External analysis

All businesses planning to embark on a growth strategy are engaged in a change and innovation process. This generally means they are attempting to adapt to some situation in order to achieve success. Therefore, such businesses should first undertake an analysis of the competitive environment in order to determine what will be the best growth strategy.

The desire to grow an existing business is not enough: growth occurs because a need has presented itself in the marketplace and no one appears to be meeting that need. In other words, the market is underserved. Growth also often occurs because some new external factor has appeared that threatens a business as it is currently operating.

To deal with both of these factors, a business planning a growth strategy should look at the first two parts of the TOWS analysis:

1. Threats - What are the external threats to your existing business? Has the market peaked and begun to decline; are your products outdated; have new and powerful competitors moved into the market? Conduct a thorough competitive analysis of your market, or the market you hope to move into, so that you know what you are facing. List the top five threats you face in order of importance and analyse each in detail.
   
   
   
2. Opportunities - Where do opportunities lie in this competitive environment? What external factors are causing you to think of growth? Is your industry consolidating? Are there new technology processes that you can take advantage of? Have new market segments emerged? Examine your industry from a macro point of view to determine large trends. Then compare these to the competitive landscape - the five threats you mapped previously. This will provide you with a grid that should yield some opportunities. Perhaps competitors have not noticed some new trend, or have approached it in the wrong way. Sifting through these opportunities will eventually supply you with a market niche you can exploit.