CIPS L4M2 Practice Exams
Last updated on Oct 24,2026- Exam Code: L4M2
- Exam Name: Defining Business Needs
- Certification Provider: CIPS
- Latest update: Oct 24,2026
Question #271
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
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
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 #272
A market has a considerable number of buyers and suppliers. Analysis of the market reveals that loyalty from buyers is relatively low and switching to alternative providers is commonplace.
Which of the following market characteristics is supporting this type of buyer behaviour?
- A . Supplier bargaining strength
- B . Barriers to market entry
- C . Increasing use of technology
- D . The availability of substitute products
Correct Answer: D
Question #273
Buyer’s database on market data
- A . 1 and 2 only
- B . 2 and 3 only
- C . 1 and 4 only
- D . 3 and 4 only
Correct Answer: A
Question #273
Buyer’s database on market data
- A . 1 and 2 only
- B . 2 and 3 only
- C . 1 and 4 only
- D . 3 and 4 only
Correct Answer: A
Question #275
Information security
2 and 4 only
B. 1 and 2 only
C. 2 and 3 only
D. 3 and 4 only
Correct Answer: B
Explanation:
ISO 14001:2015 specifies the requirements for an environmental management system that an organization can use to enhance its environmental performance. ISO 14001:2015 is intended for use by an organization seeking to manage its environmental responsibilities in a systematic manner that contributes to the environmental pillar of sustainability.
ISO 14001:2015 helps an organization achieve the intended outcomes of its environmental management system, which provide value for the environment, the organization itself and interested parties. Consistent with the organization’s environmental policy, the intended outcomes of an environmental management system include:
• enhancement of environmental performance;
• fulfilment of compliance obligations;
• achievement of environmental objectives.
ISO 14001:2015 is applicable to any organization, regardless of size, type and nature, and applies to the environmental aspects of its activities, products and services that the organization determines it can either control or influence considering a life cycle perspective. ISO 14001:2015 does not state specific environmental performance criteria.
ISO 14001:2015 can be used in whole or in part to systematically improve environmental management. Claims of conformity to ISO 14001:2015, however, are not acceptable unless all its requirements are incorporated into an organization’s environmental management system and fulfilled without exclusion.
In conclusion, ISO 14001:2015 focuses on: management system (including roles, leadership and processes) and the life cycle of product or service. Life cycle is defined as "consecutive and inter-linked stages of a product (or service) system, from raw material acquisition or generation from natural resources to final disposal. […] The life cycle stages include acquisition of raw materials, design, production, transportation/ delivery, use, end-of-life treatment and final disposal." The answer is process and life cycle.
Reference: – ISO 14001:2015 Environmental management systems ― Requirements with guidance for use LO 3, AC 3.1
Explanation:
ISO 14001:2015 specifies the requirements for an environmental management system that an organization can use to enhance its environmental performance. ISO 14001:2015 is intended for use by an organization seeking to manage its environmental responsibilities in a systematic manner that contributes to the environmental pillar of sustainability.
ISO 14001:2015 helps an organization achieve the intended outcomes of its environmental management system, which provide value for the environment, the organization itself and interested parties. Consistent with the organization’s environmental policy, the intended outcomes of an environmental management system include:
• enhancement of environmental performance;
• fulfilment of compliance obligations;
• achievement of environmental objectives.
ISO 14001:2015 is applicable to any organization, regardless of size, type and nature, and applies to the environmental aspects of its activities, products and services that the organization determines it can either control or influence considering a life cycle perspective. ISO 14001:2015 does not state specific environmental performance criteria.
ISO 14001:2015 can be used in whole or in part to systematically improve environmental management. Claims of conformity to ISO 14001:2015, however, are not acceptable unless all its requirements are incorporated into an organization’s environmental management system and fulfilled without exclusion.
In conclusion, ISO 14001:2015 focuses on: management system (including roles, leadership and processes) and the life cycle of product or service. Life cycle is defined as "consecutive and inter-linked stages of a product (or service) system, from raw material acquisition or generation from natural resources to final disposal. […] The life cycle stages include acquisition of raw materials, design, production, transportation/ delivery, use, end-of-life treatment and final disposal." The answer is process and life cycle.
Reference: – ISO 14001:2015 Environmental management systems ― Requirements with guidance for use LO 3, AC 3.1
Question #276
An automotive manufacturer is sourcing rubber components from Company A. The specification given to the supplier state that the component should be 1 meter long, without mentioning the tolerance. Enthusiast with the opportunity, engineers at Company A work hard to cut the components with tolerance at only +/- 1mm. The head and tail of the component is then joined together to form a circular band. After that it is stretched over another component. To fit this purpose, the rubber component can be at any length from 80cm to 110cm.
This is an example of…?
- A . Defects
- B . Waiting
- C . Unnecessary motion
- D . Over processing
Correct Answer: D
D
Explanation:
This questions is intended to ask students about types of waste in Lean principles.
Lean was born out of manufacturing practices but in recent time has transformed the world of knowledge work and management. It encourages the practice of continuous improvement and is based on the fundamental idea of respect for people. Womack and Jones defined the five principles of Lean manufacturing in their book “The Machine That Changed the World”.
The five principles are considered a recipe for improving workplace efficiency and include: 1) defining value, 2) mapping the value stream, 3) creating flow, 4) using a pull system, and 5) pursuing perfection.
Lean principles aim to eliminate waste in processes.
The eight wastes of Lean principles are:
– Defects
– Over-production
– Waiting
– Not using talent
– Transport and handling
– Inventory
– Motion waste
– Excess processing
In the scenario, the component is processed more than necessary. The engineers try to make them as accurate as possible with very little tolerance. In fact, the component does not need to be that precise. This excesses buyer’s requirements and incurs costs for both buyer and supplier. The scenario is an example of over processing (or excess processing).
Overprocessing is one of the seven wastes of lean manufacturing (or 7 mudas); Overprocessing is adding more value to a product than the customer actually requires such as painting areas that will never be seen or be exposed to corrosion.
Overprocessing as one of the seven wastes is caused by having unclear standards and specifications, many operators will try to do the best job possible and will not always be aware of what truly adds value to the product or even the end use. They will therefore often expend time polishing and finishing components that do not require it.
Reference: – CIPS study guide page 153-156
– Waste of Overprocessing; causes, costs, examples solutions, symptoms (leanmanufactur-ingtools.org)
LO 3, AC 3.4
D
Explanation:
This questions is intended to ask students about types of waste in Lean principles.
Lean was born out of manufacturing practices but in recent time has transformed the world of knowledge work and management. It encourages the practice of continuous improvement and is based on the fundamental idea of respect for people. Womack and Jones defined the five principles of Lean manufacturing in their book “The Machine That Changed the World”.
The five principles are considered a recipe for improving workplace efficiency and include: 1) defining value, 2) mapping the value stream, 3) creating flow, 4) using a pull system, and 5) pursuing perfection.
Lean principles aim to eliminate waste in processes.
The eight wastes of Lean principles are:
– Defects
– Over-production
– Waiting
– Not using talent
– Transport and handling
– Inventory
– Motion waste
– Excess processing
In the scenario, the component is processed more than necessary. The engineers try to make them as accurate as possible with very little tolerance. In fact, the component does not need to be that precise. This excesses buyer’s requirements and incurs costs for both buyer and supplier. The scenario is an example of over processing (or excess processing).
Overprocessing is one of the seven wastes of lean manufacturing (or 7 mudas); Overprocessing is adding more value to a product than the customer actually requires such as painting areas that will never be seen or be exposed to corrosion.
Overprocessing as one of the seven wastes is caused by having unclear standards and specifications, many operators will try to do the best job possible and will not always be aware of what truly adds value to the product or even the end use. They will therefore often expend time polishing and finishing components that do not require it.
Reference: – CIPS study guide page 153-156
– Waste of Overprocessing; causes, costs, examples solutions, symptoms (leanmanufactur-ingtools.org)
LO 3, AC 3.4
Question #277
The buyer’s spend is a high proportion of the supplier’s revenue
- A . 1 and 2 only
- B . 2 and 4 only
- C . 1 and 4 only
- D . 2 and 3 only
Correct Answer: C
C
Explanation:
1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.
Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power.
Reference: CIPS Level 4, Market Power Analysis.
C
Explanation:
1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.
Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power.
Reference: CIPS Level 4, Market Power Analysis.
Question #277
The buyer’s spend is a high proportion of the supplier’s revenue
- A . 1 and 2 only
- B . 2 and 4 only
- C . 1 and 4 only
- D . 2 and 3 only
Correct Answer: C
C
Explanation:
1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.
Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power.
Reference: CIPS Level 4, Market Power Analysis.
C
Explanation:
1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.
Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power.
Reference: CIPS Level 4, Market Power Analysis.
Question #277
The buyer’s spend is a high proportion of the supplier’s revenue
- A . 1 and 2 only
- B . 2 and 4 only
- C . 1 and 4 only
- D . 2 and 3 only
Correct Answer: C
C
Explanation:
1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.
Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power.
Reference: CIPS Level 4, Market Power Analysis.
C
Explanation:
1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.
Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power.
Reference: CIPS Level 4, Market Power Analysis.
Question #277
The buyer’s spend is a high proportion of the supplier’s revenue
- A . 1 and 2 only
- B . 2 and 4 only
- C . 1 and 4 only
- D . 2 and 3 only
Correct Answer: C
C
Explanation:
1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.
Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power.
Reference: CIPS Level 4, Market Power Analysis.
C
Explanation:
1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.
Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power.
Reference: CIPS Level 4, Market Power Analysis.