Application of the Tows Matrix to Volkswagen

Application of the TOWS Matrix to Volkswagen

Volkswagen (VW) was a successful company that experienced great difficulties in the early 1970s, but then developed a strategy that resulted in an excellent market position in the late 1970s. The TOWS Matrix shown in Figure 1 will focus on the crucial period from late 1973 to early 1975. The external threats and opportunities pertain mostly to the situation VW faced in the United States, but a similar situation prevailed in Europe at that time.

Weaknesses and Threats (WT)

A company with great weaknesses often has to resort to a survival strategy. VW

could have seriously considered the option of a joint operation with Chrysler or

American Motors. Another alternative would have been to withdraw from the

American market altogether. Although in difficulties VW did not have to resort to a

survival strategy because the company still had much strength. Consequently, a

more appropriate strategy was to attempt to overcome the weaknesses and

develop them into strengths. In other words, the direction was toward the strength-

opportunity position (SO) in the matrix shown.Specifically, the strategy was to

reduce the competitive threat by developing a more flexible new product line that

would accommodate the needs and desires of the car-buying public.

Weaknesses and Opportunities (WO)

The growing affluence of customers has resulted in 'trading up' to more luxurious

cars. Yet, VW had essentially followed a one-model policy which presented a

problem when the design of the Beetle became obsolete A new model line had to be

introduced to reach a wider spectrum of buyers. In order to minimize the additional

costs of a multi product line, the building block principle was employed in the

design of the new cars. This allowed using the same parts for different models that

ranged from the relatively low-priced Rabbit to the higher priced Audi line.Another

weakness at VW was the rising costs in Germany. For example, in...