Environmental Threat and Opportunity Profile (ЕТОР)
Environmental factors are quite complex and it may be difficult for strategy managers to classify them into neat categories to interpret them as opportunities and threats. A matrix of comparison is drawn where one item or factor is compared with other items after which the scores arrived at are added and ranked for each factor and the total weightage score is calculated for prioritizing each of the factors.
This is achieved by brainstorming. And finally, the strategy manager uses his judgment to place various environmental issues in a clear perspective to create the environmental threat and opportunity profile.
Although the technique of dividing various environmental factors into specific sectors and evaluating them as opportunities and threats is suggested by some authors, it must be carefully noted that each sector is not exclusive to the other.
Each of the major factors about a particular sector of the environment may be divided into sub-sectors and their effects studied. The field force analysis goes hand in glove with ETOP, as here also the contribution of opportunities and threats posed by the environment is also a necessary part of the study.
ETOP Preparation:
The preparation of ETOP involves dividing the environment into different sectors and then analyzing the impact of each sector on the organization. A comprehensive ETOP requires subdividing each environmental sector into sub-factors and then the impact of each sub-factor on the organization is described in the form of a statement.
A summary ETOP may only show the major factors for the sake of simplicity. Table 1 provides an example of an ETOP prepared for an established company, which is in the Two Wheeler industry.
The main business of the company is in Motor Bike manufacturing for the domestic and export markets. This example relates to a hypothetical company but the illustration is realistic based on the current Indian business environment.
Table 1: Environmental Threat and Opportunity Profile (ETOP) for a Motor Bike company:
As shown in the table motorbike manufacturing is an attractive proposition due to the many opportunities operating in the environment. The company can capitalize on the burgeoning demand by taking advantage of the various government policies and concessions. It can also take advantage of the high export potential that already exists.
Since the company is an established manufacturer of motorbikes, it has a favourable supplier as well as a technological environment. But contrast the implications of this ETOP for a new manufacturer who is planning to enter this industry.
Though the market environment would still be favourable, much would depend on the extent to which the company can ensure the supply of raw materials and components, have access to the latest technology and have the facilities to use it. The preparation of an ETOP provides a clear picture for organizations to formulate strategies to take advantage of the opportunities and counter the threats in their environment.
The strategic managers should keep the focus on the following dimensions:
1. Issue Selection:
Focus on issues, which have been selected, should not be missed since there is a likelihood of arriving at incorrect priorities. Some of the impotent issues may be those related to market share, competitive pricing, customer preferences, technological changes, economic policies, competitive trends, etc.
2. Accuracy of Data:
Data should be collected from good sources otherwise the entire process of environmental scanning may go waste. The relevance, importance, manageability, variability and low cost of data are some of the important factors, Which must be kept in focus.
3. Impact Studies:
Impact studies should be conducted focusing on the various opportunities and threats and the critical issues selected. It may include the study of probable effects on the company’s strengths and weaknesses, operating and remote environment, competitive position, the accomplishment of mission and vision etc. Efforts should be taken to make assessments more objective wherever possible.
4. Flexibility in Operations:
There are several uncertainties that exist in a business situation and so a company can be greatly benefited by devising proactive and flexible strategies in their plans, structures, strategy etc. The optimum level of flexibility should be maintained.
Some of the key elements for increasing flexibility are as follows:
(a) The strategy for flexibility must be stated to enable managers to adopt it during unique situations.
(b) Strategies must be reviewed and changed if required.
(c) Exceptions to decided strategies must be handled beforehand. This would enable managers to violate strategies when it is necessary.
(d) Flexibility may be quite costly for an organization in terms of changes and compressed plans; however, it is equally important for companies to meet urgent challenges.
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