"Political Legal Economic PESTELfactors Environmental Social Technological SWOT ANALYSISThis model focuses on both internal and external factors. Strengths and weaknesses are primarily focuseson internal factors while opportunities and threats place emphasis on external factors.Strengths are the areas in which the business excels in and gets a competitive edge while weaknesses areareas in which the entity has a competitive drawback. Opportunities and threats refer to the chances orpotential difficulties the organization may face. SWOT is a simple tool to implement that requires nospecial skill, an in depth understanding of the entity and its environment are enough making it costeffective also. (Ferrel and Hartline, 2008) Strengths Weaknesses Opportunities Threats Limitations of SWOT analysisAlthough it is not difficult for an entity to identify strengths, weaknesses, opportunities and threats, it is ofminimal use if there is no clear differentiation of what requires more priority over the other. The analysis does not provide a structured way in highlighting the strengths, weaknesses, opportunitiesand threats. It can therefore lead to difficulties or even ambiguity in classifying factors as strengths,weaknesses, opportunities or threats.The external factors it highlights are not in control of the entity and therefore the analysis may be of littleor no use.PART 3: RESULTS, ANALYSIS, CONCLUSION AND RECOMMENDATIONS RESULTS AND ANALYSISRATIO ANALYSISRefer to Appendix 1, Appendix 2, Appendix 3 and Appendix 4 ARM BCL ARM BCL ARM BCL 2009 2010 2011Revenue growth - - 15.9% -6.4% 37.2% 27.8%Gross profit margin 36.1% 36.1% 35.2% 34.3% 32.2% 27.8%Operating profit margin19.7% 31.7% 22.5% 26.8% 20.0% 23.7%ROCE 11.6% 35.0% 10.0% 29.1% 10.2% 29.9%Asset turnover0.42 0.93 0.36 0.84 0.40 1.07Current ratio 1.0 2.6 1.3 1.7 0.8 2.6Quick ratio 0.7 1.7 1.0 1.3 0.5 1.8Receivables days 98 24 113 22 83 15Payables days 125 76 116 103 125 57Inventory days 120 83 107 70 93 61Debt ratio 66% 35% 70% 35% 70% 28%Debt : Equity ratio 194% 53% 236% 54% 236% 39%Interest cover 13.3 679.1 5.9 82.5 5.3 22.7EPS growth - - 67.5% -23.5% 6.5% 3.0%DPS growth - - 16.7% -22.7% 14.3% 17.6%Table 1: Financial resultsRevenueARM’s revenue steadily increased; the graph below shows the turnover from year ended 2009 to 2011 Revenue (in milllions) 50000 45000 35884 40000 35000 29994 28075 30000 25000 BCL REVENUE 20000 ARM REVENUE 15000 10000 8181 5965 5000 5145 0 2009 2010 2011 Chart 1ARM revenue increased by 37.2% in 2011 and 15.9% in 2010. The increase is attributed to the cementgrinding plant commissioned in early 2011 that led to increased output and therefore higherrevenue(ARM, 2011).Comparing the increase in revenue with Bamburi Cement Limited, a leadingcement manufacturer in Kenya, the growth appears to be encouraging. BCL’s revenue grew by 27.8% in2011. The revenue change in 2010 was a negative 6%. This is a positive performance indicator for ARM.Profitability ratiosARM’s profit for the year increased from KES 645 million in 2009 to KES 1,075 million in 2010 to KES1,150 in 2011. Comparing this with BCL, ARM appears to be stronger. BCL’s profit for the year wasKES 6,970 million in 2009, KES 5,299 million in 2010 and KES 5,859 million in 2011. Gross profitThe gross profit increased from KES 1,854 million in 2009 to KES 2,099 million in 2010 and KES 2,631million in 2011. This is due to the increase in revenue. This is a good sign especially when compared toBCL’s gross profit that generally reduced from 2009 to 2011. Gross profit of BCL was KES 10,815million in 2009and KES 9,964 million in 2011.Chart 2 shows the gross profit margin of ARM and BCL during the years 2009 to 2011. ARM’s grossprofit margin is gradually reducing which means that the cost of sales is increasing more than the revenueincrease. This can be due to high production costs; ARM faced heavy maintenance costs due to poweroutages. The Kaloleni plant suffered 93 power outages during the year 2011 (ARM, 2011). The margindecreased by 0.9% and 3% in 2010 and 2011 respectively. This is however less than BCL whichdecreased by 1.8% and 6.5% in 2010 and 2011 respectively. This means that ARM managed to controltheir cost of sales better than BCL which is good. Gross Profit Margin 40 35 30 25 20 ARM Gross profit margin 15 BCL gross profit margin 10 5 0 2009 2010 2011 Chart 2Operating ProfitARM had a lower operating profit margin than BCL. This means that the company did not control costs atits level best and could have done better. However, it should be noted that the margins are decreasing forboth ARM and BCL. This may be attributable to tough economic conditions that include increasedcompetition, high inflation among others.Operating Profit Margin 35 30 25 20 15 10 5 0 2009 2010 2011 ARM OPERATING PROFIT19.7 22.5 20 MARGIN BCL OPERATING PROFIT31.7 26.8 23.7 MARGIN Chart 3Percentage"