SWOT & TOWS ANALYSIS

The difference between SWOT and TOWS analysis is that the former identifies internal and
external factors. The latter expands upon this by interlinking the identified factors to assess
the strategies available to companies. In other words, TOWS is used to align the strength and
weaknesses of a company (internal factors) to the opportunities and threats that exist in the
environment (external factors), to gain a better understanding of the current and future
strategies of a company. Hence, SWOT analysis is often the initial step before doing TOWS
analysis.

What is SWOT Analysis?

SWOT analysis is an overview of the strengths and weaknesses, which are internal to an
organization, along with the opportunities and threats, which exist in the external
environment and can impact business decisions.

It needs to be mentioned that internal and external analysis exercises should not be confined
to just painting an overall picture of the company and its environment. This is a point that a
lot of students seem to miss. Instead, it is the interplay between individual factors in the
internal and external environments which gives rise to different strategies. This is where
TOWS comes in and helps take SWOT a step further towards analytical thinking.

SWOT is a method of analyzing a company's internal strengths and weaknesses and its
external environment of opportunities and threats.
Strengths: These are areas in which the organization is better and outdoes the competition.
Some examples are strong brand recognition, a loyal customer base, unique propriety
technology and a healthy financial condition.
Weaknesses: These are problem areas that are not performing at optimum levels and that
need improvement. These could be high employee turnover, poor product quality, an
unmotivated sales force, lack of capital and an excessive level of debt.
Opportunities: Managers have identified better opportunities to expand and sell more of
their products and services. It might be going into new international markets, developing an
innovative product line or being able to exploit weaknesses in a competitor.
Threats: These are factors that can hurt a business: things like rapidly increasing costs, new
competitors in the market, tightening supply of labor, changing demographics and more
government regulations.
Conducting a SWOT analysis on your company should not be a mind-numbing mental
exercise. It should be short and simple. What is your business good at? Where are you weak?
What are the bright opportunities you see, and what threats scare you? That's it. You don't
need to over-think this process.
How to Do a SWOT Analysis-
Strategic planning is as important for a small business as it is for the largest company. A
thoughtful evaluation of the internal and external factors that affect your business can help
you form an effective strategy for growth and improved performance, and SWOT analysis is
a valuable tool to get you started. SWOT stands for Strengths, Weaknesses, Opportunities
and Threats. Strengths and weaknesses are internal factors that exist within your company;
opportunities and threats come from the outside. When writing your analysis, use a matrix or
a list form with bullet points to make the document forceful and easy to read and to stimulate
further discussion.

1. Consider your company’s strengths. Perhaps it has a high-quality product or service, a

large share of the market or a strong brand. These are factors that can give your
company a competitive advantage. Strong management and a solid financial position
are also important strengths that can help your business prosper.
2. Evaluate the business’s weaknesses. Maybe your product is costly to produce, or you
have other expenses that are high. If you have high employee turnover or problems
with suppliers, or if you have been in business only a short time, you may be at a
disadvantage relative to your competitors. Be honest and thorough in this section.
3. Identify opportunities for growth or to improve business fundamentals. Perhaps there
are new markets you can move into, or a competitive situation that you can exploit.
External factors such as demographic trends can provide opportunities for growth.
Consider brand extensions or investments in technology to expand your business.
4. List external threats that could limit growth, such as business climate or market
saturation. Think about whether the competition has a better product or greater
financial resources or human capital, and identify trends that may increase your
expenses or decrease demand for your product or service. Consider whether your
business is particularly vulnerable to a recession.
5. Form a strategic objective for your business. The SWOT analysis allows you to see at
a glance the parts of your business you can leverage for growth and the areas where
you may need a defensive plan that will lessen your company’s vulnerability to
threats.

What is TOWS Analysis?

TOWS Matrix Definition

TOWS Analysis refers to the interlinking of the internal strengths and weaknesses of a
company with the threats and opportunities that it faces in its external environment. It is a
categorization of the strategies which are available to a company. It does this by focusing on
aligning internal elements with external factors in an appropriate manner. To help with this
analysis, a visual representation is often used. The following image is an example of a TOWS
matrix illustration.
What Are TOWS Strategies?

TOWS strategies fall into four categories:

Strengths-Opportunities: Develop plans that leverage the strengths of the company to
capitalize on opportunities. A few ideas could be to diversify into new markets, improve the
quality of products and reduce the costs of top-selling products.
Example: Apple has strong brand awareness and loyalty from its customers. It also has
strong capabilities in product design and aesthetic. Combining these factors (which are
internal strengths) with the growing popularity of touchscreen smartphones (a good market
opportunity) is what to led to the launch of the first iPhone. this was of course, an immediate
and massive hit, breaking various records for phone sales at the time.
Weaknesses-Opportunities: After identifying weaknesses, focus on ways to resolve
them in a goal to take advantage of opportunities. This might require finding new and cheaper
suppliers, developing more aggressive marketing campaigns and reviewing operational
processes to reduce costs.
Example: Apple typically has a comparatively smaller product portfolio compared to its
competitors, and this is one of its few weaknesses (although this may be arguable). When
new opportunities arise in the market in the form of the latest trends, Apple is not always the
quickest to capitalize on it. However, the company has still made good use of WO strategies
in its ascent to commercial success. The wearables sector first started gaining traction in 2010
and this represented a strong market opportunity. Competitors like Google, Samsung,
Motorola had all launched gadgets in this space in the next few years and were seeing returns.
Apple then overcame its weakness and entered this market with its Apple Watch in 2015,
which provide to be a success.
Strengths-Threats: Use the company's strengths to counter external threats. If the
company has a strong research and development department, for example, start new product
development projects to enter different markets.
Example: As mentioned earlier, some of the core strengths of Apple are its product design
and strong brand loyalty which it commands from its consumers. It has taken advantage of
these strengths to insist on the use of its proprietary lighting cable connection on iPhones and
iPads. this boosts its revenue while most other phone manufacturers have already adopted
Type C as a standard connection for their devices. However, Apple faces a threat in some
markets like the European Union where the local regulators are pushing for the company to
also adopt Type C in its devices to reduce unnecessary electronic waste. Adopting the Type-
C standard might potentially lead to a partial loss of revenue for the company. However, by
properly using its strength in product design and capitalizing on brand loyalty, a sizable
portion of its consumers will continue to buy Apple’s Type C charger rather than cheaper
alternatives.
Weaknesses-Threats: Find ways to minimize weaknesses and counter threats. This could
involve closing out poor-selling products, terminating under-performing employees and
developing more aggressive selling techniques.
Example: Apple has been in the digital media sector since the launch of its Apple TV device
in 2007. However, despite updating this device over the years with several upgraded versions,
it was not a commercial success. The weakness it had in this area was mainly due to limited
functionality and interconnectivity compared to competing products like Roku or Fire Stick
since you needed to already be in the Apple ‘ecosystem’ to make full use of it. At the same
time, the threat in the digital media space was growing day by day with more and more
streaming services. The introduction and launch of its own streaming service (Apple TV+) is
a WT strategy. This is because it helps the company reduce its weakness and overcome the
growing threat to a certain extent.
If you're doing a SWOT analysis, and coming up with TOWS strategies sounds like a waste
of time for a small business owner, it's not. As a matter of fact, a SWOT analysis is even
more critical for small businesses that typically don't have large corporate departments for
support. The burden of maintaining and growing a business falls entirely on the shoulders of
the owner, who must always be on his toes to counter and react to changes in the
marketplace. SWOT and TOWS methods are a simple, organized way for a small business
owner to develop a plan for the future, so that the business can survive in the long run.

TOWS Example – Starbucks