General EnvironmentGeneral Environment

SWOT AnalysisSWOT Analysis

Strengths

WeaknessOpportunities

Threats

General EnvironmentGeneral Environment

TOWS MatrixTOWS Matrix

ThreatsThreats

OpportunitiesOpportunities

StrengthsStrengths

WeaknessesWeaknesses

TOWS MatrixTOWS Matrix

Develop four types of strategiesDevelop four types of strategies

– Strengths-Opportunities (SO)Strengths-Opportunities (SO)

– Weaknesses-Opportunities (WO)Weaknesses-Opportunities (WO)

– Strengths-Threats (ST)Strengths-Threats (ST)

– Weaknesses-Threats (WT)Weaknesses-Threats (WT)

SOSO StrategiesStrategies

SO

Strategies

Use a firm’s internal

strengths to take advantage of

external opportunities

ThreatsOpportunitiesWeaknesses

Strengths(TOWS)

WOWO StrategiesStrategies

WO

Strategies

Improving internal

weaknesses by taking

advantage of external

opportunities

ThreatsOpportunitiesWeaknesses

Strengths(TOWS)

STST StrategiesStrategies

ST

Strategies

Using firm’s strengths to

avoid or reduce the impact of

external threats.

ThreatsOpportunitiesWeaknesses

Strengths(TOWS)

WTWT StrategiesStrategies

WT

Strategies

Defensive tactics aimed at reducing internal

weaknesses and avoiding

environmental threats.

ThreatsOpportunitiesWeaknesses

Strengths(TOWS)

TOWS MatrixTOWS Matrix

Steps in developing the TOWS Matrix

1. List the firm’s key external opportunities

2. List the firm’s key external threats

3. List the firm’s key internal strengths

4. List the firm’s key internal weaknesses

TOWS MatrixTOWS Matrix

Developing the TOWS Matrix

5. Match internal strengths with external opportunities and record the resultant SO Strategies

6. Match internal weaknesses with external opportunities and record the resultant WO Strategies

7. Match internal strengths with external threats and record the resultant ST Strategies

8. Match internal weaknesses with external threats and record the resultant WT Strategies

TOWS MatrixTOWS Matrix

WT Strategies

Minimize weaknesses and avoid threats

ST Strategies

Use strengths to avoid threats

Threats-T

List Threats

WO Strategies

Overcome weaknesses by taking advantage of

opportunities

SO Strategies

Use strengths to take advantage of opportunities

Opportunities-O

List Opportunities

Weaknesses-W

List Weaknesses

Strengths-

SList Strengths

SPACE MatrixSPACE Matrix

Strategic Position and Action Evaluation Matrix

Four quadrant framework Determines appropriate strategies

Aggressive Conservative Defensive Competitive

SPACE MatrixSPACE Matrix

Two Internal Dimensions Financial Strength [FS] Competitive Advantage [CA]

Two External Dimensions Environmental Stability [ES] Industry Strength [IS]

SPACE MatrixSPACE Matrix

Overall Strategic position determined by:

– Financial Strength [FS]– Competitive Advantage [CA]– Environmental Stability [ES]– Industry Strength [IS]

SPACE MatrixSPACE Matrix

Developing the SPACE Matrix:

• EFE Matrix• IFE Matrix• Financial Strength• Competitive Advantage• Environmental Stability• Industry Strength

SPACE MatrixSPACE Matrix

• Select variables to define FS, CA, ES, & IS

• Assign numerical ranking from +1 (worst) to +6 (best) for FS and IS; Assign numerical ranking from –1 (best) to –6 (worst) for ES and CA.

• Compute average score for FS, CA, ES, & IS

SPACE MatrixSPACE Matrix

• Plot the average scores on the Matrix• Add the two scores on the x-axis and

plot point on X. Add the scores on the y-axis and plot Y. Plot the intersection of the new xy point.

• Draw a directional vector from origin through the new intersection point.

SPACE FactorsSPACE Factors

Environmental Stability (ES)

Technological changes

Rate of inflation

Demand variability

Price range of competing products

Barriers to entry

Competitive pressure

Price elasticity of demand

Financial Strength (FS)

Return on investment

Leverage

Liquidity

Working capital

Cash flow

Ease of exit from market

Risk involved in business

External Strategic PositionInternal Strategic Position

SPACE FactorsSPACE Factors

Industry Strength (IS)

Growth potential

Profit potential

Financial stability

Technological know-how

Resource utilization

Capital intensify

Ease of entry into market

Productivity, capacity utilization

Competitive Advantage CA

Market share

Product quality

Product life cycle

Customer loyalty

Competition’s capacity utilization

Technological know-how

Control over suppliers & distributors

External Strategic PositionInternal Strategic Position

SPACE MatrixSPACE MatrixFS

+6

+1

+5+4+3

+2

-6

-5

-4

-3

-2

-1-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6

ES

CA IS

Conservative Aggressive

Defensive Competitive