APPLICATION OF THREATS, OPPORTUNITIES, WEAKNESSES AND STRENGTHS (TOWS) MATRIX STRATEGIC PLANNING MODEL IN MANUFACTURING FIRMS IN NIGERIA

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ABSTRACT

The turbulent and often dynamic state of firm’s operative environment compels its vulnerability to competitive forces and often implies imperative of change in corporate culture for survival. TOWS matrix model though applied in many manufacturing firms across the globe in meeting the growing challenges of competition and need for superior performance, have unfortunately not recorded equivalent results in Nigeria’s manufacturing industries. The limited adoption of TOWS matrix model is explained by a host of factors including firms’ organizational change culture, managerial capacity, and the comprehensiveness of environmental scanning elements.This study, therefore, assesses the prospects and challenges of applicability of TOWS matrix model in manufacturing firms in Nigeria. The methodology of study was the descriptive survey research design. The instruments used for data collection were the structured questionnaire, interview schedule and empirical research findings from available related literature. From a population of one hundred and ninety-two (192) registered manufacturing firms found in the south east area of Nigeria, and a management level employee population of 2,880 using a combination of Taro Yamane formula, Proportionate Stratified Sampling (PSS) and Multi-Stage Stratified Random Sampling (MSSRS) technique, twenty-eight (28) firms were eventually selected for the study, from which four hundred and twenty (420) management employees where issued questionnairewith 94.76% response rate. The result of the study showed existence of a positive and significant relationship between a firms’ organization change culture and her awareness of Tows Matrix model; firms’ human resource capacity and degree of application of TOWS matrix model; improvement in the competitive capabilities of firms’ products in relation to others in the best of class and application of TOWS matrix model in the past five years (2004-2009); comprehensiveness of firms’ environmental scanning elements and reliability of strategies formulated with TOWS matrix model; the low adoption of strategic alliance as a strategic choice in Nigeria manufacturing firms and extent of change resistance in firms. The study also showed prospects of TOWS matrix model in Nigeria manufacturing firms while revealing the challenges to its sustainable application. The conclusion of the study is that organisational culture, managerial development, comprehensiveness and scanning of environmental elements and adoption of strategic alliance as a strategic choice constitute critical imperatives in the application of TOWS matrix model in Nigeria manufacturing firms. The recommendation of the study include: entrenchment of organizational change as a deliberate corporate policy; improvement of firm’s awareness and intensity of adoption of TOWS matrix; and development of firm’s managerial capacity. The study’s major contribution to knowledge include: the development of an improved version of TOWS matrix model captioned ‘WEBBED TOWS MATRIX MODEL’.

TABLE OF CONTENTS

Title page                                                                                                  i

Approval                                                                                                            ii

Certification                                                                                                        iii

Dedication                                                                                                        iv

Acknowledgements                                                                                               v

Abstract                                                                                                                vi

Table of Contents                                                                                            vii

List of Tables                                                                                                       xi

List of Figures                                                                                                    xiii

CHAPTER ONE: INTRODUCTION                                                                               

  1.       Background of the Study                                                                 1
  2. Statement of the Problem                                                                         5
  3.  Objectives of the Study                                                                    7
  4. Research Questions                                                                    7
  5. Research Hypotheses                                                                            8
  6. Scope and  Area of the Study                                                                   9
  7. Significance of the Study                                                                 9

1.8       Limitations of the study                                                                    10

1.9       Conceptual definition of key terms                                                     11

1.10     Operational definition of key terms                                                   12

1.11     Organization of the Study                                                               13

             References                                                                                14

 CHAPTER TWO: REVIEW OF RELEVANT LITERATURE

2.1       Conceptual Framework                                                               16

2.1.1    The Concept of Organisational change                                               16

2.1.2    Types of Organisational Change                                                         17

2.1.3    Dimensions of Organisational Change                                                  19

2.1.4    Forces of Change in Organisations                                                       20

2.1.5    Organisations Change Resistance                                  22                          2.1.6            Strategies for Managing Change in Organisations                 23

2.2       Conceptual Definition of Strategy                                         25

2.2.1    Levels of Strategy                                                                        28

2.3       Organisational Culture and Strategy Relationship               37

2.4       Environmental Elements, Comprehensiveness and Scanning          39

2.5       Human Resource Capacity and Strategy Application                  46

2.6       Competitive Strategy and Operation Strategy                                 47

2.7       The Concept of Strategic Planning                                     50

2.8       Theoretical Framework                                                     53

2.8.1    Theories of Strategic Planning Models                                                53

2.8.1.1 Mintzbergs Model                                                                                60

2.8.1.2 Ansoffs Model                                                                           61

2.8.1.3 Steiners Model                                                                               62

2.8.1.4 Wheelen and Hunger Model                                                        63

2.9    Strategy Formation Models                                                                    66

2.9.1  Synoptic Model                                                                                            66

2.9.2  Adaptive Model                                                                                67

2.9.3  Synthesis (Synoptic-Adaptive) Model    69                     

   2.10       Situational Analysis Models                                               69

2.10.1    Strength –Weaknesses-Opportunities-Threats (SWOT) Model   70       

 2.10.2    Critical Success Factors (CSF) Model                                      73

2.11       Matrix Models in Strategic Planning                                          75

2.11.1    Business Portfolio Matrix Model                                         76

2.11.2    General Electric’s (GE) Business Screen Matrix Model                    78

2.11.3    Strategic Factor Evaluation Matrix Models                                78

2.11.3.1 Internal Factor Evaluation (IFE) Matrix   Model                             79

2.11.3.2 External Factor Evaluation (EFE) Matrix Model                               83

2.11.3.3 Internal – External (IE) Matrix Model                                 86

2.11.3.4 Strategic Position and Action Evaluation (SPACE) Matrix Model     87

2.11.3.5 Quantitative Strategic Planning Matrix (QSPM) Model       89

2.11.3.6 Grand Strategy (GS) Matrix Model                                        94

2.11.3.7 Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix Model      95

2.12        Review of Related Empirical Studies on Strategic Planning models-Firm’s Performance Relationship                                                              105

2.12.1     Empirical Evidence of Adoption, Benefits, Prospects and Challenges

of TOWS Matrix Model in firms                                                110

2.13        Summary of Related Literature Review                                                                  111

References                                                        117                                                                                         

CHAPTER THREE: RESEARCH METHODOLOGY             

3.0       Introduction                                                                                  133

3.1       Research Design                                                                             133

3.2       Population of the Study                                                                        134

3.3       Sample Size Determination and Sampling Technique                 134

3.4       Sources of Data                                                                            140

3.5       Instruments for Data Collection                                                            140

3.6       Validity of the Study Instrument                                                141

3.7       Reliability of the Questionnaire                                              143

3.8       Administration of the Questionnaire                                  145

3.9       Method of Data Analayis                                                              146

            References                                                   148                                                                                                     

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1       Introduction                                                                           149

4.2       Data Presentation and Analysis                                                     149

4.3       Test of Hypothesis –I                                                                       163

4.4       Test of Hypothesis –II                                                                                     170

4.5       Test of Hypothesis –III                                                                    176

4.6       Test of Hypothesis –IV                                                              182

4.7       Test of Hypothesis-V                                                                         188

             References                                                                                            199

CHAPTER FIVE:

DISCUSSION OF RESULTS, SUMMARY OF MAJOR FINDINGS,

CONCLUSION, RECOMMENDATIONS, CONTRIBUTION TO

KNOWLEDGE AND SUGGESTION FOR FURTHER STUDIES

5.0         Introduction                                                                                        200

5.1         Discussion of Results                                                                          200

5.1.1      Discussion of Objective I                                                                      201

5.1.2      Assessment of Hypothesis I                                                                202

5.1.3      Discussion of Objective II                                                                204

5.1.4      Assessment of Hypothesis II                                         205

5.1.5      Discussion of Objective III                                                           205

5.1.6      Assessment of Hypothesis III                                                            208

5.1.7      Discussion of Objective IV                                                                209

5.1.8      Assessment of Hypothesis IV                                                         210

5.1.9      Discussion of Objective V                                                            212

5.1.10    Assessment of Hypothesis V                                                         214

5.2         Summary of Major Findings                                                         216

5.2A      Model Developed in this Research                                           217

5.3         Conclusion                                                                              219

5.4         Recommendations                                                                              222

5.5         Contribution to Knowledge                                                            224

5.6         Suggestion for Further Studies                                                       227

              References                                                                                                229

  Bibliography                                                                                 232

List of Tables

Table    2.1      Application of IFE Matrix Model at Amazon               82

Table    2.2      External Factor Evaluation (EFE) Matrix Model for Morgan

Stanley Dean Witter (MSDW)                                                                       85

Table    2.3      Strategic Position and Action Evaluation Matrix Model for Morgan   Stanley Dean Witter (MSDW)                                          89

Table    2.4      Quantitative Strategic Planning (QSPM) Matrix Model for Pakistan State Oil Incorporated                                            93

Table    2.5      Empirical Studies on Strategic Planning Models – Firm’s Performance Relationship                                                                   106

Table    2.6      Summary of Lisrel Analysis Generated Results based on

Davis (2007) Study                                                                                         111

Table   3.1      Computation of Number of Manufacturing Firms studied using

PSS/M.S.S.R.S procedure                                                    136

Table   3.2       Proportionate Allocation of 28 Firms in the states studied                            137

Table   3.3       Departments and Number of Management Employees used in the  Study in the 28 firms                                                                                      138

Table   3.4       Allocation of Questionnaire to 28 selected manufacturing firms                   139

Table   3.5       Empirical Validity of the Study Instrument                 142

Table  3.6        Summary Reliability Statistics on items in the Questionnaire                        144

Table  3.7        Number of Questionnaire Administered in the States        145

Table  3.8        Hypotheses and Stattistical Tools used for Analyses                146

Table  4.1        Return Rate of Questionnaire                                              149

Table  4.2        Analysis of respondents according to their departments                 150

Table  4.3        Level of Respondents in Management hierarchy            150

Table 4. 4        Sex of Respondents                                                          151

Table 4. 5        Respondents years of service in firm                                 151

Table 4. 6        Age of Respondents firms                                                      152

Table 4. 7        Educational Qualification of Respondents                         153

Table 4. 8        Firms Commitment to Strategic Planning                        154

Table 4. 9        Extent firms embark on Organizational Change as a Corporate Policy          155

Table 4. 9A     Extent Organisations Resist Change                                   156

Table 4. 10      Relationship between firm’s competitive abilities and adoption of strategic planning                                                             157

Table 4. 11      Awareness of TOWS matrix as a strategic planning tool                               158

Table 4. 12      Application of TOWS matrix in manufacturing organizations                       159

Table 4. 13      Extent firms apply TOWS matrix model                               160

Table 4. 14      Length of time firms have applied TOWS matrix model               161

Table 4. 15      Extent Organizational change culture relates to Awareness of TOWS  matrix model                                                                                 162

Table 4. 16      Extent to which resistance to change in organisations relates to degree of application of  TOWS Matrix model                                       163

Table 4.16A    Computation of Correlation Coefficient derived from tables 4.9 and 4.11   164

Table 4.17       Extent Management Development is required in Strategic planning              167

Table 4.18       Extent firms’ Managerial abilities relate to degree of application of TOWS matrix model.                                              168

Table 4.19       Extent Management Expertise in terms of core skills, competences, and capabilities is required for successful strategy formulation using TOWS matrix model                                                     169

Table 4.20         Computation of Expected Frequencies derived from tables 4.2.17 and 4.2.18          171

Table 4.21      Computation of Pearson Chi-Square from Table 4.17 and 4.18                      172

Table 4.22      Improvement in identified performance measures in the past five years (2004-2009) of application of TOWS matrix model.        174

Table 4.23      Extent competitive capabilities of firms’ products have improved in relation   to others in the best of class in the past five years (2004-2009) of Application of TOWS matrix model.                      175

Table: 4.23A   Computation of Correlation Coefficient derived from Tables 4.13 and 4.23   177

Table 4.24        Extent firms consider accurate assessment of environmental elements crucial in    strategic planning                                                179

Table 4.25     Extent Comprehensiveness of firms’ Environmental scanning elements relates to the reliability of strategies formulated with TOWS matrix model.                                180

Table 4.26       Computation of Expected Frequencies derived from tables 4.2.8 and 4.2.24  183     

Table 4.27     Computation of Pearson Chi-Square from Table 4.8 and 4.24                         184

Table 4.28     Use of Strategic Alliance in Nigeria Manufacturing Firms                               186

Table 4.29     Low Adoption of Strategic Alliance relates to the extent of Change Resistance in manufacturing firms.                                       187

Table 4.29A  Computation of Correlation Coefficient derived from Tables 4.9A and 4.26 188

Table 4.30     Existence of Inherent Problems/Challenges in the application of TOWS matrix model                                                                                         191

Table 4.31      Challenges to successful application of TOWS matrix model in manufacturing firms                                                       192

Table 4.32     Capacity to overcoming problems/challenges associated with the application  of TOWS matrix model in manufacturing firms.          194

Table 4.33     Benefits of applying TOWS matrix in manufacturing firms                             195

Table 4.34     Prospects of Applying TOWS matrix in manufacturing firm                           197

List of Figures

Figure: 2.1         Nimmanphatcharin Internal Environment Model     40

Figure: 2.2         The Competitive Environment Model            43

Figure: 2.3         Strategic Planning Model                      60

Figure: 2.4         Mitzbergs Core Design School Model           61

Figure: 2.5         Steiners Planning Model                         63

Figure: 2.6         Wheelen and Hunger Model                   65

Figure: 2.7         SWOT Analysis Model               71

Figure: 2.8         Critical Success Factors Model                       75

Figure: 2.9         Boston Consulting Group (BCG) Matrix Model               77

Figure: 2.10       Internal Factor Evaluation (IFE) Matrix Model                81

Figure: 2.11       External Factor Evaluation (EFE) Matrix Model    84       

Figure: 2.12       Internal –External Factor Evaluation (IE) Matrix Model                             86

Figure: 2.13       Strategic Positions and Action Evaluation Matrix (SPACE) Model           88

Figure: 2.14       Quantitative Strategic Planning (QSPM) Matrix Model 90       

Figure: 2.15       Grand Strategy (GS) Matrix Model                                 94

Figure: 2.16       TOWS Matrix Model                                                     101

Figure: 2.17        TOWS Analysis of Daimler-Benz Manufacturing Company   104

Figure: 5.2.1       WEBBED TOWS Matrix Model (Developed in this Study)                      217

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

A major aim of enterprises is to build a market position strong enough and an organization capable enough in producing successful performance despite foreseeable events, potent competition, internal and external organizational problems (Nimmanphatcharin, 2003:13). Global competition requires that managers think of ways to change their organizations continuously to gain competitive advantage. The complexity of  today’s operative environment necessitate adoption of a best practice strategic planning model in meeting contemporary challenges faced by organizations in terms of domestic and  cross border product competitiveness (Faulkner and Bowman,2007:45).

Eze (2001:35) posits that both organizations and their managers are subject to changes which render once-effective approaches to competition ineffective.  Ezigbo (2007:79) states that managers introduce changes to solve organizational problems like low productivity, laissez-faire attitude, conflicts, and competitive pressures.

The turbulence encountered by manufacturing organizations in Europe, America and the Far East in the late 1980’s coupled with competition introduced by globalization and free market economy forced firms to review the quality of their strategic formulations by putting in place a strategic planning framework known as the TOWS matrix that identifies threats and opportunities in the external environment and objectively seek to match them with identified internal organizations weaknesses and strengths in a logical manner in order to remain competitive (Eaton,1999:83).

Itami (2007:29) posits that the proactiveness necessary to place Nigeria’s manufacturing firms in the league of best practice firms for strategic leadership in their spheres of economic endeavour is lacking admist stiff competition and a diversity of industry and environmental challenges.

Strategy involves the critical decisions a firm makes about how to match its resources and strengths with its environment to create an advantage over its competitors. The decisions to pursue a strategy type be it, Business level (competitive) strategy, Corporate or Functional level strategy are viewed as measures that can fastrack or impede the adoption, adaptability and sustainability  of strategic planning frameworks in organizations. The decisions are also rooted on certain organization culture which affects the resistance or acceptability of change. Furthermore, organisational ideology and strategic planning orientation be it Ansoff’s strategic planning model, Mintzberg’s design school model, Steiner’s company-wide planning, or Wheelen and Hunger’s strategic management model also determine the strategy a firm will pursue, as large scale  preponderance of conservatism and resistance to change exist in firms. 

Strategic Planning, being a management function relies on the competence of management-level employees for effective implementation. Arising from this, it is viewed that management’s  human resource capacity in terms of core skills determines the extent to which it would pursue and   implement strategic models be it of synoptic, adaptive or synthesis (synoptic- adaptive) origin.

The integration of management’s strategic intent in strategy development to drive organisations visions and missions are also seen as key to the sustainable application of TOWS matrix strategic planning model in meeting desired performance. Hoffer and Schendel (1978:25) posit that an effective planning model must explicitly include the visions and missions of the firm, an establishment of firm’s objectives, and an assessment of the current strategy based on a comprehensive scanning of environmental analysis elements. Studies by Wihioka (2006:89), shows that firms in Nigeria apply Strategic Planning processes with low degree of formality and comprehensiveness, and doubts the reliability of formulated strategies to assure firms of desirable performance.

A variety of strategic planning frameworks based on synoptic, adaptive and synthesis (synoptic-adaptive) ideologies have been developed, showing the relationship of critical internal and external environment variables; including- The SWOT Analysis model, Critical Success Factors (CSF’s) models, and Strategic Factor Evaluation Matrix (SFEM)  models- Internal Factor Evaluation (IFE) matrix model, External Factor Evaluation (EFE) matrix model, Internal-External (IE) matrix model, Strategic Positioning and Action Evaluation (SPACE) matrix model, Quantitative Strategic Planning (QSPM) matrix model, Grand Strategy (GS) matrix model, and matrix models – Boston Consulting Group (BCG) matrix model, and General Electric Business Screen Matrix.

These models aside from showing the relationship of critical internal and external environment variables are fraught with certain inherent structural and operational limitations that inhibit their individual and collective capabilities to providing feasible alternative strategies for firm’s competitive advantage, as do the TOWS matrix model (Weihrich and Koontz 2005:15; Hirsch, 2006: 327; Davis, 2007: 32). The limitations include the following:

  1. Inability to clearly identify the internal and external environmental scanning elements of a firm.
  2. Inability to provide guidance as to the comprehensiveness of environmental scanning elements.
  3. Inability to distinctively identify opportunities in order to take advantage of them.
  4. Inability to anticipate potential threats in order to effectively avoid them.
  5. Inability to give insufficient attention to the threats and constraints in the external environment.
  6. Inabilty to match or combine the internal and external environment variables of a firm in a logical and distinctive manner in order to arrive at feasible strategic alternatives.
  7. Inability to systematize the choice of strategy.
  8. Inability to depict the market position and competitive domain of the firm.

 Furthermore, the strategic planning models also give the erroneous impression that a firm uses its strengths to take advantage of opportunities, but ignore other important relationships, such as the challenge of overcoming weaknesses in the enterprise to exploit opportunities. Organizations are known to respond more to threats than opportunities, as it is only a threat to the status-quo that compels a change. Furthermore, few people are sufficiently disposed to identify their strengths at the outset, but they tend to be aware of their weaknesses (Weihrich and Koontz, 2005:129).

According to Weihrich (1982:1), although the set of variables in the above stated models are not new, matching them in a systematic manner is, and this is the distinctive competence of the TOWS matrix model. Hoffer and Schendel (1978:56), Weihrich (1982:9) in evaluating the effectiveness of these matrix models suggest the development and adoption of a matrix in which both the competitive situation and market position of firms are depicted, by proposing the TOWS matrix model. Studies by Nimmanphatcharin, 2003:10; Weihrich and Koontz, 2005:136 aver that the TOWS matrix is a logical combination of external and internal environments in a distinctive manner in order to identify best strategies, which could be used at both corporate and business levels of an organization.

The TOWS matrix model, while not replacing other  matrices, builds on the information provided by them to develop four coherent strategies that matches firms’ internal capabilities with firms’ external environment variables for competitive advantage . Competition among firms and across borders has been brought about by rapid changes in the world economic order and social changes (Eke, 2004:10).

Studies by Heller (2007:15) reveal that firms like Pactiv Corporation, Amsted industries, Brunswick Corporation, Hyundai heavy industries, Dresser Inc, FKI Plc, Fiskas Corporation, Federal Signal Corporation, Wal-Mart Inc, AT&T with established tradition for SWOT and other strategic planning models have drastically drifted to TOWS matrix in their organizational repositioning for competitive advantage and superior performance. The TOWS matrix model is also fast gaining grounds in large multinational manufacturing firms like Volkswagen, Daimler Benz, Winnebago industries incorporated, Timken Company, Companhia Vale Do Rio Doce, Bridgestone Corporation, Heidelberger Druckmaschinen AG, Compagnie de Saint-Gobain, Snap-on Incorporated, Mitsuibishi Corporation, Pirelli & C.S.P.A, Alamo Group Inc, Matsushita Electric Works, Ltd, AGCO Corporation, Starbucks Corporation, just to mention but a few.

The Nigerian Manufacturing sector is at the brink of near collapse, as a result of low productivity, poor domestic and international competitiveness in a continuously changing business world (Obiozor, 2009:32). Giwa (2000:32) declares that Nigeria’s manufacturing firms must accept the challenges of present times and manufacture products that must meet international standards and apply business strategies that would make their organizations the least cost operators and preferred suppliers of consumer goods.

Unfortunately in Nigeria, there is a dearth of literature and empirical evidence to support the application of TOWS matrix strategic planning model in Nigeria’s manufacturing firms in order to explore its potentials as a best practice model that has positively impacted on many multinational manufacturing firms across the globe. From the foregone, this study seeks to explore the problems and prospects of applying TOWS matrix model in manufacturing firms in Nigeria.

1.2       STATEMENT OF THE PROBLEM

APPLICATION OF THREATS, OPPORTUNITIES, WEAKNESSES AND STRENGTHS (TOWS) MATRIX STRATEGIC PLANNING MODEL IN MANUFACTURING FIRMS IN NIGERIA