L4M2 Exam Preparation Material | Defining Business Needs

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Question#1

Logistics support stage

A. 2 and 3 only
B. 2 and 5 only
C. 1 and 2 only
D. 1 and 4 only

Explanation:
Writing a specification and then procuring and using the product or service has a number of stages. The further on in the process you are, the less potential there is for cost reductions. Therefore, opportunities for cost reduction will be greatest in the two first stages: planning stage and pre-design stage.
LO 3, AC 3.1

Question#2

It could be argued that wherever possible, specifications should be more output and outcome focused.
Why is this?

A. So that they can be amended easily after contract award
B. To allow as many suppliers as possible to respond
C. To reduce the number of options available
D. So that a specific branded product is provided

Question#3

Which of the following events would increase the number of suppliers in a particular market?

A. Introduction of minimum wage regulations
B. High and increasing levels of investment required to enter the market
C. Requirement for all companies to have 10,000 or more employees
D. De-regulation of a previously government-run industry

Explanation:
Comprehensive and Detailed Explanation (from CIPS L4M2 C Market Structure and Barriers to Entry) De-regulation removes government controls and barriers, allowing new competitors to enter, thereby increasing supplier numbers and competition.
The other options raise barriers to entry (more costs or requirements), thus reducing potential entrants.
Relevant L4M2 references:
“Barriers to market entry and exit”
“Impact of deregulation on supply market dynamics”

Question#4

Which of the following problems may be identified as open-ended problems? Select TWO that apply:

A. Shortage of key medicines in healthcare industry
B. A cyber attack takes down whole company’s IT system
C. Engine failures cause flight cancellations.
D. Logistics costs incur a large portion in wholesale prices
E. The suppliers don’t comply with the company’s policy on underage labour.

Explanation:
Explanation
Open-ended problem is something stopping the achievement of an objective or blocking progress. To solve this type of problems, procurement professional should find a way to unblock the block-age. In the above question, high logistics cost is an obstacle to cost cutting objective while supplier’s incompliance prevents the company to achieve its sustainable objective.
Reference: CIPS study guide page 11
LO 1, AC 1.1

Question#5

The bargaining strength of suppliers is likely to be high in which of the following situations? (Select TWO)

A. The buyer’s spend is a high proportion of the supplier’s revenue
B. The buyer’s requirement is urgent
C. The buyer is educated on supply markets
D. The buyer is large in size relative to the supplier
E. There is a limited number of suppliers in relation to buyers

Explanation:
Comprehensive and Detailed Explanation (from CIPS L4M2: Supply Market Analysis)
Supplier power is high when:
Few suppliers exist relative to demand → less competition.
Urgent demand gives suppliers leverage over buyers.
A and D would reduce supplier power; C (educated buyer) also weakens it.
Relevant CIPS L4M2 Sections:
Porter’s Five Forces C supplier power
Market structure and urgency as power drivers

Exam Code: L4M2
Q & A: 304 Q&As         Updated:  Sep 21,2026

 

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Exam Code: L4M2
Q & A: 304 Q&As
Updated:  Sep 21,2026

 

 Access Complete L4M2 Preparation Material