The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
- Understanding the TOWS Matrix
- Benefits of the TOWS Matrix
- TOWS matrix example
- Key takeaways
- TOWS matrix vs. SWOT analysis
- Connected strategic frameworks
Understanding the TOWS Matrix
The TOWS Matrix was developed by management consultant Heinz Weihrich. He recognized that the SWOT Analysis – although highly successful in its own right – had significant shortcomings.
While the SWOT Analysis identifies Strengths, Weaknesses, Opportunities, And Threats, it does not make any attempt to make links between them. For example, a business with a perceived weakness may then see it as a threat. Another business that identifies an opportunity may be able to match it to one of their existing strengths.
The TOWS Matrix, then, is a much more useful graphical representation of a SWOT Analysis. Internal strengths and weaknesses are compared to external opportunities and threats. Every one of the four individual factors can influence and impact each other.
The four strategy combinations of a TOWS Matrix
In this quadrant of the TOWS Matrix, a business must assess its strengths on a case by case basis to determine if it can use them to capitalize on opportunities. For example, a car manufacturer operating in a luxury car market (opportunity) with a strong R&D culture (strength) may design a feature-packed line of premium vehicles.
Here, the business should assess each strength based on its ability to counteract or avoid external threats. Returning to the car manufacturer example, unfavorable exchange rates (the threat) may be counteracted by the company using its R&D expertise to build a factory in a country with a better-valued currency.
In the WO quadrant, an organization must determine how its weaknesses can be eliminated or offset by external opportunities. For example, inexperience in dealing with foreign labor unions (weakness) can be overcome by hiring managers with the relevant experience (external opportunity).
In the final strategy combination, the business assesses each weakness and threat and determines if they can be avoided. The car manufacturer with little experience operating in foreign markets (weakness) can avoid entering that market altogether. Another maker with a heavy reliance on a single car model (weakness) can reduce the threat of competition by developing a range of different models.
Benefits of the TOWS Matrix
The benefits of creating a TOWS Matrix include:
- A more versatile option than some other techniques that are glorified brainstorming sessions. It allows a business to link external and internal factors and their potential impact on business operations.
- Simple to understand through all levels of management and is relatively simple to execute. This increases employee focus and cohesiveness.
- The TOWS Matrix also facilitates the discovery of unknown aspects of a business. Whether they are unquantified strengths or hidden threats, newfound insights into operations help a company plan for the future, and facilitate growth.
TOWS matrix example
Below is a TOWS matrix example for The Boeing Company with respect to the four strategy combinations outlined above.
Boeing has several strengths that it can turn into opportunities to maintain or increase market share. These include:
- Established, reliable supplier network – over the years, Boeing has built a robust network of suppliers that allow it to overcome bottlenecks.
- Customer satisfaction – despite recent setbacks with the 737 MAX, Boeing’s extensive clientele in the form of airlines and government are satisfied with its products. Boeing enjoys extensive brand equity around the world which it uses to drive sales.
- Free cash flow – for Q4 2021, Boeing reported a free cash flow of $494 million. The company is using some of this cash to position itself as a safe and sustainable airline as the world returns to air travel after COVID-19.
Here is a look at the strengths that can be used to avoid external threats:
- Research and development – Boeing has a strong history of research and development, with several pioneering aircraft in both the commercial and defense industries. Today, the company is partnering with scientific organizations to make air travel more sustainable and reduce its environmental impact.
- Global and strategic partners – while Boeing has a strong presence in America, approximately 70% of commercial aircraft revenue is derived from customers outside the United States. This includes many emerging markets where there has also been a rapid increase in defense, space, and security revenue. What’s more, the company has over 20,000 suppliers and partners and collaborates with over 50 international universities. Taken as a whole, this helps Boeing counter the threat of Airbus and maintain or even increase its market share.
How is Boeing turning its weaknesses into opportunities?
- Unsafe aircraft – the release of the 737 MAX was rushed to counter a similar new aircraft released by Airbus. Two 737s crashed killing all on board, with both experiencing the same malfunction. In late 2021, the company admitted full responsibility for the disasters which paved the way for compensation to be paid to the victims’ families. Boeing is now using this weakness to improve its software development, technical documentation, and pilot training procedures.
- Anti-union stance – some 35% of Boeing’s 162,000 employees are union members. The company’s anti-union stance is well known, with production of the 787 Dreamliner moved from Seattle to South Carolina to reduce employee organization. Many of Boeing’s most senior or skilled employees were also terminated for their union affiliations, while others had their workloads increased significantly or were reprimanded for quality control issues. Moving forward, Boeing has an opportunity to adopt a less inflammatory stance and increase its productivity in the process.
Finally, let’s look at a weakness that may turn out to be a threat:
- Domestic workforce – with a strong domestic workforce in the United States, Boeing is vulnerable to recent, substantial increases in the minimum wage. This has seen much of aircraft component manufacturing move overseas, with a dedicated 737 completion factory opened in China in 2018. Off-shore manufacturing to counter rising wages is a clear trend, with 30% of the 787 Dreamliner made overseas compared to just 5% of the older 747 jumbo jet. While rising minimum wages do not impact Boeing’s senior engineers, it remains to be seen whether the company will continue to outsource more of its aircraft assembly.
- The TOWS Matrix builds on the success of the SWOT Analysis by allowing a business to identify appropriate strategic actions.
- The TOWS Matrix consists of four strategies that help a business understand, plan, and prepare for the possible interaction between threats and weaknesses with strengths and weaknesses.
- The TOWS Matrix creates cohesion in the workforce and helps a business unearth hidden strengths or weaknesses that will influence future decision making.
TOWS matrix vs. SWOT analysis
The SWOT analysis is used by organizations to compare external opportunities and threats with their internal strengths and weaknesses. However, it does not provide instruction on what to do with the resultant information.
The TOWS matrix also compares external opportunities and threats with internal strengths and weaknesses. The matrix, which is a variation of the SWOT analysis, clarifies the actions an organization can take to benefit from its findings.
What are some of the key similarities and differences?
- The SWOT analysis is used by organizations to compare external opportunities and threats with their internal strengths and weaknesses. The TOWS matrix analyses the same four factors but provides actionable insights.
- The TOWS matrix looks at the specific relationship between each of the four factors, with a strategy for each relationship defined in one of four quadrants.
- The SWOT analysis is a simple but effective way for an organization to assess its strengths, weaknesses, opportunities, and threats. Its limited ability to provide actionable insights means it is often paired with another analysis.
Connected strategic frameworks
Other related business frameworks:
- AIDA Model
- Ansoff Matrix
- Business Analysis
- Business Model Canvas
- Business Strategy Frameworks
- VRIO Framework