• Every organisation, like a living organism, is surrounded by its environment through which it survives. The environment is the source of opportunities for any business. For instance, business enterprises rely on satisfied customers to survive through the provision of goods and/or services. However, the same environment is a source of threats for any organisation, for instance, through the entry of new competitors, adverse economic changes, changes in regulations, etc.
• As discussed in one of my previous posts, an organisation’s environment is made up of three layers, a) the macro-environment; b) industry; and c) competitors. Among other tools, the macro-environment can be analysed through the use of PESTEL analysis, which I have discussed in greater detail here.
• However, businesses are not distinguished by their environment, which presents both threats and opportunities, but more by their strategic capabilities. One of the most useful tools for analysing an organisation’s strategic capabilities is the SWOT analysis, which I have also discussed here. SWOT facilitates the development of strategic options which drives an organisation’s strategic path.
Application of The TOWS matrix – TOWS matrix of Domino’s Pizza
• TOWS matrix represents one of the tools that can be used in business strategy to analyse the suitability of strategic options. It is based on a SWOT analysis. If you are an entrepreneur, knowing how to make the TOWS matrix can enable you to develop a set of strategic options which will ensure that your business concentrates on those strategies that shall steer your business to success.
• For instance, looking at figure 1, the top-left quadrant of the TOWS matrix prompts one to think of options that use the strengths of the business to capitalise on the opportunities in the business environment while the bottom- right quadrant prompts the consideration of options that minimise wastes and avoids threats. Figure 1 shows the essential structure of the TOWS matrix.
• In order to understand how to make the TOWS matrix and apply it, I shall use a SWOT analysis of Domino’s Pizza from a 2011 case study in order to learn how to make the TOWS matrix.
Brief overview of Domino’s Pizza
Domino’s Pizza is an international company that specialises in the making and delivery of Pizza in the United States and in more than 65 other countries. A public company headquartered in Michigan, U.S.A, the company is the second largest pizza chain after Pizza Hut in the United States. As at January 2011, Domino’s had 4, 475 domestic franchise stores, 454 company-owned stores in the United States and 4,422 stores worldwide resulting in a total store count of 9, 351 and operates in more than 65 countries in the world.
An example of how to use the TOWS matrix
Step 1 – Prepare a SWOT analysis
Table 1 is a SWOT analysis of Domino’s Pizza following information gathered from the company’s annual report, website and other sources.
Step 2 – Use the SWOT analysis to prepare the TOWS matrix
TOWS Matrix of Domino’s Pizza
From the SWOT analysis (Table 1), the TOWS matrix of Domino’s Pizza can now be written. The strategic options are the bulleted points in the pink-shaded quadrants (see Table 2).
TOW Matrix Template
A template of the TOWS matrix (like the one shown above) is available for download as a Word Document (.doc) here.
For an in-depth discussion of the TOWS matrix see the following:
Weihrich, H, 1982, ‘The TOWS matrix – a tool for situational analysis’, Long Range Planning, pp. 54–66.
Helms, M & Nixon, J 2010, ‘Exploring SWOT analysis – where are we now? A review
of academic research from the last decade’, Journal of Strategy and Management, vol. 3, no.3, pp. 215-251.