In today’s ever changing business environment, managers are faced with the task of devising strategies that would enable their firm remain at the top of competition. Dynamic firms are those that can foresee eminent changes in the business environment and adapt accordingly.
Companies employ befitting strategies for various situations. To know the changes in the environment and apply the appropriate strategy firms conduct a situational analysis through the SWOT analysis or the TOWS matrix.SWOT or TOWS analysis helps the strategists to get a better understanding of the strategic choices that they face. It helps in answering the questions: how do you: Make the most of your strengths? Circumvent your weaknesses? Capitalize on your opportunities? And Manage your threats? Both the SWOT analysis and the TOWS matrix are both dependent on the; Strength: Strengths are the qualities that enable us to accomplish the organization’s mission.
These are the basis on which continued success can be made and continued/sustained.Strengths can be either tangible or intangible. These are what you are well-versed in or what you have expertise in, the traits and qualities your employees possess (individually and as a team) and the distinct features that give your organization its consistency. Weakness: Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential.
These weaknesses deteriorate influences on the organizational success and growth. Weaknesses are the factors which do not meet the standards we feel they should meet.Weaknesses in an organization may be depreciating machinery, insufficient research and development facilities, narrow product range, poor decision-making, etc. Opportunities: Opportunities are presented by the environment within which our organization operates. These arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable.
Organizations can gain competitive advantage by making use of opportunities Threats: Threats arise when conditions in external environment jeopardize the reliability and profitability of the organization’s business.They compound the vulnerability when they relate to the weaknesses. When a threat comes, the stability and survival can be at stake. Examples of threats are - unrest among employees; ever changing technology; increasing competition leading to excess capacity, price wars and reducing industry profits; etc. Both the SWOT analysis and TOWS matrix helps firms to: * Build on organization strength. * Reverse the weaknesses of firms.
* Overcome organizational threats * Identify the core competencies of the firm. * Determine the objectives for strategic planning. * Develop a source of information for strategic planning.At a practical level, the only difference between TOWS and SWOT is that TOWS emphasizes the external environment whilst SWOT emphasizes the internal environment.
The TOWS matrix is less cumbersome than the SWOT analysis and produces four alternative strategic approaches by establishing the relationship between important variables that managers may employ during strategy formulation depending on the problems or threats they believe the firm is exposed to. the TOWS matrix generates the: SO “Maxi-Maxi” strategy: strategies that uses strengths to maximize opportunities. ST “Maxi-Mini” strategy: strategies that uses strengths to minimize threats.WO “Mini-Maxi strategy: strategies that minimize weaknesses by taking advantage of opportunities.
WT “Mini-Mini” strategy: strategies that minimize weaknesses and avoid threats. Unlike the TOWS matrix which generates only four alternatives strategies, the SWOT analysis is capable of producing an overwhelmingly abundant data which management can use to formulate long term plans to maintain competitive advantage. With the SWOT analysis management proceeds by A SWOT analysis should help focus discussion on future choices and the extent to which an organization is capable of supporting these strategies.There are, however, two main dangers: * A SWOT exercise can generate very long lists of apparent strengths, weaknesses, opportunities and threats, whereas what matters is to be clear about what is really important and what is less important.
* There is a danger of overgeneralization. Identifying a very general explanation of strategic capabilities does not explain the underlying reasons for that capability. The SWOT analysis is not a substitute for more rigorous, insightful analysis, for example by using the techniques and concepts provided by the PESTEL analysis and the six forces framework analysis developed by Michael Porter.
