CIPS L4M2 Defining Business Needs Online Training

Question #131

Company A sells a product for $100. The total unit variable costs are $60. Fixed costs as in its ac-count are $20,000.

How many products does the company have to sell to achieve break-even point?

A . 600
B . 550
C . 400
D . 500

Reveal Solution Hide Solution

Question #131

Company A sells a product for $100. The total unit variable costs are $60. Fixed costs as in its ac-count are $20,000.

How many products does the company have to sell to achieve break-even point?

A . 600
B . 550
C . 400
D . 500

Reveal Solution Hide Solution

Question #131

Company A sells a product for $100. The total unit variable costs are $60. Fixed costs as in its ac-count are $20,000.

How many products does the company have to sell to achieve break-even point?

A . 600
B . 550
C . 400
D . 500

Reveal Solution Hide Solution

Question #131

Company A sells a product for $100. The total unit variable costs are $60. Fixed costs as in its ac-count are $20,000.

How many products does the company have to sell to achieve break-even point?

A . 600
B . 550
C . 400
D . 500

Reveal Solution Hide Solution

Question #131

Company A sells a product for $100. The total unit variable costs are $60. Fixed costs as in its ac-count are $20,000.

How many products does the company have to sell to achieve break-even point?

A . 600
B . 550
C . 400
D . 500

Reveal Solution Hide Solution

Question #136

The substitute fits organization’s strategy

A . 1 and 4 only
B . 3 and 4 only
C . 1 and 2 only
D . 2 and 4 only

Reveal Solution Hide Solution

Correct Answer: D
D

Explanation:

The threat of substitution is a function of three factors:

• The relative value/ price of a substitute compared to an industry’s product

• The cost of switching to the substitute

• The buyer’s propensity to switch

Buyers with different circumstances and in different industries do not all have equal propensities to substitute when faced with a comparable economic motivation. Differences in their circumstances lead buyers to respond to a given relative value to price (RVP) and switching cost differently. While such differences might be treated as factors that modify RVP or switching costs, it is more helpful in practice to isolate them.

Resources. Substitution often involves up-front investments of capital and other resources. Access to such resources will differ from one buyer to another.

Risk Profile. Buyers often have very different risk profiles, the result of such things as their past history, age and income, ownership structure, background and orientation of management, and nature of competition in their industry. Buyers prone to risk taking are more likely to substitute than buyers that are risk-averse.

Technological Orientation. Buyers experienced with technological change may be less concerned with some kinds of substitution risks, while extremely aware of others that a less technologically sophisticated buyer would be oblivious to.

Previous Substitutions. The second substitution may be easier for a buyer than the first, unless the

first substitution has been a failure. The buyer’s uncertainties over undertaking a substitution may have diminished if a past substitution has been successful, or risen if a past substitution has led to difficulties. In the soft drink industry, this seems to have worked to the benefit of aspartame.

Intensity of Rivalry. Buyers under intense competitive pressure and searching for competitive ad-vantage will tend to substitute more quickly to gain a given advantage than those that are not. Generic Strategy. The RVP of a substitute will have different significance depending on the competitive advantage that industrial, commercial, or institutional buyers are seeking or the value of time and particular performance needs of the household buyer. A substitute that offers a cost saving will tend to be of more interest to a cost leader than a differentiator, for example.

Many of these factors that shape the buyer’s propensity to substitute will be a function of the particular decision maker who is involved in the purchase decision.

Porter, Michael E.. Competitive Advantage: Creating and Sustaining Superior Performance (p. 278-

289). Free Press. Kindle Edition.

Reference: CIPS study guide page 95-96

LO 2, AC 2.2

Question #137

GSC Ltd is a manufacturer of car parts. To accommodate growing demands of electric cars, the company is developing a new component which requires different type of steel. The project team estimates that the component will be ready for production in 1.5 years. Until then, they need to keep the production busy.

After checking the inventory records, the production team sees that the company has 3 months of stock. The lead time for each batch is two months.

Which of the following should be a priority action of the company?

A . Create new specification to new supplier
B . Standardise the specification
C . Create new specification to current supplier
D . Make a call-off order to current supplier

Reveal Solution Hide Solution

Question #137

GSC Ltd is a manufacturer of car parts. To accommodate growing demands of electric cars, the company is developing a new component which requires different type of steel. The project team estimates that the component will be ready for production in 1.5 years. Until then, they need to keep the production busy.

After checking the inventory records, the production team sees that the company has 3 months of stock. The lead time for each batch is two months.

Which of the following should be a priority action of the company?

A . Create new specification to new supplier
B . Standardise the specification
C . Create new specification to current supplier
D . Make a call-off order to current supplier

Reveal Solution Hide Solution