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CIPS L4M2 Exam
Defining Business Needs (Page 4 )

Updated On: 30-Jan-2026
Page 4 of 30
PDF with 238 Questions

What will be the result of retaliation between business rivals in an industry?

  1. Higher exit barrier
  2. More new entrants
  3. Lower profit
  4. Greater bargaining power of suppliers

Answer(s): C

Explanation:

Industry rivalry--or rivalry among existing firms--is one of Porter's five forces used to deter-mine the intensity of competition in an industry. Other factors in this competitive analysis are:
- Barriers to entry
- Bargaining power of buyers
- Bargaining power of suppliers
- Threat of substitutes
Industry rivalry usually takes the form of jockeying for position using various tactics (for example, price competition, advertising battles, product introductions). This rivalry tends to increase in intensity when companies either feel competitive pressure or see an opportunity to improve their position.
In most industries, one company's competitive moves will have a noticeable impact on the competition, who will then retaliate to counter those efforts. Companies are mutually dependent, so the pattern of action and reaction may harm all companies and the industry. Some types of competition (for example, price competition) are very unstable and negatively influence industry profitability. Other tactics (for example, advertising battles) may positively influence the industry, as they increase demand or enhance product differentiation.
References
Porter, M. (1998). Competitive Strategy. New York: Free Press. pp. 17-23.
CIPS study guide page 86-87
LO 2, AC 2.2



Which of the following are likely to be disadvantages of using outcome-based specifications? Select THREE that apply

  1. Time consuming to produce
  2. Stifling innovation
  3. Difficulty to measure performance
  4. Long time delay between action and result
  5. Responsibility for product failure falling to buyer
  6. Ambiguity of outcome

Answer(s): C,D,F

Explanation:

An Outcome Based Specification (OBS) focuses on the desired outcome of a service in business terms, rather than a detailed technical specification of how the service is to be provided; this allows providers scope to propose innovative solutions that might not have occurred to the procurement team. Outcome should be distinguished from output, which is the measurable results of a set of inputs. The example of difference between outcome and output is written at the bottom of page 123 in the study guide.
Outcomes should be the starting point in making new specification. However, using outcome-based specification has some setbacks:
- First, it is not easy to measure the outcomes. Usually, outcome of a project is a statement like 'increase customer satisfaction', 'maintain ambient temperature' or 'provide a convenient way to do something'. They are not easy to measure as output.
- Second, sometimes the desired outcomes require time to be materialised
- Third, outcomes can be ambiguous


Reference:

CIPS study guide page 122-123
LO3, AC 3.1



Which of the following are typical benefits of through-life asset management to buying organisa- tion? Select the TWO that apply.

  1. Shorter specifications
  2. Lower risks as there are many suppliers accountable for costs and service over the life of the asset
  3. Lower total cost of ownership
  4. Greater supplier's bargaining power
  5. Better capability of supplier over time

Answer(s): C,E

Explanation:

According to Andrew Graves, "Through-life Management involves the life-cycle management of the products, services and activities required to deliver a fully integrated capability to the customer, while reducing the cost of ownership for the customer." Benefits of through-life asset management can be:
- Lower total life-cycle costs
- Better match between the asset and end-user's needs
- Better supplier capabilities over time because it gains experience of buying organisation's needs.


Reference:

CIPS study guide page 131

LO 3, AC 3.2



Which of the following are main focuses of ISO 27001:2013 standard?
1. Confidentiality
2. Logistics
3. Process
4. Life cycle

  1. 1 and 3 only
  2. 3 and 4 only
  3. 2 and 3 only
  4. 2 and 4 only

Answer(s): A

Explanation:

This International Standard (ISO 27001:2013) has been prepared to provide requirements for establishing, implementing, maintaining and continually improving an information security management system. The adoption of an information security management system is a strategic decision for an organization. The establishment and implementation of an organization's information security management system is influenced by the organization's needs and objectives, security requirements, the organizational processes used and the size and structure of the organization. All of these influencing factors are expected to change over time. The information security management system preserves the confidentiality, integrity and availability of information by applying a risk management process and gives confidence to interested parties that risks are adequately managed.
It is important that the information security management system is part of and integrated with the organization's processes and overall management structure and that information security is considered in the design of processes, information systems, and controls. It is expected that an information security management system implementation will be scaled in accordance with the needs of the organization.
This International Standard can be used by internal and external parties to assess the organization's ability to meet the organization's own information security requirements. The order in which requirements are presented in this International Standard does not reflect their importance or imply the order in which they are to be implemented. The list items are enumerated for reference purpose only.
ISO/IEC 27000 describes the overview and the vocabulary of information security management systems, referencing the information security management system family of standards (includ-ing ISO/IEC 27003[2], ISO/IEC 27004[3] and ISO/IEC 27005[4]), with related terms and defini-tions.


Reference:

- ISO/IEC 27001:2013 Information technology -- Security techniques -- Information security management systems -- Requirements
LO 3, AC 3.1



Which of the following always impact negatively on a company's cash flow? Select 2 that ap-ply

  1. Increasing revenue
  2. More inventory
  3. Depreciation of fixed asset
  4. Supplier shortens their payment period
  5. Customers agree to pay immediately

Answer(s): B,D

Explanation:

To answer this question, candidates are required to remember the cash flow cycle and cost entries as well as the impact of their timing on a business.



Source: https://cfoperspective.com/free-your-cash-trapped-in-the-cash-conversion-cycle/ Shorter payment term and more inventory are likely to have negative impact on the cash flow be- cause the buyer has to pay sooner and greater.
"Customers agree to pay immediately" will increase the organisation's bank account sooner. Depreciation has no impact on cash flow as it is only listed in Profit and Loss statement. Increasing revenue may have negative or positive impact on cash flow, depending on the real situation.


Reference:

CIPS study guide page 54
LO 1, AC 1.4



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