TOWS Matrix in Understanding the Strategic Options of Companies - Assignment Example

Marketing TOWS matrix Introduction It is apparent that in the past, most firms classify their strengths and weaknesses, and threats and opportunities in the external environment. However, what is frequently disregarded is that mixing these aspects may necessitate unique strategic choices. In order to systemize these options, the TOWS Matrix is deemed as the most effective. The TOWS Matrix assists companies in understanding the strategic options that they face and that which they can pursue (Mind Tools Ltd, 2011). A strategy is the art which determines how firms will succeed in business (Aaker, 2005). A TOWS Matrix enables companies to maximize on their strengths, circumvent their weaknesses, capitalize on their opportunities and manage their threats. Doing this necessitates matching external opportunities and threats with the company’s strengths and weaknesses (Mind Tools Ltd, 2011). Woolworths TOWS analysis In this case it is obvious that assessing and understanding Woolworth’s external settings, compared with the knowledge of the company’s internal setting, and maximizing such knowledge, will facilitate Woolworth’s supermarkets in forming its strategic options, enhance its strategic vision and mission and furthermore, take strategic actions which lead to increased returns and strategic competitiveness (Global Data, 2011). Besides, understanding of internal and external environments will facilitate Woolworths in adapting and changing as required to its surroundings to ensure that it remains competitive. Making use of such strategies as product introduction, price competition, and advertising, Woolworth’s supermarkets have been able to persistently compete with its rivals for a strong rank in the supermarket industry (Global Data, 2011). The following TOWS Matrix indicates how Woolworths can be able to build on its strategic options. The aim of developing the strengths and opportunities (SO) strategies is to exploit the external opportunities, whereas the weaknesses and opportunities (WO) strategies are developed with an aim of overcoming the company’s weaknesses by making the most use of the opportunities (Mind Tools Ltd, 2011). On the other hand, the strengths and threats (ST) strategies are developed with an aim of eliminating or minimizing threats by making use of the internal strengths, whilst the weaknesses and threats (WT) strategies are developed in order to minimize weaknesses and avoid threats (Mind Tools Ltd, 2011). Research has revealed that companies which have been able to pursue strategic options have emerged successful in the business. Woolworths TOWS Matrix Internal Strengths 1. Avery strong financial position 2. Revenue growth compared to that of the competitors 3. recognition of the Woolworths brand name Internal Weaknesses 1. limited geographical presence 2. leadership challenges External Opportunities 1. growth in the company’s market share implies the possibilities of future growth 2. the rapid technological growth may offer an opportunity for innovations and customer satisfaction Strengths and Opportunities (SO) Combine existing and new technologies to offer innovative products and ensure customer satisfaction (S1, S2, O2) Make use of the strong financial position and revenue growths to adapt new technologies (S1, S2, O2) Weaknesses and Opportunities (WO) Expanding the business into other new markets (W1, O1) Hire more oriented and skilled leaders (W2, O1) External Threats 1. high competition from others supermarkets stores in Australia and the induction of new players 2. The rapid growth in technology means that the company has to keep up with the latest technologies. Strengths and Threats (ST) Meet competition with better formulated strategies (S2, T1) Weaknesses and Threats (WT) Reduce threat of competition by expanding into new markets (W1, T1) Engage in joint operations in order to survive the induction of new players (Mind Tools Ltd, 2011; Global Data, 2011) Discussing the strategic options in terms of achieving a sustainable competitive advantage Studies have revealed that a firm has competitive advantage if it has the capability of attracting clients and defending against competitive forces better compared to its competitors (Aaker, (2005). Firms desire developing competitive advantages which have some essence of sustainability. Efficient competitive strategies generally encompass establishing distinctive strong or unique competencies in different areas essential for success and employing them to ensure a competitive advantage over competitors (Allio, 2005). Some of the paradigms of unique competencies include superior product features, advanced technology, superior distribution and sales capabilities, enhanced production skills and technology, and improved client service and convenience resulting to satisfaction (Aaker, (2005). Some of the strategic options as featured in the TOWS Matrix that can help Woolworths to attain a sustainable competitive advantage over its rivals are discussed herein. Combine existing and new technologies to offer innovative products and ensure customer satisfaction: Woolworth’s supermarkets have to keep up to date with the rapid technological growth if it has to remain competitive in the market. Such technologies as customer serving computers are very essential in order to ensure that quick service is offered to customers (Global Data, 2011). Integration of IT in business operations will also assist the company greatly in its shopping and marketing activities (Flanagan and Sanderson, 2000). Online presence such as the use of internet will also contribute greatly to the success of Woolworths supermarkets. Research has proved that combination of existing and new technologies has made most companies to have a competitive advantage over their rivals (Flanagan and Sanderson, 2000). Expanding the business into other new markets: One of the weaknesses faced by Woolworth’s supermarkets is its limited geographical presence (Global Data, 2011). It is apparent that the supermarkets are found in Australia and New Zealand only. As a result, the company may face major competition from other companies such as Wal-Mart which operates in a number of countries. Any modification in the Australian and New Zealand supermarket industry may greatly affect the company’s market share. Expanding into other markets means that in case of any modifications in the current market, the company will still survive. Research has revealed that operating in various markets offers companies’ competitive advantage over their rivals as such companies have a wide range of customers meaning they have a high possibility of increasing their market share and revenues both in short and long terms (Aaker, 2005). Hire more oriented and skilled leaders: studies have proven that efficient leadership is one of the major factors resulting to the success of any organization. Oriented and skilled leaders will be able to formulate efficient and effective policies and lead the organization into the required strategic direction (Allio, 2005). These strategies are required by the company if it has to gain competitive advantage over its competitors. For Woolworths, such strategies as product introduction, price competition, and advertising are important if the company has to compete efficiently with its rivals (Flanagan and Sanderson, 2000). Furthermore, with oriented leaders, the staffs will be able to identify themselves with the company and they will work towards achieving the company’s goals and objectives. Strategy formulation: Strategy formulation is considered as a component of strategic management procedure which includes diagnosis, formulation and implementation. The three features of strategy formulation encompass competitive strategy, corporate level strategy and functional strategy (Allio, 2005). In this case, in order to gain a competitive advantage over its competitors, Woolworth’s supermarkets should formulate competitive strategies which encompass deciding how the firm will compete in strategic business units. Competitive strategy concerns being different from others and purposely choosing to execute actions differently or carry out diverse activities compared to the competitors in order to deliver a distinctive mix of value (Allio, 2005). The core of strategy lies in generating novel competitive advantages quicker than rivals copy the current ones being employed. Engage in joint operations in order to survive the induction of new players: It is apparent that the threat of new entrants in the supermarket industry is very high. This is evidenced by the fact that, though the costs of establishment are high; low level of brand loyalty, low government regulations and high supplier power will allow persons to come up with their own supermarkets (Aaker, 2005). For this reasons, Woolworth’s supermarkets should engage in joint operations with other companies. Joint ventures are a type of alliance that is formed with an aim of strategically attaining important goals that are jointly beneficial. Some of the reasons why Woolworths should engage in joint venture is that it will be able to share or obtain technology, share access to certain markets, share production facilities and capabilities, and lessen market and financial risks amongst achieving other competitive advantages (Flanagan and Sanderson, 2000). The most suitable, acceptable and feasible strategy Expanding the business in other new markets can be termed as the most suitable, acceptable and feasible strategy that will not only offer the company a competitive advantage but will also bring about revenue and financial growth for the company. The presence of a company in various markets is deemed suitable and beneficial especially in circumstances when there is modifications in one of the market; the company will still survive such a change. Nevertheless, expanding into new markets is not a simple task as Woolworths has to carry out adequate research in order to identify its market, choose it target customers and further become accustomed into the new environment. Implementation issues After strategy formulation, the next step involves the implementation of the strategy. However, research has proved that many companies have failed to successfully implement their strategies due to various issues (Hrebiniak, 2006). Most of the issues are linked with lack of resources such as financial problems, inefficient management, lack of committed people, poor communication, cultural, and structural factors (Hrebiniak, 2006). In this case, we will discuss the issues linked with the implementation of the strategy- ‘expansion of the company into new markets’- with focus on culture and/or structure. When the time for organizational change occurs, which may include instances when companies merge their operations or when the existing framework becomes a barrier to growth and other strategic change for competitive advantage, and then it becomes crucial to change culture (Allio, 2005). In a more static circumstance the existing culture may have negative effects on the morale of the staff with dire consequences on the overall company’s productivity. It is apparent that strategy implementation necessitates both the association of the top management and the other personnel’s. In this case, if the existing culture does not motivate Woolworth’s employees as required the expansion of the company to other markets will not be a successful. This is based on the fact that Woolworths will need to transfer some staffs to the new venture and furthermore, such staffs are required to build good customer image. Culture is basically formed by the selection of new employees who hold similar values as the organization. The organization beliefs and business practices should integrate with the culture. Culture is never static but keeps on changing depending on the different environment and circumstance from which the company is operating (Aaker, 2005). This means that when Woolworths is expanding to the new markets, it has to consider a change of culture. Both external factors like competition and state of technology and internal factors like hiring, training and selection shape culture (Woolworths Supermarkets, 2011). Culture becomes an important asset if it compatible with the business practices and is therefore crucial in strategy implementation (Aaker, 2005). Where the culture and the operation of the business are not compatible the meaning there is no culture-strategy fit and failure in implementation of strategy and therefore the company needs to adopt measures to make the two compatible. A strong culture is paramount in strategy implementation. Strong culture emanates from the business practices, values and beliefs that serve as catalysts to boost the morale of the staff in strategy implementation (Allio, 2005). Everyone in their job feel revitalized to perform their duty for strategy implementation. For instance if the culture of an organization is based on empowering the staff, employees will be an important tool in strategy implementation. On the other hand, a weak culture provides frail support to the implementation of the strategy (Hrebiniak, 2006). In this scenario the employees are demotivated and have no pride in ownership of the business. This may not augur well for the company as the employees are an important aspect in strategy implementation. Organization structure on the other hand is the pattern wherein, the different parts of the company are interconnected or interrelated (Olson et al., 2005). Structure lay down linkages amongst various activities and positions. Research has proven that in order to successfully implement strategy, the structure of the company should be designed in such a way that it meets the requirements of the strategy (Olson et al., 2005). The association between structure and structure may be defined in terms of making use of the structure to ensure strategy implementation due to the fact that structure offers facilities and resources to implement strategy. Thus, structure and strategy should be incorporated. However, failure to integrate these two aspects may result to various issues including misdirection, confusion, and splintered effort in the company (Hrebiniak, 2006). Furthermore, inefficient and poor structure of the company will result to unsuccessful implementation of the strategy. It is apparent that for Woolworths supermarkets to efficiently establish markets in other countries, a strong organization structure is required. This will involve a structure that incorporates top management, middle and lower and other employees who will all work hand in hand with an aim of ensuring that the strategy is efficiently implemented. With a poor structure, such problems as communication will be an issue. In today’s business world everything is dynamic and adoption of a culture that is dynamic may not be unreasonable. At the end of the day a culture that is dynamic has the capacity to adapt to the changing demands and environment in the business world. Furthermore, ensuring a strong organizational structure will also yield better results. Woolworths supermarkets have evidenced to have a strong culture and structure which has enabled the company to have a competitive advantage over its rivals and emerge the best in terms of market share. Conclusion It is apparent that a TOWS Matrix assists companies in understanding the strategic options that they face and that which they can pursue in order to ensure competitive advantage and success. A TOWS Matrix enables companies to maximize on their strengths, circumvent their weaknesses, capitalize on their opportunities and manage their threats. Doing this necessitates matching external opportunities and threats with the company’s strengths and weaknesses. Woolworth’s supermarkets in forming its strategic options enhance its strategic vision and mission and furthermore, take strategic actions which lead to increased returns and strategic competitiveness. Expanding into other markets is deemed as the most suitable, appropriate and feasible strategy that can be adopted by the company. In so doing the company will be able to enlarge its market and this bring about various benefits such as increased growth in terms of revenues, profitability and market share. However, the implementation of this strategy may be limited by various factors including culture and structure. In order to ensure successful implementation the company structure should be designed in such a way that meets the requirements of the strategy. Furthermore, culture, structure and strategy should also be integrated together. References Aaker, M 2005. Strategic Marketing Management, 7 th edition. New York: Wiley. Allio, M.K. 2005. A Short, Practical Guide to Implementing Strategy. Journal of Business Strategy, vol.26, 12-21. Flanagan, B. and Sanderson, B., 2000. Woolies’ independent thrust, Retail World, Vol.50, p.5. Global Data, 2011. Woolworths supermarkets - Financial and Strategic SWOT Analysis Review. Hrebiniak, L.G. 2006. Obstacles to Effective Strategy Implementation. Organizational Dynamics, vol.35, 12-31. Mind Tools Ltd, 2011. Using the TOWS Matrix: Developing strategic options from an external-internal analysis. http://www.mindtools.com/pages/article/newSTR_89.htm. [Accessed December 22, 2011]. Olson, E.M., Slater, S.F., and Hult, G.T. 2005. The importance of structure and process to strategy implementation‟. Business Horizons, 48, 47-54. Woolworths Supermarkets, 2011. Culture and Strategy, http://www.woolworths.com.au/wps/wcm/connect/Website/Woolworths/About+Us/Our+Peopl Culture+and+Strategy/ [Accessed December 22, 2011]. Read More