Analysing Companys External Environment

Scenario planning Preparing an Environmental Threat and

Opportunity Profile (ETOP).
Environmental Threat and Opportunity Profile
()!
The 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 total weight age score
calculated for prioritizing each of the factors.
This is achieved by brainstorming. And finally the strategy manger
uses his judgment to place various environmental issues in clear
perspective to create the environmental threat and opportunity
profile.
 ETOP analysis (environmental threat and opportunity profile) is the
process of gathering information about events and their relationships
within an organizations internal and external environments.
The basic purpose of environmental scanning is to
help management determine the future direction of the organization.
Structuring of environmental issues is necessary to make
them meaning full for strategy formulation.
ETOP Preparation
The preparation of ETOP involves dividing the environment into
different sectors and then analyzing the impact of each sector on the
organization.
the impact of each sub factor on the organization is described in the
form of a statement.
The 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 exports markets. This example relates to a
hypothetical company but the illustration is realistic based n the
current Indian business environment.
 Environmental Threat and Opportunity Profile (ETOP) for a Motor Bike company:
Environmental Sectors Impact of each sector

Social () Customer preference for motorbike, which

are fashionable, easy to ride and durable.
Political () No significant factor.
Economic () Growing affluence among urban consumers;
Exports potential high.
Regulatory () Two Wheeler industry a thrust area for
exports.
Market () Industry growth rate is 10 to 12 percent per
year, For motorbike growth rate is 40
percent, largely Unsaturated demand.
Supplier () Mostly ancillaries and associated companies
supply parts and components, REP licenses
for imported raw materials available.
Technological () Technological up gradation of industry in
progress. Import of machinery under OGL
ETOP for GE Oil & Gas
O&NG industry is divided into three major sectors upstream, midstream
and downstream.
The upstream sector is a term commonly used to refer to exploration,
recovery and production of O&NG. In industry jargon it is simply called
Exploration and Production (E&P).
The downstream sector is a term commonly used to refer to the refining of
crude oil and the selling and distribution of natural gas and products
derived from crude oil.
The midstream industry processes, stores, markets and transports
commodities such as crude oil, natural gas, natural gas liquids (liquefied
natural gas such as ethane, propane and butane) and Sulphur.
 An organizations internal environment consists of the elements
within the organization, including current employees, management,
the organizations culture which is defined by operating procedures
and employee behavior. Though some elements affect the
organization as a whole, others affect only the management. A
managers philosophical or leadership style directly impacts
employees.
Changes in philosophy and leadership style are under the control of
the manager.
Unlike the external environment of a business, the internal
environment can be controlled.
 The external environment of an organization are those factors outside the
company that affect the companys ability to function. Some external
elements can be manipulated by company marketing, while others require
the organization to make adjustments. Organizations need to monitor the
basic components of a firms external environment, and keep a close watch
on it at all times.
The external environment consists of customers, government, economy
and competition.
Corporate image, or reputation, describes the manner in which a company,
its activities, and its products or services are perceived by outsiders. In a
competitive business climate, many businesses actively work to create and
communicate a positive image to their customers, shareholders, the
financial community, and the general public. A company that bungles or
ignores its image is likely to encounter a variety of problems.
 Opportunities and Threats: External opportunities provide an
organization with a means to improve its performance and
competitive advantage in a market environment.
Some opportunities can be foreseen, such as being able to expand a
franchise into a new city. When organizations can think far ahead,
they can create some opportunities
 For GE Oil & Gas the opportunities are:
According to figures released by Americas Cambridge Energy Research Associates, India is
home to around 64 trillion cubic feet of unexplored gas at various locations. This gas can be
extracted, and supplied into houses and production units to trigger countrys growth.
Demand for oil and gas in India will keep on increasing due to countrys rising energy needs.
Oil and gas majors like Cairn, ONGC and Reliance have lined up plans for huge investments in-
order to increase oil and gas production in the country, which has fuelled the growth.
GE oil & gas can grow from within by focusing on niche products and markets where its larger
rivals arent a factor.
GE specializes in growth areas such as drilling equipment and compressors.
GE is cash rich company. It aspires to continue to develop technology overlaps between the
businesses it has.
Narendra Modi government is planning to set up several power plants. It is considering setting
up gas based power generation projects in states like- Madhya Pradesh, Odisha and Uttar
Pradesh. While it plans to set up thermal power plants in states like Andhra Pradesh,
Chhattisgarh, West Bengal, Jharkhand and Bihar which produce coal, this is indeed good news.
 For GE Oil & Gas the threats are
The environmental pressure and market demand that oil companies
experience today force them to explore new industries, i.e. renewables.
State owned oil and gas companies like ONGC and Oil India limited are
market leaders in the country. However, they are facing tough competition
in oil exploration and production from private players like Reliance, Essar,
Adani, etc.
Analysts are doubtful GE Oil & Gas can achieve enough weight without
acquisitions to be a major player in the industry.
GE Oil & Gas needs to get bigger and develop a clearer strategy if it hopes
to keep up with its larger competitors.
The Oil & Gas sector need to emphasize on R&D. India is weak in it.
Currently, Dehradun based University of Petroleum and Energy Studies is
considered as the only private University which offers PHD, post graduate
and undergraduate courses in energy and petroleum. This University aims
to create professionals who can serve Indias rapidly growing oil and gas
Industry.