Question based on ISTD SM Solved Assignment and other course
Answer:
The identification of environmental issues is helpful in structuring the environmental appraisal so that the strategists have a good idea of where the environmental opportunities and threats lie. Structuring the environmental appraisal is a difficult process as environmental issues do not lend themselves to a straightforward classification into neat categories. An issue may arise simultaneously from more than one factor (sector) of the environment. Strategists have to use their experience and judgement to place the different environmental issues where they mainly belong, so that clarity emerges.
In order to draw a clear picture of what opportunities and threats are faced by the organization at a given time. It is necessary to appraise the environment. This is done by being aware of the factors that affect environmental appraisal identifying the environmental factors and structuring the results of this environmental appraisal. The identification of environmental issues is helpful in structuring the environmental appraisal so that the strategists have a good idea of where the environmental opportunities and threats lie. The environmental scanning can be done in the structured way. There are many techniques available to structure the environmental appraisal. One such technique suggested by Glueck is that of preparing an Environmental Threat and Opportunity Profile (ETOP) for an organization. The preparation of an ETOP involves dividing the environment into different sectors and then analyzing the impact of each sector of the organization.
In order for the environmental analysis to have a useful input into the business planning process, a wide range of information and opinions needs to be summarized in a meaningful way. The Environmental Threat and Opportunity Profile provide a summaryof the environmental factors that are most critical to thecompany.
The preparation of an ETOP involves dividing the environment into different sectors and then analyzing the impact of each sector on the organization. A comprehensive ETOP requires dividing each environmental sector into sub-factor and then the impact of each sub-factor on 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 ETOP prepared for an established company which is in the bicycle industry. The main business of the company is in sports cycle manufacturing for domestic and exports market. This example relates to a hypothetical company but the illustration is realistic.
As observed from Table 1 sports cycle manufacturing is an attractive proposition due to many opportunities operating in the environment. Prospects in the economic, social and technological sectors are bright. Market environment can throw up opportunities in the niche segment that the company operates in. The company can capitalize on the burgeoning demand by taking advantage of the various government policies and concessions that still exist despite the low attention value of the industry. It can also take advantage of the high exports potential that already exists and has not been adequately capitalized upon. Since the company is an established manufacturer of bicycles, it has a favorable supplier environment with traditionalties binding it to its vendors. But contrast the implications of this ETOP for a new manufacturer, who is planning to enter this industry. Though the economic, social and technological environment sectors would still be favorable, much would depend on the extent to which the company is able to 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 to the strategists about which sectors and the different factors in each sector have a favorable impact on the organization. By the means of an ETOP, the organization knows where it stands with respect to its environment. Obviously, such an understanding can be of great help to an organization in formulating appropriate strategies to take advantage of the opportunities and counter the threats in the environment.
Before the formulation of strategies can be undertaken, strategists have to assess whether the organization has the required strengths or whether it has weaknesses which can affect its capability of taking advantage of the opportunities. This assessment is done through an analysis of the strengths and weaknesses of the organization and forms a part of SWOT analysis. The strengths and weaknesses can be analyzed through an organizational appraisal.
