis uses in an internal approach.

TOWS Matrix - An External Approach

TOWS stands for threats, opportunities, weaknesses, and strengths. You might remember these four components from SWOT Analysis. They are the same four components. As mentioned above, TOWS will begin with external threats and opportunities.

As you progress through TOWS, you'll move from external to internal analysis, which is the reverse flow of SWOT. By starting with external factors, TOWS helps companies develop strategies for dealing with its external environment.

The TOWS Matrix

The core component of the TOWS Matrix is the matrix development. The result looks like the following:

Internal Strengths (S)

SO : Strategies that use strengths to maximize opportunities

ST : Strategies that use strengths to minimize threats.

Internal Weaknesses (W)

WO : Strategies that minimize weaknesses by taking advantage of opportunities

WT : Strategies that minimize weaknesses and avoid threats

To use the matrix, list out your external and internal components. For example, we'll use a fintech company that creates stock analysis software and uses artificial intelligence to provide stock suggestions. Its competitors are larger brokerage firms that supply similar services, but instead of AI, they source stock suggestions manually using an experienced team. Going through the four external and internal components, the fintech's TOWS Matrix may look like the following:

External Opportunities (0)
  • Faster and more suggestions into the marketplace place
  • A lower priced product that can compete
External Threats (T)
  • Branding and marketing budget of existing brokerages
  • The credibility of larger brokerages
Internal Strengths (S)
  • The highly specialized team that can improve AI engine
  • Ability to develop similar prod3ucts using AI

SO : Strategies that use strengths to maximize opportunities

ST : Strategies that use strengths to minimize threats.

Internal Weaknesses (W)
  • A young team that may not have the experience needed to compete with larger brokerages
  • The company will not have developed partnerships

WO : Strategies that minimize weaknesses by taking advantage of opportunities

WT : Strategies that minimize weaknesses and avoid threats

With the listed external and internal components, we begin combining them to recognize each of the following Matrix components:

  • SO - This box looks at how the fintech can utilize its strengths and opportunities. This is the company's power position. The SO box on the matrix is where the fintech should put most of its efforts for full maximization of resources. Specifically, it can combine its lower priced product with its ability to develop similar AI products. This will allow the fintech to undercut prices of larger brokerages and begin pulling away from their customers. While at the same time, it can test new products to this same audience.

  • ST - Two threats have been listed. The fintech can offset those threats through its strengths. While competitors may have larger marketing budgets, the fintech can release a lower priced product with more features and reliability, due to its utilization of AI. Additionally, the fintech can speak to the experience, education, and accomplishments of its team to help offset some of the brokerages' credibility. In this way, the fintech can also begin building its credibility in the market.

  • WO - The WO box is not an area of strength. When dealing with weaknesses, a company will instead focus on minimization. This is a defensive move rather than an offensive one. The fintech's weakness is lack of experience and partnerships within the marketplace. Larger brokerages will have years of experience in this space along with well-developed partnerships.

  • WT - The WT box is the weakest area for a company. It also a defensive position. The company's goal is to work on strategies that minimize weaknesses and avoid threats. Rather than trying to go head-to-head with larger brokerages through marketing and advertising, the fintech may look more to word-of-mouth and content marketing, which are both extremely low cost. Additionally, it may not focus on developing partnerships or may even consider breaking off efforts to create certain partnerships until a later time, with the understanding that these are difficult areas to move forward in.

Outsourcing Development of Your TOWS Matrix

Understanding that SWOT Analysis begins with an internal focus and moves out while the TOWS Matrix does just the opposite can provide a more comprehensive picture of strategies that your company can utilize.

The Research Optimus research team has many years of experience analyzing companies and building out SWOT Analysis and TOWS Matrices. For a fully developed TOWS Matrix of your company, please contact us to learn more.

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