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CIPS L5M6 Exam
Category Management (Page 4 )

Updated On: 1-Feb-2026
Page 4 of 20
PDF with 92 Questions

High exit barriers in a marketplace mean that rivalry between suppliers is low. Is this statement TRUE?

  1. Yes ­ rivalry is low as buyer power is strong
  2. Yes ­ rivalry is low as supplier power is strong
  3. No ­ rivalry between existing suppliers is high
  4. No ­ high exit barriers mean no new suppliers will enter the marketplace

Answer(s): C

Explanation:

The correct response is No ­ rivalry between existing suppliers is high. Exit barriers refer to the difficulty suppliers face when attempting to leave a market or industry. These barriers may include high investment in specialised assets, contractual obligations, redundancy costs, or reputational damage.
When suppliers are unable or unwilling to exit, they remain within the industry regardless of declining profitability. This forces them to compete aggressively to retain market share, which increases rivalry among existing firms.

Options A and B are incorrect because the question relates to rivalry, not directly to buyer or supplier power. Option D is also incorrect because exit barriers do not influence new suppliers entering; they affect current suppliers trying to leave.

A practical example is the oil and energy industry, where huge capital investments make it very costly to exit. Companies stay even during downturns, resulting in fierce rivalry.

[Ref: CIPS L5M6 Study Guide, p.114 ­ Porter's Five Forces: Exit Barriers and Rivalry]



Joe is a Category Manager at an automobile company.
Which of the following would be the best way to decide on categories in this industry?

  1. Alphabetically
  2. By spend
  3. By supplier
  4. By part

Answer(s): D

Explanation:

In the automobile industry, the most logical method for structuring categories is by part. Large manufacturing organisations, such as Ford or Toyota, procure thousands of parts and materials from hundreds of suppliers. To manage this complexity effectively, they segment procurement responsibilities into categories such as engines, tyres, glass, electronics, or body frames. This allows Category Managers to develop deep expertise in their assigned areas, improving supplier relationships and value delivery.

Other approaches are less effective:

Alphabetical categorisation is impractical and arbitrary, providing no strategic value.

By spend creates imbalances, as high-value categories would attract disproportionate workload and risk, leaving others underrepresented.

By supplier could lead to inefficiency and over-fragmentation, as suppliers often provide multiple types of products.

The study guide stresses that categorisation must allow procurement teams to be efficient, balanced, and capable of strategic focus. By organising categories by part, managers can align more closely with engineering and production needs, ensuring better cross-functional collaboration.

[Ref: CIPS L5M6 Study Guide, p.3 ­ Defining categories in Category Management]



On the BCG Matrix, what is a cash cow?

  1. High market share, high market growth
  2. High market share, low market growth
  3. Low market share, low market growth
  4. Low market share, high market growth

Answer(s): B

Explanation:

Within the Boston Consulting Group [BCG] Matrix, a Cash Cow represents a product or business unit that holds a high market share in a low-growth market. These products typically generate strong and stable cash flows because they dominate their markets with little new competition. Although growth opportunities are limited, these units require minimal investment and often fund other parts of the business.

For example, a well-established soft drinks brand in a mature market is a classic cash cow.
While sales are stable and market share is high, growth potential is low due to saturation. This differs from:

Stars [high share, high growth] which require significant investment.

Question Marks [low share, high growth] which may or may not succeed.

Dogs [low share, low growth] which are often candidates for divestment.

In category management, identifying cash cows helps procurement teams prioritise efficiency and cost management, ensuring these categories remain profitable without heavy strategic input.

[Ref: CIPS L5M6 Study Guide, p.117 ­ BCG Matrix and procurement strategy]



Callie is a Category Manager at a car parts manufacturer. She discovers through a SWOT analysis that many other customers are increasing short-term demand for raw materials.
Which category does this fall under?

  1. Strengths
  2. Weaknesses
  3. Opportunities
  4. Threats

Answer(s): D

Explanation:

This situation represents a Threat within SWOT analysis. SWOT distinguishes between internal and external factors. Strengths and weaknesses are internal to the organisation, while opportunities and threats are external.

Here, the short-term spike in demand is external to Callie's business. It is also potentially harmful because increased competition for raw materials [rubber, metal, etc.] can lead to higher prices, longer lead times, and supply shortages. Therefore, this is categorised as a threat.

It cannot be an opportunity, as the increase in demand benefits suppliers rather than Callie's firm. Nor is it a strength or weakness, as those describe factors within the company such as production capabilities or financial resources.

Using SWOT in category management allows managers to anticipate and mitigate external risks while leveraging internal strengths. Recognising this threat means Callie may develop strategies such as dual sourcing, supplier collaboration, or forward buying to reduce exposure.

[Ref: CIPS L5M6 Study Guide, p.122 ­ SWOT analysis in category management]



Why would a company use a Technology Roadmap?

  1. To decide between two different software providers
  2. To assist in marking a tender for IT equipment
  3. To help decide which technology to invest in the future
  4. To mitigate risks of cyber-attacks

Answer(s): C

Explanation:

A Technology Roadmap is a planning tool used to align technological investments with business strategy. It enables organisations to evaluate current capabilities, identify emerging challenges, and plan for future technology adoption. The purpose is not just to decide between existing options but to forecast which innovations will be most valuable over time.

For instance, a company may use a roadmap to determine whether to invest in automation, artificial intelligence, or renewable energy solutions, based on expected business growth and industry trends. This ensures resources are allocated to technologies that offer long-term competitiveness.

Other options are less accurate:

Option A oversimplifies; technology roadmaps are not for one-off decisions.

Option B is incorrect as tenders require specifications, not long-term roadmaps.

Option D relates to risk management, not strategic technology planning.

Therefore, the roadmap helps businesses stay adaptive and forward-thinking, ensuring that investments made today remain relevant tomorrow.

[Ref: CIPS L5M6 Study Guide, pp.126­127 ­ Technology Roadmaps in category management]



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