SWOT Analysis (and TOWS Matrix) EXPLAINED with EXAMPLES | B2U

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SWOT Analysis: Bringing Internal and External

Factors Together
 April 14, 2017

Administrator  4 Comments  Ansoff Matrix, External Factors, Internal Factors, Opportunities, PESTEL,

Porter's Five Forces, Strengths, SWOT, SWOT Analysis, Threats, TOWS, Value Chain Analysis, VRIO Framework, Weaknesses

SWOT Analysis (also known as SWOT Matrix) is a business framework that helps assessing a wide variety of factors
that may have a profound impact on a business’s performance. These factors may either be internal to a company or Recent Posts
external. Furthermore, these factors may either be favourable/helpful or unfavourable/harmful to a company. By
combining these two dimensions one can draw a 2×2-matrix consisting of four quadrants: Strengths, Weaknesses, Product Life Cycle: The Introduction, Growth,
Opportunities and Threats. This article will cover each of these four quadrants of the SWOT analysis and will help Maturity and Decline of a Product Category
you choosing the right tools to assess the most important factors that may affect your business.
Three Levels of Strategy: Corporate Strategy,
Business Strategy and Functional Strategy

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Fiedler’s Contingency Model of Leadership:

Matching the Leader to the Situation

Hersey and Blanchard Situational Leadership

Model: Adapting the Leadership Style to the
Follower

Blake and Mouton Managerial Grid: A

Behavioural Approach towards Management and
Leadership

Crossing the Chasm in the Technology Adoption

Life Cycle

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Figure 1: SWOT Analysis

Strengths (SWOT Analysis)

A company’s strengths are its charactersitics that give it an advantage over others (competitors). Sometimes
these strengths are also referred to as unique selling points (USPs), firm-specific advantages (FSAs) or competitive
advantage. The source of these strengths are resources and capabilities that are valuable, rare, hard-to-imitate and
organization-wide supported. The VRIO framework is a useful tool to evaluate a company’s resources. Examples of
valuable company resources are patents, a strong brand reputation, a new innovative product, a talented workforce,
historically developed know-how and large financial reserves. Another way of assessing where a company’s strengths
are coming from is by doing a Value Chain Analysis. By mapping out a company’s complete value chain, from the
purchasing of raw materials to the marketing and sales of the end-products, management is better able to see where true
value is created.
Top Frameworks

Ansoff Matrix: How to Grow Your Business?

Weaknesses (SWOT Analysis) Porter’s Five Forces

Similarly, these tools are very helpful in assessing a company’s weaknesses. These weaknesses are company Scanning the Environment: PESTEL Analysis
characteristics that place a company at a disadvantage relative to others. In other words: they are harmful to a BCG Matrix: Portfolio Analysis in Corporate
company. Weaknesses could for example be a lack of patent protection, poor reputation among customers, a small Strategy
working capital, bad leadership and an inefficient production process. Weaknesses are best discovered by having
SWOT Analysis: Bringing Internal and External
enough feedback loops in place, both internally and externally. Think about sending out customer surveys and
Factors Together
organizing monthly employee gatherings. Together, the strengths and weaknesses form the internal side of the
VRIO: From Firm Resources to Competitive
organization and the SWOT analysis.
Advantage

Opportunities (SWOT Analysis)

Opportunities are the external factors of the SWOT analysis that may affect a company’s performance

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positively. To assess the opportunities, a company should look for elements in the environment that could be exploited
to its own advantage. The best way to asses the external factors is by using PESTEL analysis for the macro-
environment and Porter’s Five Forces for the industry dynamics. PESTEL looks at political, economic, social,
technological, environmental and legal trends in the macro-environment. Examples are the increasing purchasing
power of customers, governmental subsidies, more favourable international trade policies, and general lifestyle changes
among the population. Porter’s Five Forces on the other hand looks more specifically at industry factors like the current
competition, upstream supplier power, downstream buyer power, potential new entrants and substitute products or
services.

Threats (SWOT Analysis)

The threats on the other hand are the external factors that could cause trouble for the company in the future.
Similary to the opportunities, one could use a PESTEL analyis and a Porter’s Five Forces model to assess the elements
in the environment that could harm the organization. Examples of harmful macro-environmental developments could
be an increasing unemployment rate, disruptive technologies, protests from NGO’s and increasing government
corruption levels. In terms of industry specific threats, one could think about new competitors entering the arena, the
availability of substitute products and increasing bargaining power from suppliers. Together, the opportunties and
threats make up the external part of the SWOT analysis.

Figure 2: External Factors of SWOT Analysis (PESTEL and Porter’s Five Forces)

TOWS Matrix
A SWOT analysis helps assessing a company’s current internal and external situation, but does not provide concrete
strategic actions to take. One way to map out the strategic options a company has, is by using the so called TOWS
matrix (or TOWS analysis). By combining the external environment’s opportunities and threats with the internal
organization’s strengths and weaknesses, management can come up with four basic strategies to follow based on the
situation it is in:

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TOWS Matrix

Figure 3: TOWS Matrix

WT situation: Mini-Mini strategy
The company in this case has little development opportunities. It operates in a hostile environment and its potential for
change is small. It does not have significant strengths, which could withstand threats. The aim of the Mini-Mini
strategy is to minimize both weaknesses and threats. Mini-Mini strategy boils down to a pessimistic scenario such as
the liquidation of a company or in an optimistic situation – to strive for survival by merging with another organization.

WO situation: Mini-Maxi strategy 
In this situation the company has more vulnerabilities (weaknesses), but its environment provides plenty of
opportunities to resolve that. The Mini-Maxi strategy attempts to minimize the weaknesses and to maximize the
opportunities. The strategy should include the exploitation of these opportunities while reducing or correcting
weaknesses within the organization. Outsourcing activities or acquiring another company with the right resources could
be an option for example.

ST situation: Maxi-Mini strategy:
In this case we see a strong company operating in a hostile environment. The aim of a Maxi-Mini strategy is to
maximize the strengths of a company while minimizing the threats through these strengths. A company with strong
financial capabilities and cost-reducing skills, could lower its prices to drive out competition.

SO situation: Maxi-Maxi strategy:
Any company would like to be in a position where it can maximize both strengths and opportunities. Such an enterprise
can lead from strengths, utilizing its resources to take advantage of the opportunities the market is offering. Companies
in these situations could think about expanding internationally or diversifing their product portfolio to boost revenues.
For these growth opportunities you might want to look at the well-known business growth framework: the Ansoff

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SWOT Analysis (and TOWS Matrix) EXPLAINED with EXAMPLES | B2U

Matrix.

SWOT ANALYSIS

Figure 4: SWOT Analysis converted into TOWS (SO, ST, WO and WT Strategies)

SWOT Analysis In Sum

A great thing about the SWOT analysis is the fact that it combines different research streams and perspectives (e.g.
Resource Based View (RBV) and Industrial Organization (I/O) perspectives). Frameworks such as Porter’s Five
Forces were critisized that they focused too much on the external environment to determine a company’s profit
potential, whereas the VRIO framework relied too much on internal resources and capabilities as a source for
competitive advantage. In reality both internal and external factors will have to be taken into account of course to
improve a company’s chances for success. A SWOT analysis combined with a TOWS analysis offers a good starting
point to assess the current situation and to evaluate potential next steps.

Further Reading:
Humphrey, A. (2005). SWOT Analysis for Management Consulting. SRI Alumni Newsletter
Weihrich, H. (1982). The TOWS Matrix: A Tool for Situational Analysis.

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4 thoughts on “SWOT Analysis: Bringing Internal and External Factors

Together”

 H@ssele'
 February 28, 2020 at 16:38
 Permalink

This is a very good thing

Thanks

 Reply

 Wolde Bulto
 April 6, 2020 at 08:13
 Permalink

Thank you for the constructive insight on SWOT analysis!

 Reply

 Ada
 May 12, 2020 at 19:20

https://www.business-to-you.com/swot-analysis/[3/13/2021 4:47:50 PM]

SWOT Analysis (and TOWS Matrix) EXPLAINED with EXAMPLES | B2U

 Permalink

This was so insightful and useful. Thank you.

 Reply

 Feroze
 January 31, 2021 at 05:32
 Permalink

comprehensive summation and user-friendly approach.

 Reply

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