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ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business

Which of the following is the best description of the main limitation of PESTEL analysis when used by a business for strategic planning?

The main limitation is that PESTEL only lists external factors. It does not rank them by importance or predict how they will change, so users must judge which matter most and review them regularly. It is an external tool, usable by any sector and in several countries.

  1. AIt lists external factors but does not itself show which are most important or how they will changeCorrect
  2. BIt cannot be applied to businesses operating in more than one country
  3. CIt focuses only on internal strengths and weaknesses of the business
  4. DIt can only be used for businesses in the public sector

Explanation

PESTEL identifies external macro-environment factors, but the list must be prioritised and kept up to date, since factors change and vary in impact. It is an external tool, so it does not address internal strengths. It can be used in any sector and across countries, so the other statements are wrong.

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