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
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.
Amazon TOWS matrix
Here is a look at a sample TOWS matrix for Amazon.
Strengths and opportunities (SO)
Amazon’s customer-centrism, excellent brand equity, attractive technology, and considerable resources mean it is well-positioned to expand into additional markets.
One of these markets is the bricks-and-mortar space in the United States.
While the company’s acquisition of Whole Foods has been well publicized, it has also launched a chain of supermarkets known as Amazon Go.
Early versions of these supermarkets were small and more like convenience stores, but a new 6,150 square foot, 1300-product outlet was recently opened in Seattle.
In addition to containing no checkouts, the supermarket offers fresh coffee or kombucha on tap and a line of made-to-order meals prepared by in-house chefs.
With Amazon Go stores increasing in prevalence and size, Amazon is using its technology to expand into bricks-and-mortar retail with a more seamless and convenient shopping experience.
Strengths and threats (ST)
The ease with which Amazon can expand into new markets is impressive, but this strength is sometimes offset by the presence of local competitors and markets with low entry barriers.
In the Indian market, for example, the company has experienced stiff competition from the Walmart-backed Flipkart and fellow eCommerce platform Snapdeal.
Establishing a presence in the critical and lucrative Indian market has not been easy for Amazon.
With a $200 million investment in 2019, the company wanted to take a 49% stake in Future Coupons, the gift voucher arm of India’s second-largest retailer.
More than three years later, the deal has yet to be finalized. The company has spent this time in a protracted legal battle with Reliance Retail which India’s richest man heads.
The importance of closing the deal in the burgeoning Indian market is obvious, with just 4% of its over 1 billion citizens buying items online.
But with Walmart’s acquisition of Flipkart for $16 billion, Indian authorities have become wary of foreign investment. Amazon’s deep pockets may not be enough to counter this threat to its expansion.
Weaknesses and opportunities (WO)
The company’s poor performance in China is not unlike its performance in India, with established competitors such as Alibaba hindering Amazon’s ability to remain competitive.
Amazon pulled its Chinese marketplace in 2019 and in June 2022, announced it would also be pulling its Kindle e-bookstore and app in the near future.
In announcing the move, a company spokesperson noted that “With our portfolio of businesses in China, we will continue to innovate and invest where we can provide value to our customers.”
Moving forward, these opportunities will be found in components of the business Amazon is choosing to retain in China.
These include cross-border eCommerce and also cloud and advertising services.
Weaknesses and threats (WT)
How can Amazon minimize its weaknesses and manage its threats? Amazon’s reliance on the North American market could be considered a weakness, with almost 60% of its 2021 revenue attributed to customers in that region.
The company’s commitment to fast and convenient delivery also saw it spend $77 billion on worldwide shipping in 2021 – an increase of $16 billion over 2020 and a 100% increase from 2019.
Since the company outsources many of these services to third parties, it has less control over this expense than it would otherwise prefer.
This leaves the company more vulnerable to increases in the cost of transportation and labor which have risen significantly in 2022.
With reliance on the US market and transportation costs eating into profits, it is clear that Amazon may have to increase the cost of its Prime membership program.
Recent expansion into Brazil, Europe, and Japan has increased revenue somewhat, but as the reach of Amazon’s logistics platform increases, so too do Amazon’s logistical costs.
In August 2022, the company raised its fees for sellers who utilize its Fulfilment by Amazon (FBA) service to counter rising inflation.
The threat of inflation will need to be carefully managed, however, since Amazon will not want to alienate its cohort of 1.9 million active sellers who are responsible for around $80.5 billion in annual sales.
The Boeing Company TOWS matrix
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.
Procter & Gamble TOWS matrix
In this example, let’s take a look at a TOWS matrix for dominant consumer packaged goods company Procter & Gamble.
Procter & Gamble has several strengths that it may be able to turn into opportunities:
- Brand leverage and diversification – some of Procter & Gamble’s brands have been in consumer homes for more than 180 years and today, the company boasts over 20 billion-dollar brands such as Gillette, Olay, Tide, Pantene, and Oral-B. While the company sold its snack food brand Pringles to Kellogg’s in 2012, Procter & Gamble could leverage its brand equity to diversify into related industries and increase sales.
- Rural expansion – the company is also using its global presence to expand into rural markets in developing countries. In 2021, it invested around $5 billion in India to partner with farmers and stall owners to deliver superior products and enhance their retail and communication skills. Retailers were also trained on inventory management best practices and tech-enabled solutions.
Here are two ways Procter & Gamble can use inherent strengths to counter threats:
- Private-label supermarket brands – supermarket chains around the world such as Tesco, Walmart, and Woolworths are increasingly introducing private-label brands in their stores that compete directly with P&G products. While it is unlikely that Procter & Gamble can compete on price, it can compete in other ways such as product differentiation, perceived value, and current consumer trends. The company can also take advantage of its brand equity to create a superior customer experience and reinforce brand loyalty.
- Counterfeit products – like other successful companies, Procter & Gamble’s has seen many of its products counterfeited in parts of the world. In 2011, the company possessed a 350-strong team of lawyers with a particular focus on counterfeit online sales. More recently, P&G partnered with U.S. Customs and Border Protection to prevent fake products from entering its North American supply chain.
Procter & Gamble is turning the following weaknesses into opportunities:
- Palm oil deforestation – Procter & Gamble committed to no deforestation stemming from palm oil plantations by 2020. To ensure that the palm oil it sourced was sustainable, the company made several improvements to its supply chain. It established a traceability system for all palm oil products and worked with farmers, NGOs, peers, and academic experts to promote sustainable standards across the industry.
- Low entry barriers – Procter & Gamble consistently encounters new market entrants because the segments in which it operates have low barriers to entry. The company has used economies of scale to remain price competitive to some extent, but it has also relied on decades of internal innovation at global research facilities that are stocked with the best talent on offer. This culture dissuades new entrants and allows P&G to capitalize on new or unexplored market segments and products.
In the final quadrant, we’ll consider a weakness that has the potential to enhance or interact with a threat:
- Rising costs – In July 2021, the company announced that its input costs rose to nearly $2 billion as commodity and transportation expenses increased due to COVID-19. With the prices of everything from plastic to palm oil increasing, the company was forced to pass the added expenses on to consumers. This measure has the potential to exacerbate the two threats we mentioned earlier. In response to rising prices, the prevalence of counterfeit products at more attractive price points may increase. Consumers may also be more inclined to purchase cheaper private-label brands over P&G products.
Disney TOWS Matrix
In this TOWS example, let’s analyze the entertainment company Disney.
How does Disney utilize its strengths and turn them into opportunities?
- Expanded product mix – in 2022, Disney was the 19th most valuable brand in the world with an estimated value of $57.06 billion. The company’s place in consumer childhoods for over a century and stories that resonate with kids and adults alike are almost impossible for a competitor to replicate. Disney has leveraged its brand value to expand its product mix to include more media networks and branded theme parks. The same is also apparent in studio entertainment such as musical recordings and stage plays.
- Acquisition competency – Disney also has a strong history of successful acquisitions, with Pixar Animation Studios (2006), Marvel Entertainment (2009), Lucasfilm (2012), and 21st Century Fox (2019) just four examples that have driven consistent revenue and profit increases. To maintain its position in the market and facilitate growth, it is likely the company will continue to bolster its portfolio with further acquisitions in the future.
What are some of the threats Disney can avoid or mitigate with its strengths?
- Aging population – Disney’s strong brand appeal to children may be a threat as its total addressable market declines. This decline is due to an aging population with many parents – particularly in developed nations – having fewer children. To avoid this threat, Disney could use its strong production heritage to release content for adult audiences.
- Global recession – another threat to the company is a recession, with entertainment often one of the first areas consumers cut back on to save money. Disney’s strength here lies in its opinion of recessions themselves, with Walt Disney once quipping that “I’ve heard there’s going to be a recession, I’ve decided not to participate.” This does not infer that Disney’s leadership does not believe in recessions. Rather, it means the company finds ways on a micro level to offset whatever occurs at the macro level. For example, Disney offers creative and aggressive discounts, promotions, and celebrations in its theme parks during periods of low visitation. When economic times are better and attendance rises, the company responds by increasing its prices.
In this quadrant of the TOWS matrix, we take a look at one way Disney can transform its weaknesses into opportunities.
North American dependence
In 2021, around 83% of Disney’s total revenue of $65.39 billion came from North America despite the company’s globally dominant brand.
This dependence makes the company vulnerable to economic downturns, but the drivers of this situation are complex.
Attempts to expand outside of North America in the past have failed, among other reasons, because Disney did not respect cultural norms.
Case in point is the expansion of Disneyland into Paris and Hong Kong.
While many of Disney’s characters and stories have universal appeal, it must be able to produce content that balances the local (American) and global aspects of its audience.
Lastly, let’s describe one of Disney’s weaknesses that may turn out to be a threat.
Disney tends to operate in borderline hyper-competitive markets such as parks and resorts, media, and interactive entertainment.
Many of these industries are dynamic and change rapidly in response to new trends or technologies.
Disney’s reliance on the North American market where it also experiences strong competition is a threat.
Some of the company’s competitors can provide niche products at a more affordable price than Disney and may be more responsive to new trends.
Other competitors may be in a stronger position because a larger percentage of their revenue comes from outside the United States.
One could also categorize the recording and sharing of copyrighted material as a form of competition that Disney must also do its best to counter.
Hertz TOWS matrix
In this additional TOWS matrix case study, we’ll take a look at the rental company Hertz.
Hertz holds 36.1% of the car rental market in the United States ahead of competitors such as Enterprise (33.2%) and Avis (26%). Hertz is also the second-largest company of its type in the world by sales, location, and fleet size. It operates in over 160 countries and since it was founded in 1918, has amassed significant brand value.
These characteristics enable Hertz to position itself as a leader in the EV market. In 2023, the Hertz Electrifies public-private partnership (PPP) was launched in Colorado to transform the rental industry and accelerate the mainstream adoption of electric vehicles. The company plans to offer 5,200 rental EVs to both consumers and ride-share drivers alike.
Hertz will also increase charging capacity and infrastructure at Denver International Airport and, in conjunction with BP Pulse, develop a global high-speed charging network starting with various neighborhoods in the city.
One of the primary threats to Hertz is the industry in which it operates. In the era of ride-hailing, car rental and fleet management companies have fallen out of favor to some extent. Many are associated with slow turnaround times, vehicle availability issues, and prohibitive prices in peak demand periods.
Consumers now desire (and indeed expect) more seamless and transparent solutions, with mobility-as-a-service (MaaS) one of the most popular. In addition to the myriad carpool, ride-share, and bike-share choices, demand for MaaS has also been driven by on-demand bus services and better integration between multiple modes of transport.
Hertz is now available inside apps like Whim where users who are not necessarily travelers can rent vehicles as the need arises. Whim is specifically designed to make urban mobility more convenient, sustainable, and versatile.
Hertz also makes its rental vehicles available to Uber and Lyft drivers who want to avoid the costs associated with maintaining their own vehicles. A similar MaaS product is available via Hertz My Car, a monthly car subscription service where users can rent vehicles for a variety of different purposes with flexible arrangements.
In either case, Hertz has used its brand equity and vast vehicle fleet to make itself more relevant to the consumers of today.
Just a few months into the COVID-19 pandemic, Hertz was forced to file for bankruptcy citing a sharp decline in revenue and bookings. The company’s weakness was that it relied on airport locations for two-thirds of its revenue. When pandemic restrictions reduced air travel patronage by 94%, Hertz lost the majority of its revenue almost overnight.
However, just twelve months after the bankruptcy declaration and bloated with debt, Hertz re-emerged after investors were buoyed by travel returning to pre-pandemic levels. Investors found themselves in a bidding war to revive the company, with victor Knighthead Capital providing the company with $5.9 billion in the capital.
Hertz’s excess inventory was a weakness as travel was halted, but it became an opportunity thereafter once supply chain issues caused new car production to decrease. With many consumers turning to second-hand vehicles instead, Hertz was able to sell 200,000 vehicles over the second half of 2020 and make money on the transactions.
The company later used the funds to make a $4.2 billion purchase of 100,000 Teslas and kickstart EV ambitions.
Hertz has been able to avoid or at least overcome many of its weaknesses. It invested in EVs and MaaS to address the inherent shortfalls of traditional car rental and has used its cloud to not only become a participant but a leader in the new era.
In the process, Hertz has reduced its reliance on airport locations and unhindered travel which was its Achilles heel over the pandemic.
One weakness that remains at Hertz is high employee turnover as a result of poor company culture and demanding senior management. In 2018, 24/7 Wall St noted that Hertz “has some of the most dissatisfied employees of any large American company” with just a 35% employee approval rating on Glassdoor.
Turnover and an undesirable culture pose a threat to the company’s long-term viability – no matter how successfully it can pivot in response to external factors.
- 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
Organizations use the SWOT analysis to compare external opportunities and threats with their internal strengths and weaknesses.
However, it does not provide instructions on what to do with the resultant information.
The TOWS matrix also compares external opportunities and threats with internal strengths and weaknesses.
The matrix, 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.
TOWS and Porter’s Five Forces
The TOWS matrix might be useful in assessing the external and internal context.
However, for a deeper understanding of the business landscape, you can use the Five forces model, which will help you assess the context based on the following:
- Competitive rivalry
- Barriers to entry
- Bargaining power of suppliers
- Bargaining power of customers
- Threats of substitute products or services
A variation of it is the six forces model, which is more relevant for the digital business world.
TOWS and BCG Matrix
Once you have assessed the business landscape via the TOWS Matrix, you need to start prioritizing the products that might make your company successful.
Thus, it would help if you evaluated how to allocate capital toward products that have a high potential for the organization while enabling to keep maintaining the products that are the core of the organization.
For that sake, the BCG Matrix is a great companion, as it will tell you if products can be categorized as below:
And it will help build a so-called Success Sequence vs a Disaster Sequence.
TOWS and Ansoff Matrix
Another great companion to the TOWS matrix is the Ansoff Matrix, which will help determine whether the expansion strategy you’re using is relevant or not.
Indeed, the Ansoff Matrix, will help you determine which of the four strategies below might be more effective to further grow the business!
What do you mean by TOWS matrix?
The TOWS Matrix is a strategic framework that looks at four aspects: Threats, Opportunities, Weaknesses, and Strengths. The matrix, a variation of the SWOT analysis, clarifies the actions an organization can take to benefit from its findings, thus enabling the SWOT analysis to be implemented.
What is the difference between TOWS and SWOT?
Whereas a SWOT Analysis focuses on understanding the market landscape by starting from the internal environment, the TOWS matrix flips the logic by starting from external environmental forces first. In addition, the TOWS also helps execute the SWOT analysis.
What is the importance of TOWS?
One of the most challenging parts of implementing a successful business strategy is execution. What often makes execution not effective is the lack of prioritization. Strategic frameworks like TOWS help organizations prioritize the next steps of the business strategy to simply inform the execution and implementation of the business strategy.
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Related Strategy Concepts: Go-To-Market Strategy, Marketing Strategy, Business Models, Tech Business Models, Jobs-To-Be Done, Design Thinking, Lean Startup Canvas, Value Chain, Value Proposition Canvas, Balanced Scorecard, Business Model Canvas, SWOT Analysis, Growth Hacking, Bundling, Unbundling, Bootstrapping, Venture Capital, Porter’s Five Forces, Porter’s Generic Strategies, Porter’s Five Forces, PESTEL Analysis, SWOT, Porter’s Diamond Model, Ansoff, Technology Adoption Curve, TOWS, SOAR, Balanced Scorecard, OKR, Agile Methodology, Value Proposition, VTDF Framework, BCG Matrix, GE McKinsey Matrix, Kotter’s 8-Step Change Model.