Limitations Of PEST Analysis
I have collected different newspapers, including trade journals and company’s related articles for the defined period. The newspapers used were Express Tribune, Daily Times, Business Recorder, and The Nation in order to gain the most up to date and authentic information about the country’s economy, its effects on the cement industry, and the economists’ views of the company’s performance.
I also studied related magazines that helped me a lot to gather authentic information.
Journal Articles, eBooks, PDF:
Different online journal articles, eBooks, and PDF files were also consulted in order to enhance my knowledge and my ideas by studying different research methodologies so that I could be able to produce a successful project.
- b. Limitations of Information Gathering
I had to face certain difficulties during the collection of information by using secondary sources. While using the internet, the accuracy, completeness, and authenticity of the information were the most considerable things and I had to be more careful about them. The newspapers I have collected were not in good positions, most of the related articles were missing and I had to search the related articles from an unorganized huge stockpile. I also had to visit different libraries so that I could get the updated versions of reference books.
- c. Ethical Consideration
Ethics are defined as “what is right and wrong and how conduct should be judged right and wrong, it is about”.(BPP, P1)
All ACCA members, affiliates, and students are bound to follow the Code and Ethics and Conduct and its set principles. The principles are Integrity, Objectivity, Confidentiality, Professional competence, and Due Care and Professional behavior. These principles are defined as follows:
- All members of ACCA should be honest and straightforward in all business and professional relationships.
- ACCA members should not compromise their professional and business judgment through the undue influence of others and conflict of interests.
- Members must keep all the information confidential that they acquire in their professional and business careers.
- Members must keep their knowledge and professional information up to a certain level that ensures that all clients and business partners get adequate services.
- Their behavior must be highly professional following all the rules and regulations and must not conduct any activity that discredits their profession. (Code of Ethics and Conduct, 2011)
The main ethical issuethat I faced during the execution of my research was academic integrity. As most of the information which I received was through online medium, true and fair information was a point of consideration I need to be more careful about unintentional errors and outright falsification of the collected information. Secondly, I also had to face the plagiarism issue, that is to copy someone other work as my own and I had to be very careful in this regard. I used Harvard Referencing System in order to reference the others work. Moreover, to overcome this issue I had installed plagiarism software “Viper” and passed my research report through it.
- d. Accounting and Business Tools
The following is the detail of the accounting and business tools that I have used during my research.
Ratio Analysis is described as the interpretation of the financial health of a company by studying the relationship of key accounting variables. Ratios are basically used to recognize that how a company has performed over a defined period and to compare with the ratios of other organizations and the industry in order to evaluate the performance of the company.(LSBF ACCA P3: Introduction to Ratio Analysis, 2014)
Limitation of Ratio Analysis
Despite the advantages of ratio analysis, the following are the limitations:
The ratios can be found distorted if they are used to compare the companies that practice different accounting policies.
If the selected two companies from two different industries are compared using ratios, the comparison might be misleading.
Ratios are used to explain the past information about the financials of companies, however; the users are more concerned with the current and future aspects affecting the company’s performance.(Accountingexplained, 2014)
The most common model used for the strategic formulation and planning is SWOT Model. SWOT analysis is used to evaluate a company’s strengths, weaknesses, opportunities, and threats. The SWOT techniqueis valuable as it provides an in-depth analysis of internal as well as external factors.
The strengths of a business are its capabilities and resources that are considered to develop a competitive advantage for the company over competitors in the market. Human capitals, patents, strong reputation of the company, effective sales strategy and cost advantages are some examples of the strengths of a business.
The weaknesses are the absence of strengths in the business or the limitations and such aspects present in the company that leads to the shortcomings against the opponents. High cost structure, high prices of products, weak brand name, poor reputation in the market and lack of best human capital in the company are some examples of weaknesses.
New opportunities can always be revealed for increasing profits and growth of the company while analyzing the external environmental analysis. Examples of opportunities are the arrival of new technologies and the removal of international trade barriers etc.
The external environment also contains certain aspects that could lead to adverse factors or threats to the company. For example shifts in the customer’s taste away from the company’s products, advancement, entry of new firms in the market, new regulations, changes in economic conditions, and the introduction of substitute products etc.(Quickmba, 2014)
Limitation of SWOT Analysis
The SWOT technique is limited because of the following factors:
The use of internal factors as the strengths and weaknesses and external factors as the opportunities and threats of a company is a subjective decision.
Another limitation with the use of SWOT is that there are no understandable limits as to what is and what is not relevant.
The determination of external factors as an opportunity or a threat is not distinguished by SWOT analysis. The same factor can be simultaneously characterized both for opportunities and threats.
The macro-environmental factors which affect the business performance of a company can be analyzed by using the acronym PEST.
The political factors like the change of a government, political instability, change in tax policies, environmental law, and foreign trade policy etc of a country havesignificant impacts on the company’s performance.
The economic factors of a country like inflation rates, interest rates, economic growth and exchange rates etc have also noteworthy influence on the organization’s profits and economic growth.
Social factors also affect the company’s performance as they indicate the customers’ interest and attitudes of the population. Some important social factors are the customers’ choice of the products, age distribution, population growth rate, education and career attitudes, religious belief, cultural and social conventions, and health consciousness etc.
Technological factors like the advancements in technology, updated versions of installed programs, and new concepts have impacts on producing, marketing, distributing goods and services and communicating with target markets. (Team FME, 2014)
Limitations of PEST analysis
The limitations of PEST Analysis are the following:
The external factors which affect the organization are usually dynamic and the change occurs at very fast speed. It is a matter of concern that how these fast changes will affect the future or present concerns of the company. So the PEST analysis has to be conducted regularly to make it effective.
The collection of relevant external information from reliable resources and in proper time becomes a little bit difficult for the company. Moreover, the process also restricted by the companies because of cost considerations.(Free-management-ebooks, 2014)