CIPS L4M2 Defining Business Needs Online Training

Question #69

Which of the following might be the consequences of under-specification? Select TWO that apply:

A . Few suppliers can supply the full range of features
B . Additional cost to rework
C . Unfit products or services
D . Poor competition between suppliers
E . Higher cost due to inessential features

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Question #69

Which of the following might be the consequences of under-specification? Select TWO that apply:

A . Few suppliers can supply the full range of features
B . Additional cost to rework
C . Unfit products or services
D . Poor competition between suppliers
E . Higher cost due to inessential features

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Question #73

Competitors are increasingly deploying robotics and automation to boost productivity.

Which of the below business sectors does EV Inc belong to?

A . Construction
B . Manufacturing
C . Financial services
D . Retails

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Question #74

Lider Ltd is a leading bathroom furniture manufacturer in India. The company has more than 30 years experience in the market with extended knowledge of engineering and customers’ taste. Lider is planning to launch a new type of bath fitting next year which offers Bluetooth connectivity and thermostat display. The company gathers a team of multi-disciplines, including engineering, procurement, sales and marketing. At the first team meeting, the project leader tells the team to discuss which functions will be valued by the customers, and how to deliver those functions with the lowest costs possible.

Which of the following describes the process that the project team is undertaking?

A . Cost analysis
B . Standardisation
C . Value engineering
D . Just in time

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Question #75

Dana is an automobile manufacturer. It has a new electrification strategy that aims at making eco-friendly electric pick-up trucks. To implement this strategy, the procurement department must source new categories of parts that make motors, sensors, solenoids and stators. He starts to analyse the market by identifying specific supply market segments for those parts and finding suppliers who have the best capabilities in those segment. He intends to segment the market based on specific features of the products.

Which variable is used by Dana procurement manager to shape and manage supply market?

A . Buyer segments
B . Channel segments
C . Geographical segments
D . Product segments

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Question #76

Which of the following is a risk to buying organization when using conformance specification?

A . Buyer is responsible for product failure
B . Buyer may face liquidity risks
C . Buyer cannot control the inputs
D . Time to produce specification is shortened

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Question #77

After a project, the procurement team at CLK Ltd meets up and summarises on the performance. They see that they actually spent $5,000 less than planned budget. The team tries to identifies why there is such difference.

This activity is known as…?

A . Cash flow analysis
B . Variance analysis
C . Rolling budget
D . Cost modelling

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Question #78

Which of the following bodies provides standards for the products and services in the US?

A . ISO
B . ANSI
C . AFNOR
D . BSI

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Question #79

Sabic is a petrochemical manufacturer. It wants to digitalise its operation and is looking for new IT system. The procurement manager approaches this matter with a through-life specification. He supposes that stating “good quality” in the specification will be enough for quality standard section. Is the procurement manager’s thought appropriate?

A . Yes, because the specification should be concise.
B . No, because “good quality” is an in-house jargon that suppliers are not familiar with
C . Yes, because IT sector has its own standard of quality, therefore, suppliers may deliver good quality without any further explanation
D . No, because “good quality” is very ambiguous for suppliers to identify Sabic’s re-quirement

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Question #80

Which of the following factors are likely to be direct barriers to a new entrant in a supply market?

A . Threat of forward integration
B . Value to price
C . Brand identity
D . Availability of substitutes
E . Cost advantages

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Correct Answer: C, E
C, E

Explanation:

There are many types of barriers to entry into a market. Some of these include:

– Economies of Scale: When manufacturing or selling at a large scale, companies are able to avail cost advantages because per unit costs of the product fall. So the more the company produces in quantity the more the benefit. When existing companies have this advantage, it can act as a barrier to entry because a new entrant will have to try to match the scale to achieve the same cost ad-vantage as the existing company. This may not be possible at the initial stage.

– A Differentiated Product: If the product being sold by the existing company or companies is highly differentiated or enjoys strong brand loyalty, then this can act as a strong barrier to entry. The new entrant will have to invest in creating a product with newer and unique features and bene-fits that surpass those offered by the old company. In addition, there will need to be strong efforts to break existing brand loyalties and shift them to a new untested company.

– High Capital Costs: If an industry requires huge capital investments at the onset, then this will act as a barrier to entry for many of the potential entrants. Only those will attempt to enter the competitive fray who have the resources to make this high initial investment.

– Other Cost Advantages: Apart from those cost benefits that come from economies of scale, there are other advantages that an existing firm may enjoy. These include access to the best suppliers, an understanding of existing materials and knowledge of their quality, possession of any necessary and important patents, and proprietary information and technological knowledge. There are also learning advantages, achieved over years of business and experience.

– Cost of Switching: The cost associated with a consumer’s move from one company or product or another is called the switching cost. If there are significant switching costs, then a new entrant may not be able to create means of removing these. Or, they may have to offer significant advantage to counter these switching costs at their own expense.

– Distribution Network: Often, distribution relationships are well established and may prove to be a strong barrier to entry for a new company. A new entrant will obviously need access to these distribution channels but will need to invest extra in order to engage distributors who have established relations with existing competitors.

– Suppliers: As with distributors, suppliers may be vital to the operations of a new business. Existing suppliers may have contracts or loyalties with existing companies and may prove to be difficult to form relationships with.

– Legal and Government Created Barriers: Government and regulatory requirements such as permits and licenses may be a strong barrier to entry. There may also be laws governing ways to conduct business that may conflict with a company’s practices in other countries.

– Barriers to Exit: Interestingly, barriers to exit may act as a deterrent to entry by new companies. If a company is unable to easily leave a competitive environment in case business does not work out, then it will have to stay and compete even if that is a detrimental business practice. In this case, the company may choose to not enter the market in the first place.

Reference: CIPS study guide page 96 LO 2, AC 2.2