BUSN 9229 Sustainability and Ethics

SWOT/TOWS Analysis

1. An Example of Application of the TOWS Matrix to

Winnebago Industries Inc.4
 2. SWOT Analysis Leading to a TOWS Analysis1
SWOT has a long history as a tool of strategic and marketing analysis. No one knows who
first invented SWOT analysis. It has features in strategy textbooks since at least 1972 and
can now be found in textbooks on marketing and any other business disciplines. It advocates
say that it can be used to gauge the degree of fit between the organisations strategies and
its environment, and to suggest ways in which the organisation can profit from strengths and
opportunities and shield itself against weaknesses and threats (Adams, 2005). However,
SWOT has come under criticism recently. Because it is so simple, both students and
managers have a tendency to use it without a great deal of thought, so that the results are
often useless. Another problem is that SWOT, having been conceived in simpler times, does
not cope very well with some of the subtler aspects of modern strategic theory, such as trade-
offs (De Witt and Meyer, 1998).

Strengths

Determine an organisations strong points. This should be from both internal and external
customers. A strength is a resource advantage relative to a firms competitors and the needs
of the markets that are served by that firm, or those that it expects to serve. It is a distinctive
competence when it gives the firm a comparative advantage in the marketplace. Strengths
arise from the resources and competencies available to the firm.

Weaknesses

Determine an organisations weaknesses, not only from its point of view, but also more
importantly, from customers. Although it may be difficult for an organisation to acknowledge its
weaknesses it is best to handle the bitter reality without procrastination. A weakness is a
limitation or deficiency in one or more resources or competencies relative to competitors that
impedes a firms effective performance.

Opportunities

Another major factor is to determine how organisations can continue to grow within the
marketplace. After all, opportunities are everywhere, such as the changes in technology,
government policy, social patterns, and so on. An opportunity is a major situation in a firms
environment. Key trends are one source of opportunities. Identification of a previously
overlooked market segment, changes in competitive or regulatory circumstances,
technological changes, and improved buyer or supplier relationships could represent
opportunities for the firm.
Threats

No one likes to think about threats, but we still have to face them, despite the fact that they
are external factors that are out of our control, for example, the recent economic slump in
Asia. It is vital to be prepared and face threats even during turbulent times. A threat is a major
unfavourable situation in a firms environment. Threats are key impediments to the firms
current or desired position. The entrance of new competitors, slow market growth, increased
bargaining power of key buyers or suppliers, technological changes, and new or revised
regulations could represent threats to a firms success.

Because SWOT is such as familiar and comforting tool, many students use it at the start of
their analysis. This is a mistake. In order to arrive at a proper SWOT appraisal, other analyses
need to be carrier out first.

Since opportunities and threats mostly arise from the environment, SWOT analysis needs to
take account of the results of a full environmental analysis.
It is impossible to gauge what an organisations real strengths are until you have assessed
its strategic resources in fact, strategic resources and strength are the same thing. There is
a tendency for students to put down anything vaguely favourable that they can think of about
a company as a strength. This temptation needs to be resisted - a strength is not a strength
unless it makes a genuine difference to an organisations competitiveness. The same is true
of weaknesses.

For example, look at Southwest Airlines and Amazon.com. Both companies have important
groups of potential customers to whom they offer poor service. Southwest ignores business
passengers, and will not accept transfers from other airlines. Amazon makes people wait days
to receive books that they can obtain instantly from their neighbourhood bookstores, and pay
a delivery charge for the privilege. Surely, these are major threats. Southwest and Amazon
have chosen not to give those customers priority. Serving them would divert resources from
the firms core markets, and dilute service to their main customers. Not serving them is
certainly not a weakness; in a paradoxical way, it may be a strength.

The wizardry of SWOT is the matching of specific internal and external factors, which creates
a strategic matrix and which makes sense. It is essential to note that the internal factors are
within the control of organisation, such as operations, finance, marketing, and other areas. On
the contrary, the external factors are out of the organisations control, such as political and
economic factors, technology, competition, and other areas. The four combinations are called
the maxi-maxi (strengths/opportunities), maxi-mini (strengths/threats), mini-maxi
(weaknesses/opportunities), and mini-mini (weaknesses/threats). Weihrich (1982) 4 describes
the four combinations as follows:
1. Maxi-maxi (S/O). This combination shows the organisations strengths and opportunities.
In essence, an organisation should strive to maximise its strengths to capitalise on new
opportunities.
2. Maxi-mini (S/T). This combination shows the organisations strengths in consideration of
threats, e.g. from competitors. In essence, an organisation should strive to use its strengths to
parry or minimise threats.
3. Mini-maxi (W/O). This combination shows the organisations weaknesses in tandem with
opportunities. It is an exertion to conquer the organisations weaknesses by making the most
of any new opportunities.
4. Mini-mini (W/T). This combination shows the organisations weaknesses by comparison
with the current external threats. This is most definitely defensive strategy, to minimise an
organisations internal weaknesses and avoid external threats.
 TOWS MATRIX

Internal Factors Strengths (S) Weaknesses (W)

S1 Experience W1 Distribution
S2 Integration W2 Financial
S3 Finance W3 Position
S4 Skills W4 Manufacturing
S5 Others W5 Others

External Factors LIST ALL (S) LIST ALL (W)

Opportunities (O) SO Strategies WO Strategies

O1 Demography S1,O1,O4 describe W1W4O1 describe

O2 Europe Market S1,S2,O1,O2 W2W3O2O4
O3 Super Stores S2, S5,O2,O4 W2O1
O4 Others
ETC ETC
LIST ALL (O)
MATCH ALL MATCH ALL POSSIBLE
POSSIBLE SOs WOs

ST Strategies WT Strategies
Threats (T)
S1S2T1T3 describe W1W3T1 describe
T1 Government Regul S1T2T4T5 W1T2T3
T2 Competition S2S3T1 W1W2T2T4
T3 Barriers to entry
ETC ETC
T4 Others
MATCH ALL MATCH ALL POSSIBLE
LIST ALL (T)
POSSIBLE STs WTs
 Strategies Formulate in a TOWS Matrix

Note the Strategies are formulated in the following way:

SO: strategies are generated by thinking of ways that the firm may use its strengths to
take advantage of its opportunities

ST: strategies that are generated as a way of considering the firms strengths as a way
of avoiding Threats

WO: strategies are developed to take advantage of opportunities by overcoming

weaknesses.

WT: strategies are basically defensive strategies that are designed to minimise
weaknesses and avoid threats.
 TOWS Matrix
Case study: Winnebago Industries Inc.2
(adapted from Weihrich, H., 1982, The TOWS matrix- A Tool for Situational Analysis,
Long Range Planning, Vol 15, Issue 2, p. 65).
Internal Factors Strengths (S)
S1 Name and reputation
S2 Service Reputation
S3 Dealer Network & Rep
S4 R&D Capabilities
S5 Auto Econ Plant
S6 Manufacturing Parts of
External Factors Motor Home
Opportunities (O) SO Strategies
O1 Demand Smaller RVs Smaller more
O2 International market efficient motors
O3 Demand for low cost O1,S1,
Modular housing S2,S3,S4,S5,S6
Expand into
foreign marketsO2,
S1, S4
Diversify in to
Modular housing,
O3, S1,S4,S6
Weaknesses (W)
W1 Single product
Vulnerability
W2 Higher priced units
W3 Heavy Invest
W4 One Plant Location
W5 No Plan to transition
Family to Corporate Mgt
WO Strategies
Develop and
Produce smaller
RVs International
Market
O1,O2,W1,W2
Build smaller
plants nationally &
globally O1,O2,W4
 ST Strategies WT Strategies
Threats (T)
Diversify into Sell the company
T1 Gas Shortage and high Farm Equip T1,T2,T4,W1,W4,
price Railroad Cars W5
T2 Slack demand for RVs T1,T2,T3,S1,S2,S4
T3 Trade up secondary ,S5
market Diesel Engines
T4 Increase competition Motor Homes T1,
T5 impending safety S4
regulations Make RVs Safer
re: safety
regulations
T4,T5,S4

SWOT Analysis
Case study: Winnebago Industries Inc.2

Strengths (S)

S1 Name and Reputation

S2 Service Reputation
S3 Dealer Network & Reputation
S4 R&D Capabilities
S5 Auto Econ Plant
S6 Manufacturing Parts of Motor Home

Weaknesses (W)

W1 Single product Vulnerability

W2 Higher priced units
W3 Heavy Invest
W4 One Plant Location
W5 No Plan to transition Family to Corporate Mgt

Opportunities (O)

O1 Demand Smaller RVs

O2 International market
O3 Demand for low cost Modular housing
Threats (T)

T1 Gas Shortage and high price

T2 Slack demand for RVs
T3 Trade up secondary market
T4 Increase competition
T5 impending safety regulations
 Reference List

1. Adams, J. 2005, Analyze your company using SWOTs, Supply House Times, 48 (7).

2. De Wit, B., and Meyer, R., (eds), 1998, Strategy: Process, Content, Context, St
Pauls, MN: West Publishing

3. Hitt, M.A., Ireland, R.D., and Hoskisson, E.R., 2009, Strategic Management:
Competitiveness and Globalisation: Ch 2. Nelson Education, Canada.

4. Weihrich, H., 1982, The TOWS matrix- A Tool for Situational Analysis, Long
Range Planning, Vol 15, Issue 2, p. 65).