L4M2 Practice Questions

Explanation

Primary activities consist of inbound logistics, operations, outbound logistics, sales & marketing, service.

Second activities consist of firm infrastructure, human resource management, technology development and procurement

The following graph illustrate the value chain (Source: Smartsheet)

Graphical user interface, diagram Description automatically generated

Picking and delivery components is inbound logistics.

Maintenance is an example of operations activity.

Sourcing transportation services is an activity of procurement

Assembly design is an activity in research and development (Technology)

Recruiting is an activity of human resource management

Explanation

Price Analysis is the process of deciding if the asking price for a product or service is fair and rea-sonable, without examining the specific cost and profit calculations the vendor used in arriving at the price. It is basically a process of comparing the price with known indicators of reasonableness. When adequate price competition does not exist, some other form of analysis is required. Some reasons that could affect adequate price competition are: specifications are not definitive, tolerances are restrictive, or production capacity limits those eligible to bid.

Examples of other forms of price analysis information include:

• Analysis of previous prices paid

• Comparison of vendor’s price with the in-house estimate

• Comparison of quotations or published price lists from multiple vendors

• Comparisons with government agencies (such as GSA in the US) published prices

A strike price is the set price at which a derivative contract can be bought or sold when it is exercised. For call options, the strike price is where the security can be bought by the option holder; for put options, the strike price is the price at which the security can be sold. Strike price is also known as the exercise price.

A cost driver is the direct cause of a cost and its effect is on the total cost incurred. For example, if you are to determine the amount of electricity consumed in a particular period, the number of units consumed determines the total bill for electricity. In such a scenario, the number of units of electricity consumed is a cost driver.

Explanation

Internet is a great source of information, however, information from the Internet needs to be tested for accuracy and reliability. To check the information from the Internet, a buyer can use the criteria with acronym SAMOA:

Source (of the information)

Audience (intended as the recipient of the information)

Methodology (used to collect and analyse the data)

Objectivity (of the information - there should be no bias)

Accuracy

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 – supplier power

Market structure and urgency as power drivers