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MODULE 8:
STRATEGY FORMULATION:
TOWS MATRIX ANALYSIS
STRATEGIC
MANAGEMENT
DR. EMMANUEL DOTONG
Associate Professor of Business
ejdotong@alum.up.edu.ph
STRATEGIC TOOLS AND MODELS
Module
Coverage
01
02
03
TOWS Matrix Analysis
TOWS Matrix Procedure
TOWS Matrix in action
MODULE 8:
STRATEGY FORMULATION:
TOWS MATRIX ANALYSIS
01
TOWS Matrix Analysis
Definition, Goal, and Approaches
The goal of TOWS Matrix Analysis is
to identify strategic options: SO
strategies (using strengths to take
advantage of opportunities), ST
strategies (using strengths to avoid
threats), WO strategies (overcoming
weaknesses by taking advantage of
opportunities), and WT strategies
(minimizing weaknesses and avoiding
threats).
GOAL
A strategic planning tool used to
evaluate the Threats, Opportunities,
Weaknesses, and Strengths involved
in a business venture or project. It's
essentially an extended version of
SWOT analysis, but with a focus on
examining how the identified
elements can be connected to each
other to develop strategic actions.
DEFINITION
TOWS MATRIX ANALYSIS
WO STRATEGY
ST STRATEGY
SO STRATEGY
WT STRATEGY
DEFINITION AND GOAL
TOWS VARIABLES
These are external
factors that could
potentially harm the
organization or project.
They could be economic,
social, political,
technological, or
environmental.
These are external
factors that the
organization or project
could exploit for its
advantage. They also
could be economic,
social, political,
technological, or
environmental.
These are internal factors
that could potentially
harm the organization or
project. They could
relate to resources,
processes, capabilities,
etc.
These are internal factors
that give the
organization or project
an advantage. They also
could relate to resources,
processes, capabilities,
etc.
T O W S
THREATS OPPORTUNITIES WEAKNESSES STRENGTHS
DEFINITION AND FACTORS
TOWS MATRIX
WT STRATEGY (WEAKNESSES – THREATS)
This strategy is about minimizing weaknesses and avoiding threats. It is largely defensive
and is about risk management and damage control.
ST STRATEGY (STRENGTHS-THREATS)
This strategy focuses on using strengths to avoid or mitigate threats. It's about leveraging
what you're good at to navigate potential challenges
WO STRATEGY (WEAKNESSES-OPPORTUNITIES)
This strategy aims to overcome weaknesses by taking advantage of opportunities. It's about
turning negatives into positives.
SO STRATEGY (STRENGTHS-OPPORTUNITIES)
This strategy involves using strengths to take advantage of opportunities. It's about
capitalizing on positives.
STRATEGIC APPROACHES
02
TOWS Matrix Procedures
Step-by-Step Process
TOWS MATRIX
01
02
03
Identify Strengths, Weaknesses, Opportunities, and Threats of your
organization or project.
Create a 3x3 grid with SWOT variables and SO, WO, ST, and WT quadrants.
Fill in with elements from your SWOT analysis.
Formulate business strategies for each quadrant: SO (use strengths to
leverage opportunities), WO (overcome weaknesses using opportunities),
ST (use strengths to mitigate threats), and WT (minimize weaknesses and
avoid threats). Compile and summarize the developed strategies.
SWOT ANALYSIS
TOWS MATRIX CONSTRUCTION
STRATEGY DEVELOPMENT
PROCEDURES
TOWS
MATRIX
Use Strengths to
take advantage of
Opportunities
STRENGTHS
List strengths
1.
2.
3.
4.
5.
WEAKNESSES
List weaknesses
1.
2.
3.
4.
5.
OPPORTUNITIES
List weaknesses
1.
2.
3.
4.
5.
THREATS
List weaknesses
1.
2.
3.
4.
5.
SO STRATEGIES
1.
2.
3.
4.
5.
WO STRATEGIES
1.
2.
3.
4.
5.
ST STRATEGIES
1.
2.
3.
4.
5.
WT STRATEGIES
1.
2.
3.
4.
5.
Overcome
Weaknesses by
taking advantage of
Opportunities
Use Strengths to
mitigate Threats
Minimize
Weaknesses to
avoid Threats
S
W
O
T
03
TOWS Matrix in Action
Application
SWOT ANALYSIS
INTERNAL FACTORS EXTERNAL FACTORS
POSITIVE
NEGATIVE
S1 High Customer Traffic (SM)
S2 Hybrid Service Offerings (OP)
S3 High Revenue Growth Rate (AF)
STRENGTHS
W1 Low Table Turnover Rate (OP)
W2 Limited Sitting Capacity (OP)
W3 Poor Social Media Presence (SM)
WEAKNESSES
O1 Partnership with Online Delivery Services (S2,T2)
O2 Potential Increase in Productivity (T2, T3, S2)
O3 Develop Local Events Sales Promotion (S3, T1)
OPPORTUNITIES
T1 Potential Increase in Production Cost (E1, E2, E3)
T2 Potential Decrease in Demand (P1, P2, P3, E2)
T3 Potential Increase in Product Price (E1, E2, E3)
THREATS
MATRIX
TOWS
MATRIX
Use Strengths to
take advantage of
Opportunities
STRENGTHS
List strengths
1.
2.
3.
4.
5.
WEAKNESSES
List weaknesses
1.
2.
3.
4.
5.
OPPORTUNITIES
List weaknesses
1.
2.
3.
4.
5.
THREATS
List weaknesses
1.
2.
3.
4.
5.
SO STRATEGIES
1.
2.
3.
4.
5.
WO STRATEGIES
1.
2.
3.
4.
5.
ST STRATEGIES
1.
2.
3.
4.
5.
WT STRATEGIES
1.
2.
3.
4.
5.
Overcome
Weaknesses by
taking advantage of
Opportunities
Use Strengths to
mitigate Threats
Minimize
Weaknesses to
avoid Threats
S
W
O
T
STRENGTHS WEAKNESSES
OPPORTUNITIES
THREATS
SO STRATEGIES WO STRATEGIES
ST STRATEGIES WT STRATEGIES
S1 High Customer Traffic
S2 Hybrid Service Offerings
S3 High Revenue Growth Rate
W1 Low Table Turnover Rate
W2 Limited Seating Capacity
W3 Poor Social Media Presence
O1 Partnership with Online
Delivery Services
O2 Potential Increase in
Productivity
O3 Develop Local Events Sales
Promotion
T1 Potential Increase in
Production Cost
T2 Potential Decrease in
Demand
T3 Potential Increase in
Product Price
MP - Drive high customer traffic towards
online platforms to increase productivity
(S1,O2)
HD - Promote hybrid service offerings at
local events to differentiate from
competitors (S2, O3)
FI - Partner with online delivery services
to extend reach and boost sales (S1, O1)
BUSINESS
STRATEGIES
INTEGRATION STRATEGIES
HI – Horizontal Integration
BI – Backward Integration
FI – Forward Integration
INTENSIVE STRATEGIES
PD – Product Development
MD – Market Development
MP – Market Penetration
DIVERSIFICATION STRATEGIES
RD – Concentric Diversification
HD – Horizontal Diversification
CD – Conglomerate
Diversification
DEFENSIVE STRATEGIES
RE – Retrenchment
CL – Cost Leadership
DV – Divestiture
LI - Liquidation
MD - Expand online services to offset
limited seating capacity and reach a
wider market
(W2, O1)
HD - Launch a new engaging social
media campaign unrelated to current
operations to enhance online presence
and increase productivity (W3, O2)
RE– Use high revenue growth to invest in
cost-efficient technologies or practices to
counter potential increases in production
costs (S3, T1)
MP - Enhance and extend social media
presence of the business to increase the
potential demand of the company (W2,
T2).
BI- Consider possibilities for physical
expansion or restructuring This allows the
company to control more of our supply
chain, ensuring consistent supply and
potentially reducing costs (W2,T1)
TOWS
MATRIX
INTENSIVE STRATEGIES (Market Penetration, Market Development)
Market Penetration - Leverage our strong online platforms to drive high customer traffic, thereby increasing productivity and market share.
This can be achieved through targeted marketing campaigns and promotions to attract more users to our platforms (S1,O2).
Market Penetration - Enhance and extend social media presence of the business to increase the potential demand of the company (W2, T2).
Market Development - To counteract our limited seating capacity, expand our online services to reach a wider market. By offering more
online services, we can cater to more customers without physical space constraints, tapping into new customer segments and geographical
areas (W2,O1).
INTEGRATION STRATEGIES (Forward and Backward)
Forward Integration - To extend our reach and boost sales, partner with online delivery services. This forward integration strategy allows us
to tap into the existing customer base of these services, increasing our market penetration (S1,O1).
Backward Integration - To address our limited seating capacity and potential supply chain disruptions, consider possibilities for physical
expansion or restructuring. This vertical integration strategy allows us to control more of our supply chain, ensuring consistent supply and
potentially reducing costs (W2,T1) .
DIVERSIFICATION STRATEGIES (Concentric and Horizontal)
Concentric Diversification - Stand out from competitors by promoting our hybrid service offerings at local events. This related
diversification strategy leverages our existing strengths and resources while introducing a new dimension to our services (S2,O3)
Horizontal Diversification - To counter our limited online presence, launch a new engaging social media campaign that's unrelated to
current operations. This unrelated diversification strategy will help increase our online visibility, attract more customers, and ultimately increase
productivity (W3,O2)
DEFENSIVE STRATEGIES (Retrenchment)
Retrenchment - Utilize our high revenue growth to invest in cost-efficient technologies or practices. This proactive measure will help us
counter potential increases in production costs, ensuring we maintain profitability and competitiveness (S3,T1)
BUSINESS
STRATEGIES
SUMMARY
END Thank you for Listening!
ASSOC. PROF. EMMANUEL DOTONG
Management Consultant
ejdotong@alum.up.edu.ph

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TOWS Matrix Analysis: A Strategic Planning Tool for Evaluating Threats, Opportunities, Weaknesses and Strengths

  • 1. MODULE 8: STRATEGY FORMULATION: TOWS MATRIX ANALYSIS STRATEGIC MANAGEMENT DR. EMMANUEL DOTONG Associate Professor of Business ejdotong@alum.up.edu.ph STRATEGIC TOOLS AND MODELS
  • 2. Module Coverage 01 02 03 TOWS Matrix Analysis TOWS Matrix Procedure TOWS Matrix in action MODULE 8: STRATEGY FORMULATION: TOWS MATRIX ANALYSIS
  • 3. 01 TOWS Matrix Analysis Definition, Goal, and Approaches
  • 4. The goal of TOWS Matrix Analysis is to identify strategic options: SO strategies (using strengths to take advantage of opportunities), ST strategies (using strengths to avoid threats), WO strategies (overcoming weaknesses by taking advantage of opportunities), and WT strategies (minimizing weaknesses and avoiding threats). GOAL A strategic planning tool used to evaluate the Threats, Opportunities, Weaknesses, and Strengths involved in a business venture or project. It's essentially an extended version of SWOT analysis, but with a focus on examining how the identified elements can be connected to each other to develop strategic actions. DEFINITION TOWS MATRIX ANALYSIS WO STRATEGY ST STRATEGY SO STRATEGY WT STRATEGY DEFINITION AND GOAL
  • 5. TOWS VARIABLES These are external factors that could potentially harm the organization or project. They could be economic, social, political, technological, or environmental. These are external factors that the organization or project could exploit for its advantage. They also could be economic, social, political, technological, or environmental. These are internal factors that could potentially harm the organization or project. They could relate to resources, processes, capabilities, etc. These are internal factors that give the organization or project an advantage. They also could relate to resources, processes, capabilities, etc. T O W S THREATS OPPORTUNITIES WEAKNESSES STRENGTHS DEFINITION AND FACTORS
  • 6. TOWS MATRIX WT STRATEGY (WEAKNESSES – THREATS) This strategy is about minimizing weaknesses and avoiding threats. It is largely defensive and is about risk management and damage control. ST STRATEGY (STRENGTHS-THREATS) This strategy focuses on using strengths to avoid or mitigate threats. It's about leveraging what you're good at to navigate potential challenges WO STRATEGY (WEAKNESSES-OPPORTUNITIES) This strategy aims to overcome weaknesses by taking advantage of opportunities. It's about turning negatives into positives. SO STRATEGY (STRENGTHS-OPPORTUNITIES) This strategy involves using strengths to take advantage of opportunities. It's about capitalizing on positives. STRATEGIC APPROACHES
  • 8. TOWS MATRIX 01 02 03 Identify Strengths, Weaknesses, Opportunities, and Threats of your organization or project. Create a 3x3 grid with SWOT variables and SO, WO, ST, and WT quadrants. Fill in with elements from your SWOT analysis. Formulate business strategies for each quadrant: SO (use strengths to leverage opportunities), WO (overcome weaknesses using opportunities), ST (use strengths to mitigate threats), and WT (minimize weaknesses and avoid threats). Compile and summarize the developed strategies. SWOT ANALYSIS TOWS MATRIX CONSTRUCTION STRATEGY DEVELOPMENT PROCEDURES
  • 9. TOWS MATRIX Use Strengths to take advantage of Opportunities STRENGTHS List strengths 1. 2. 3. 4. 5. WEAKNESSES List weaknesses 1. 2. 3. 4. 5. OPPORTUNITIES List weaknesses 1. 2. 3. 4. 5. THREATS List weaknesses 1. 2. 3. 4. 5. SO STRATEGIES 1. 2. 3. 4. 5. WO STRATEGIES 1. 2. 3. 4. 5. ST STRATEGIES 1. 2. 3. 4. 5. WT STRATEGIES 1. 2. 3. 4. 5. Overcome Weaknesses by taking advantage of Opportunities Use Strengths to mitigate Threats Minimize Weaknesses to avoid Threats S W O T
  • 10. 03 TOWS Matrix in Action Application
  • 11. SWOT ANALYSIS INTERNAL FACTORS EXTERNAL FACTORS POSITIVE NEGATIVE S1 High Customer Traffic (SM) S2 Hybrid Service Offerings (OP) S3 High Revenue Growth Rate (AF) STRENGTHS W1 Low Table Turnover Rate (OP) W2 Limited Sitting Capacity (OP) W3 Poor Social Media Presence (SM) WEAKNESSES O1 Partnership with Online Delivery Services (S2,T2) O2 Potential Increase in Productivity (T2, T3, S2) O3 Develop Local Events Sales Promotion (S3, T1) OPPORTUNITIES T1 Potential Increase in Production Cost (E1, E2, E3) T2 Potential Decrease in Demand (P1, P2, P3, E2) T3 Potential Increase in Product Price (E1, E2, E3) THREATS MATRIX
  • 12. TOWS MATRIX Use Strengths to take advantage of Opportunities STRENGTHS List strengths 1. 2. 3. 4. 5. WEAKNESSES List weaknesses 1. 2. 3. 4. 5. OPPORTUNITIES List weaknesses 1. 2. 3. 4. 5. THREATS List weaknesses 1. 2. 3. 4. 5. SO STRATEGIES 1. 2. 3. 4. 5. WO STRATEGIES 1. 2. 3. 4. 5. ST STRATEGIES 1. 2. 3. 4. 5. WT STRATEGIES 1. 2. 3. 4. 5. Overcome Weaknesses by taking advantage of Opportunities Use Strengths to mitigate Threats Minimize Weaknesses to avoid Threats S W O T
  • 13. STRENGTHS WEAKNESSES OPPORTUNITIES THREATS SO STRATEGIES WO STRATEGIES ST STRATEGIES WT STRATEGIES S1 High Customer Traffic S2 Hybrid Service Offerings S3 High Revenue Growth Rate W1 Low Table Turnover Rate W2 Limited Seating Capacity W3 Poor Social Media Presence O1 Partnership with Online Delivery Services O2 Potential Increase in Productivity O3 Develop Local Events Sales Promotion T1 Potential Increase in Production Cost T2 Potential Decrease in Demand T3 Potential Increase in Product Price MP - Drive high customer traffic towards online platforms to increase productivity (S1,O2) HD - Promote hybrid service offerings at local events to differentiate from competitors (S2, O3) FI - Partner with online delivery services to extend reach and boost sales (S1, O1) BUSINESS STRATEGIES INTEGRATION STRATEGIES HI – Horizontal Integration BI – Backward Integration FI – Forward Integration INTENSIVE STRATEGIES PD – Product Development MD – Market Development MP – Market Penetration DIVERSIFICATION STRATEGIES RD – Concentric Diversification HD – Horizontal Diversification CD – Conglomerate Diversification DEFENSIVE STRATEGIES RE – Retrenchment CL – Cost Leadership DV – Divestiture LI - Liquidation MD - Expand online services to offset limited seating capacity and reach a wider market (W2, O1) HD - Launch a new engaging social media campaign unrelated to current operations to enhance online presence and increase productivity (W3, O2) RE– Use high revenue growth to invest in cost-efficient technologies or practices to counter potential increases in production costs (S3, T1) MP - Enhance and extend social media presence of the business to increase the potential demand of the company (W2, T2). BI- Consider possibilities for physical expansion or restructuring This allows the company to control more of our supply chain, ensuring consistent supply and potentially reducing costs (W2,T1) TOWS MATRIX
  • 14. INTENSIVE STRATEGIES (Market Penetration, Market Development) Market Penetration - Leverage our strong online platforms to drive high customer traffic, thereby increasing productivity and market share. This can be achieved through targeted marketing campaigns and promotions to attract more users to our platforms (S1,O2). Market Penetration - Enhance and extend social media presence of the business to increase the potential demand of the company (W2, T2). Market Development - To counteract our limited seating capacity, expand our online services to reach a wider market. By offering more online services, we can cater to more customers without physical space constraints, tapping into new customer segments and geographical areas (W2,O1). INTEGRATION STRATEGIES (Forward and Backward) Forward Integration - To extend our reach and boost sales, partner with online delivery services. This forward integration strategy allows us to tap into the existing customer base of these services, increasing our market penetration (S1,O1). Backward Integration - To address our limited seating capacity and potential supply chain disruptions, consider possibilities for physical expansion or restructuring. This vertical integration strategy allows us to control more of our supply chain, ensuring consistent supply and potentially reducing costs (W2,T1) . DIVERSIFICATION STRATEGIES (Concentric and Horizontal) Concentric Diversification - Stand out from competitors by promoting our hybrid service offerings at local events. This related diversification strategy leverages our existing strengths and resources while introducing a new dimension to our services (S2,O3) Horizontal Diversification - To counter our limited online presence, launch a new engaging social media campaign that's unrelated to current operations. This unrelated diversification strategy will help increase our online visibility, attract more customers, and ultimately increase productivity (W3,O2) DEFENSIVE STRATEGIES (Retrenchment) Retrenchment - Utilize our high revenue growth to invest in cost-efficient technologies or practices. This proactive measure will help us counter potential increases in production costs, ensuring we maintain profitability and competitiveness (S3,T1) BUSINESS STRATEGIES SUMMARY
  • 15. END Thank you for Listening! ASSOC. PROF. EMMANUEL DOTONG Management Consultant ejdotong@alum.up.edu.ph