One of the more confusing aspects of strategic business planning is how a company distinguishes between resource allocation vs. resource utilization. Resource allocation refers to assigning, or “allocating”, the company’s resources in order to attain its goals and objectives, while resource utilization focuses on measuring how well, or how efficiently, the company is using its resources. The TOWS analysis is one strategic planning tool that helps to clarify this distinction by turning the resulting “TOWS” strategies into action plans that help the company better manage its resources. So, how can the TOWS analysis help your company distinguish between resource allocation and utilization?
Understanding the Limitations of the SWOT Analysis
The TOWS analysis is simply a modified SWOT analysis. Most of us know the SWOT as an acronym for Strengths, Weaknesses, Opportunities and Threats. It is a standard planning tool and one with an established history. Unfortunately, while it has its benefits, it also has its drawbacks. First, the SWOT analysis doesn’t distinguish between internal and external factors. Second, individuals often put too much information under one heading and not nearly enough under another. Third, the analysis doesn’t help the company better define its resources or allocate them to accomplish its goals and objectives. Fourth, because there is no distinction between internal and external factors, there are items that often appear under multiple SWOT headings. Ultimately, none of these issues help the company with better managing its resources.
- No distinction between internal and external factors
- Too much information or not enough
- Doesn’t distinguish between resource allocation vs. resource utilization
- Issues often appear under multiple headings
The above video is from the post: Assessing the Company’s Supply Chain with a SWOT Analysis
The intention here isn’t to imply that there is no benefit to the SWOT analysis. Instead, it’s to show how the TOWS analysis improves the SWOT by helping the company account for its current resources. It works by classifying the strengths and weaknesses portion of the SWOT form an internal company perspective, and classifies the opportunities and threats portion from an external perspective. Properly occupying the fields within the TOWS analysis means to limit the amount placed under each heading. Be succinct, to the point and focused in your assessment of your internal strengths and weaknesses vs. your external opportunities and threats. Here’s the TOWS analysis below (taking the SWOT and re-configuring it).
How Does the TOWS Help in Resource Allocation & Utilization?
When thinking of a company’s resources, what’s the first thought that comes to mind? More importantly, are resources only internal or can they also be external? A company’s resources can be both! They can come from within the company and from the company’s impact, or its influence, on its market. A company’s market share is a resource that can be leveraged to achieve a given objective and ultimately, to attain its goals. The company’s reputation as a market leader and innovator is also a resource it can use to keep competitors at bay. Defining these resources is an essential part of understanding which resources are currently being used, versus which ones are underutilized. It’s ultimately how a company is able to determine which functions it will keep within its own operations and which functions it might need to outsource.
In the following TOWS analysis table below, the company has reconfigured its strengths and weaknesses to be internal to its operations. Next, it has configured its opportunities and threats to be external to its market. It then sticks to itemizing five unique characteristics under each heading. It links its internal strengths to its external opportunities and defines the resulting strategies as its “SO” strategies. It links its internal strengths to its external threats and defines these strategies as its “ST” strategies. It then focuses on linking its internal weaknesses to its external opportunities and defines these as “WO” strategies. It then links its internal weaknesses to its external threats and defines these as “WT” strategies.
In reading the above table, it becomes fairly obvious how the TOWS analysis forces the company to better identify its resources and to allocate them to the resulting strategies. Now, most would immediately say that the company’s resources are only obvious in the “SO” & “ST” strategies. This is because these two headings force the company to use its internal strengths (resources) to close on its external opportunities and keep its external threats away. However, the weaknesses portion is also a part of the company’s resources – except in this case, it outlines the company’s lack of resources and its areas of concern. For instance, what resources does the company have that could help it reduce the impact of its overhead and high cost structure? What resources does the company have to improve its product to market lead times? More importantly, if the company doesn’t have the resources to help in these areas, should it then consider outsourcing?
One of the benefits of using the TOWS analysis in strategic business planning is that it forces the company to identify its resources, or lack thereof, once it reconfigures the SWOT analysis and comes up with its internal TOWS strategies. The company then starts to think along the lines of how it can use its own resources to accomplish its objectives and goals by focusing on the resulting strategies that emerge from the analysis. Inevitably the company will ask itself whether it has properly defined its resources, how well it is using those resources and what it must do to better use them in the future. Most importantly, it helps the company to determine if it has the capacity to handle a given business function, or if it must look outside its doors for help.
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