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.

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 of the other.

Each of the major factors pertaining to a particular sector of 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
with regard to opportunities and threats posed by the environment is also
a necessary part of 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. 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.

Table 1: Environmental Threat and Opportunity Profile (ETOP) for a

Motor Bike company:
IMPACT OF EACH SECTOR

Environmental
Sectors Impact of each sector
Customer preference for
motorbike, which are
fashionable, easy to ride
Social () and durable.

Political () No significant factor.

Growing affluence among

urban consumers; Exports
Economic () potential high.

Two Wheeler industry a

Regulatory () 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.

Mostly ancillaries and

associated companies
supply parts and
components, REP
licenses for imported raw
Supplier () materials available.

Technological up
gradation of industry in
progress. Import of
machinery under OGL list
Technological () possible.

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 exports potential that already exists.

Since the company is an established manufacturer of motorbike, it has a

favorable supplier as well as 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 favorable, much would

depend on the extent to which the company is able to ensure the supply
of raw materials and components, and have access to the latest
technology and have the facilities to use it. The preparation of an ETOP
provides a clear picture for organization to formulate strategies to take
advantage of the opportunities and counter the threats in its
environment.

The strategic managers should keep 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
study of probable effects on the companys strengths and weaknesses,
operating and remote environment, competitive position,
accomplishment of mission and vision etc. Efforts should be taken to
make assessments more objective wherever possible.
4. Flexibility in Operations:

There are number of uncertainties exist in a business situation and so a

company can be greatly benefited buy 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 the flexibility are as

follows:

(a) The strategy for flexibility must be stated to enable managers 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.

Competitive intelligence

Competitive intelligence is the action of defining, gathering, analyzing, and

distributing intelligence about products, customers, competitors, and any aspect of the
environment needed to support executives and managers making strategic decisions for an
organization.
Competitive intelligence essentially means understanding and learning what is happening in the
world outside the business so one can be as competitive as possible. It means learning as much
as possible, as soon as possible, about one's industry in general, one's competitors, or even
one's county's particular zoning rules. In short, it empowers anticipating and facing challenges
head on.[1]
Key points of this definition:

1. Competitive intelligence is an ethical and legal business practice, as opposed

to industrial espionage, which is illegal.[2]
 2. The focus is on the external business environment.[3]

3. There is a process involved in gathering information, converting it into intelligence and

then using it in decision making. Some CI professionals erroneously emphasise that if
the intelligence gathered is not usable or actionable, it is not intelligence. [4]
A more focused definition of CI regards it as the organizational function responsible for the early
identification of risks and opportunities in the market before they become obvious. Experts also
call this process the early signal analysis. This definition focuses attention on the difference
between dissemination of widely available factual information (such as market statistics, financial
reports, newspaper clippings) performed by functions such as libraries and information centers,
and competitive intelligence which is a perspective on developments and events aimed at
yielding a competitive edge.[5]
The term CI is often viewed as synonymous with competitor analysis, but competitive intelligence
is more than analyzing competitors: it is about making the organization more competitive relative
to its entire environment and stakeholders: customers, competitors, distributors, technologies,
and macroeconomic data.

How do companies stay ahead in an ever changing business world? Competitive intelligence is
how companies keep their finger on the pulse of their industry. This lesson will define competitive
intelligence and provide examples of how companies use it.

Competitive Intelligence (CI) Defined

Harry is a hotelier who is getting ready to open a new brand of hotels. He wants to make sure
that he is able to launch his new concept before any of his competitors come up with the idea.
How does he make sure he is keeping up with his competitors in the industry?

Competitive intelligence (CI) is the process of gathering and analyzing information on your
competitive environment to help you make business decisions. In order for Harry to make sure
that he is competitive and that the launch of his new brand is successful, he needs to know what
is going on in the market around him - CI can help him do this. Using CI helps business owners
anticipate challenges and face any potential obstacles immediately.

Depending on your industry, your CI information can look different. Here are some general
examples of information that CI can include:

Industry cost curves: Find out about changes to product costs.

New products: What new products are your competitors coming out with?

Evaluation & estimation of market size: Learn how big the market is for your product and
the competitors already in your market.

Supply and demand curves: Is there demand for your new product? Understanding the
supply and demand relationship for your product is essential for all businesses.
 Competitor news: What is going on with your competitors? It is important to follow your
competitors on social media and check their press releases frequently so that you are
aware of any new developments.

CI Methods
The whole idea behind CI is that you are gathering and analyzing information that will help you to
be better prepared and make sound business decisions. There are different ways that companies
can go about CI.

First, there are many websites that provide valuable CI information. For example, sites like Yahoo
Finance can give keep you up to date on stock market changes and finance news. This is
important to follow so that you can see how other companies are doing. Harry should follow other
hotel owners on these websites to learn about their stocks, profits and any major, relevant news.
Say Harry finds out that ABC Hotels is planning to open a new brand of hotels. Using online
sources to learn about this development will help him see right away if ABC's new hotels are
going to be competition for his new brand.

Next, companies can conduct a SWOT analysis to compare their own company to competitors.
A SWOT analysis is a way to analyze both internal and external forces that can affect a
company's success. SWOT stands for 'strengths, weaknesses, opportunities, and threats'; to do
a SWOT analysis you list all the factors that might fall under each of these categories.

What is competitive intelligence? How does competitive intelligence fit into the strategic planning
process? What is the role of knowledge management and how does it relate to competitive
intelligence? Is competitor analysis identical to competitive intelligence? How can competitive
intelligence become part of a corporate intranet strategy? How do we train our employees to beware
of corporate espionage and protect our intellectual property? Do the companies we compete with
engage in competitive intelligence on us and what is the effectiveness of their competitive intelligence
process? How do we measure the effectiveness of our own CI process?

The question of what Competitive Intelligence (CI) consists of is not as necessary to

understanding its importance in business than understanding a bigger and more important
question -- why do some firms in an industry win and achieve hegemony where others, often
with superior resources, fail

In short, CI is the purposeful and coordinated monitoring of your competitor(s), wherever and
whoever they may be, within a specific marketplace... Your "competitors" are those firms which you
consider rivals in business, and with whom you compete for market share. CI also has to do with
determining what your business rivals WILL DO before they do it. Strategically, to
gain foreknowledge of your competitor's plans and to plan your business strategy to countervail their
plans. As you might expect, this will involve many methods at the tactical collection level, but it will
also require integration into your existing information infrastructure, analysis and distribution of the
information, and finally, the calculation of business decisions on the grounds of that information and
the analysis of same. This is the "intelligence" part of the formula.
Most of the value-added in manufacturing or product companies is created by knowledge-based
service activities such as research and development, marketing research, product design, customer
service, advertising, or distribution. Winning firms are organizations that most successfully master the
business issues critical to their performance, and develop the most precise understanding of
definitions of value and creation of value. Competitive advantage has a lot to do with leveraging the
knowledge assets of the firm, while at the same time determining how competitors are likely to
leverage theirs.

The goals of this explanation are many:

Adopt a strategic approach to the use of competitive intelligence; to see the intelligence
function as an integral part of strategy formulation

Show how competitive intelligence is used by firms to achieve competitive advantage

Examine the process, the tools, and the output of CI

A Fortune 500 company survey showed 55 percent make use of competitive information in composing
business strategy. Each firm is a leader in its industry and each firm knows its enemies.

Companies and industries prosper through improvements in competitiveness, leveraging core

competencies, and competitive intelligence is at the core of the objective of improving competitive
advantage.

Competitive intelligence is the core of competitive strategy

Why do evidently great organizations with great products, wise managers, and other successful
strengths, go out of business?

Economies of scale, the foundation on which big companies have based their dominance in the
Industrial Era, is no longer an advantage. Changes in information technology, in the financial system,
in just-in-time production techniques, and in the rise of companies offering distribution and support
systems which previously only the largest companies could afford -- removing the advantages of
being big. The diseconomies of scale - overhead, inflexibility -- are becoming increasingly powerful.

Value Of Competitive Intelligence

Here are just a few of the questions firms ask themselves when implementing a CI program:

How do we most usefully define the company's mission, its strategic intentions, its objectives
and its strategic choices?

What do we need to know to develop and to select strategies which are not only successful,
but sustainable?

What new products should we build and which markets should we enter and how?

How do we implement our competitive strategy?

Whatever strategic framework the firm chooses to embrace for the management of its business, no
one element remains more fundamental to competitive strategy than competitive intelligence.
Competitive intelligence is more concerned with doing the right thing, than doing the thing right.
The goal of a competitor analysis is to develop a profile of the nature of strategy changes each
competitor might make, each competitor's possible response to the range of likely strategic moves
other firms could make, and each competitor's likely reaction to industry changes and environmental
shifts that might take place. Competitive intelligence should have a single-minded objective -- to
develop the strategies and tactics necessary to transfer market share profitably and consistently from
specific competitors to the company.

A firm which does not rigorously monitor and analyze key competitors is poorly-equipped to compose
and deploy effective competitive strategy and this approach leaves the firm and its markets vulnerable
to attack. The basis for CI revolves around decisions made by managers about the positioning of a
business to maximize the value of the capabilities that distinguish it from its competitors. Failure to
collect, analyze and act upon competitive information in an organized fashion can lead to the failure of
the firm itself.

What then is competitive intelligence? How do we define it? In what ways does it differ from market
research? How is it used to make companies more competitive? Who needs competitive intelligence?
How is it managed? How is it produced? How should competitive intelligence be used? By whom?
What are its costs? Where does competitive intelligence fit within the strategic management system of
the firm? What are the measurable "bottom line" benefits for managers and their organizations?

The Chinese military strategist, Sun Tzu, emphasized the need for CI: "Now the reason the
enlightened prince and the wise general conquer the enemy whenever they move, and their
achievements surpass those of ordinary men, is foreknowledge".

The upside of successfully predicting a competitor's future plans are apparent; as are the
consequences of making business decisions based on information that is faulty.

Competitive intelligence is usually composed of five major areas of endeavor, and is performed under
three main approaches in the CI framework:

assessment of strategies

competitor perceptions

effectiveness of current operations

competitor capabilities

long-term market prospects

Strategic intelligence is concerned mainly with competitor analysis or gaining an understanding of a

competitor's future goals, current strategy, assumptions held about itself and the industry, and
capabilities -- diagnostic components. Intelligence about the firm's major customers, suppliers and
partners (in marketing or research and development alliances) is often also of strategic value.

Tactical intelligence is generally operational and on a smaller-scale, not so centered on being

predictive. Tactical issues include competitors' terms of sale, their price policies and the plans they
have for changing the way in which they differentiate one or more of their products from yours.
Middle-level marketing and sales managers number among some of the main users of tactical
intelligence. They want to know how to win the day, today.

Counter intelligence is defending company secrets. Every firm has competitors as interested in
knowing your plans as you are in knowing theirs, maybe even more so. Often, this area of endeavor
will involve security and information technology, but others are often overlooked, such as hiring and
firing strategies, to contain competitor opportunities within the firm.
Competitive intelligence is the determination of solutions to these principle factors and determinants of
ongoing competitive advantage:

What is the basis of competition

Where the firm competes

Who does the competitor compete against

How does the firm compete

CI is focused on decision making

Seldom do people realize that business, just like life is merely a series of decisions. And global firms
have a growing need for the necessary information on which to base decisions concerning the
conduct and development of each of their firm's strategic objectives, and the protection of their
organizations against threats from their competitors.

Purpose & Role of Intelligence in Business

Intelligence is both a process and a product -- an analytical process that transforms tumultuously
gathered competitor and market information into actionable knowledge about competitors' capabilities,
intentions, performance, and position; as well as the final product of that process.

The focus of market research tends to be on the problems associated with the profitable marketing of
a firm's products and services. The scope of competitive intelligence is far broader. Competitive
intelligence is a value-added concept that layers over the top of business development, market
research and strategic planning.

The research objectives of a competitive intelligence project will often involve issues such as: the
manufacturing capabilities of the competitor; analysis of alliances and/or joint ventures entered into by
competitors; the competitor's future plans and strategies for specific markets, or product lines;
reasons behind changes in the corporate or business unit strategy, et cetera.

In today's global enterprise, CI happens at two levels -- corporate and business unit. Corporate
strategy concerns two different questions: what businesses the corporation should be in and how the
corporate office should manage the array of business units. And, competitive strategy is concerned
with how to create competitive advantage in each of the businesses in which a company competes
based upon core competencies.

The Cycle of Competitive Intelligence

The CIA describes the intelligence cycle as "the process by which raw information is acquired,
gathered, transmitted, evaluated, analyzed and made available as finished intelligence for
policymakers to use in decision-making and action." There are five steps which constitute this cycle:

planning and direction

collection and research

processing and storage

 analysis and production

dissemination and delivery

There are seven questions to be answered prior to making investment decisions in CI:

what do we need to know?

what do we already know?

why do we need to know it?

when do we need to know it?

what will we do with the intelligence once we have it?

what will it cost to get it?

what could it cost not to get it?

CI's Final Product

The product of the intelligence cycle, is evaluated information. It is finished intelligence, packaged in a
format appropriate as much to the intelligence itself, as it is to the customer for the intelligence, the
decision-maker.

In practice, the intelligence product is unlikely to be created from perfect input. We cannot truly and
accurately predict the future until events have already taken place and it's too late. The firm finds itself
in a position where it can only react to the competitor's move; it has lost the advantage it might have
had if the right intelligence had been available earlier. So, although we can't know for certain the
minutiae associated with exact details, we can discover plans and roughly-hewn strategies.

CI's real value is to provide managers with the organizational tool to learn what the competitor will do,
not what the competitor has already done.

Ethics and ethical behavior are concerns here and since the area is usually perceived as positive to a
company's reputation and competitiveness, it would not be useful for a firm to undertake its
intelligence activities without regard to ethical or legal considerations. Everything a firm needs to know
about the competition can be obtained by legally available means. The cost of stepping over the line --
into the black -- are far too severe, and unnecessary.

What are the bottom line benefits of CI? Improved market knowledge, improved cross-functional
relationships in the organization, greater confidence in making strategic plans, and improvements in
product quality versus the competition. In short, better business performance through doing things
better.