Generating

a Plan of Action: SWOT (TOWS) Analysis

Objective: The SWOT model provides a comprehensive view of the firm in relation to its
environment. Taking this further, you will learn to build a plan of action using the TOWS
Matrix.

The term SWOT is widely used and well known in the field of strategic management. It is an
acronym for Strengths, Weaknesses, Opportunities, and Threats, and represents a helpful tool
for generating a summary of a strategic situation. Strengths and weaknesses capture the
internal environment of the firm and may include skills, expertise, organizational resources,
competitive capabilities, positional advantages or disadvantages, weak finances, market share,
brand recognition, or distribution capabilities, to name a few. Opportunities and threats stem
from a company’s external competitive environment. It represents trends in the environment
that may be favorable or unfavorable to the firm. A merger of two rivals may, for example, be a
threat. Or, increasing concern in society about convenience may be a favorable trend for a
company whose products and services are designed for busy consumers. New regulations or
the emergence of lower-cost technologies, on the other hand, may pose threats.

The purpose of this classification was to ensure a good fit between the firm’s material,
technical, financial, and managerial resources to ensure full exploitation of opportunities while
minimizing risks facing the firm. By putting the four categories in a matrix format, Prof. H.
Weihrich provided a useful tool to generate alternatives in a systematic manner. In this format,
the analysis is referred to as the TOWS matrix (Figure 7.1, below). ALSO SEE TWO MORE
EXAMPLES OF TOWS MATRIX BELOW – ONE THAT CAN BE YOUR OWN POTENTIAL SWOT &
ANOTHER TOWS MATRIX OF A RETAIL COMPUTER STORE LIKE BEST BUY. This enables one to
match the elements of strengths and weaknesses with the opportunities and threats to
generate action steps. When S and O are matched in the SO box, they represent possible ways
in which the organization can use its strengths to take advantage of opportunities and favorable
trends in the environment.

Similarly, the ST box represents ways in which strengths could be used to protect the
organization from threats. The WO suggests areas internally that need to be tackled to take
advantage of the opportunities, and WT shows how the weaknesses make the organization
most vulnerable against threats and thereby point to defensive tactics. Take care in entering
items in the S, W, O, and T boxes, for they determine the quality of action steps you will
generate. Try to be as specific as you can. For instance, rather than saying “Good marketing
skills,” it is better to specify what aspect of marketing a company can do well. Or, instead of
listing “International expansion” as an opportunity, try to spell out what market characteristic,
internationally, represents the opportunity. When you match the items to generate action
steps, state it as actions the organization can undertake, rather than as an analysis of the
situation.

Matching the strengths and opportunities directs the growth and expansion of firms. However,
equally important is the intersection of weaknesses and threats. They represent areas where
the organization is particularly vulnerable, especially in a very competitive environment. Steps
the organization could take to mitigate potential threats and strengthen its position are
important components of an action plan. Complementary action steps, from the various boxes,
can be combined to form a cohesive “alternative.” When at least two such alternative groups of
action steps are formed, they present alternative plans of action for the future. Then,
depending on goals, resource availability, short vs. long-term time frame, etc., the organization
can make a choice.
FIGURE 7.1 TOWS MATRIX

INTERNAL Strengths (S) Weaknesses (W)

1. 1.
2. 2.
3. 3.
4. 4.
5. 5.



EXTERNAL
Opportunities (O) SO WO
Favorable Trends
1. 1. 1.
2. 2. 2.
3. 3. 3.
4.
5.





Threats (T) ST WT
Unfavorable Trends
1. 1. 1.
2. 2. 2.
3. 3. 3.
4.
5.






Example No. 1: YOUR OWN SWOT MATRIX & SO, WO, ST, WT Strategies

1. On a separate sheet of paper, construct a SWOT Matrix. Include what you

consider to be your major external opportunities, major external threats, major
strengths and major weaknesses. For example, an internal weakness might be a
low grade point average. An external opportunity might be a graduate program
that interests you.
2. Match key external and internal factors by recording in the appropriate cell of the
matrix alternative strategies or actions that would allow you to capitalize upon
your strengths, overcome your weaknesses, take advantage of your external
opportunities, and minimize the impact of external threats. Be sure to use the
appropriate matching notation in the strategy cells of the matrix. Because every
individual is unique, there is no one right answer to this exercise.
!
Leave Blank Strengths – S Weaknesses – W
1. Good grades 1. No work experience
2. Financial resources 2. No foreign language
available for education skills
3. Strong communication 3. Degree from regional
skills university with little
4. Motivated brand recognition
5. Good team player
Opportunities – O SO Strategies WO Strategies
1. Potential to advance 1. Apply to graduate 1. Seek out an internship
education with MBA school (S1, S2, O1) (W1, O2)
2. Many industries and 2. Enter industries with 2. Minimize importance of
locations with job strong potential for foreign language by
growth (especially growth (S1, S3, S4, S5, improving other aspects
health care and O2) of education (W2, O1)
biotechnology)

Threats – T ST Strategies WT Strategies

1. Many students graduate 1. Emphasize good grades 1. Pursue foreign language
each year with same to potential employers training and other skills
degree (S1, T1) that can differentiate
2. Potential for recession 2. Consider pursuing from others (W2, T1)
or slow economic MBA if job market is 2. Seek out internship in
growth (fewer jobs weak (S2, T2, T3) growing industry (W1,
available, salaries T2, T3)
lower)
3. Jobs outsourced
overseas
!