TOWS analysis is the complement for the SWOT analysis; because without SWOT analysis TOWS analysis will not be completed. The strengths-weaknesses-opportunities-threats (SWOT) Matrix gives a set of strategies by analyzing internal capacity of the company and external environment of the industry. It is a matching tool for constructing four types of strategies which are: SO, WO, ST, and WT. Here it should be noted that there is no best set of matching external and internal factors due to which analysis becomes difficult to some extent. The explanation of SO, WO, ST, and WT strategies is given below:
Firms use such strategies to grab the external opportunities by using the internal strengths. For example, A firm has a strong financial position but it is loosing its market share; now with the help of strong financial position it can introduce innovative products by investing in research and development sector. Organizations always try to overcome major weaknesses and make them strengths. Similarly, organizations try to avoid threats and concentrate on opportunities.
These strategies are used for the purpose of improving internal weaknesses by using external opportunities. It is possible that a firm has good external opportunity but can not avail it due to internal weakness. For example, A firm may find an opportunity of increasing its production by introducing new technology but the firm may lack the skilled workers required for the production. In such case, a possible WO Strategies would be to hire and train people with the essential technical skills.
Such strategies are used by the organization for the purpose of reducing the impact of external threats by using its internal strengths. For example, a firm with strong legal department (strength) can avoid external threats such as copying ideas, innovations, and patented products. Similarly, an organization with strong line of quality products may face the threat of low priced products of rivals. In such case the organization can apply ST Strategy of mass production to reduce the unit cost of production.
WT Strategies are mainly used by those firms which are not in a good and stable position. Basically, these strategies are defensive because organizations try to reduce internal weaknesses while avoiding the external threats. For example, if an organization has weak financial position (weakness) and the demand for its products is reducing (threat) then the possible WT Strategies would be to retrench or merge.
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