Pass the CIPS Level 4 Diploma in Procurement and Supply L4M2 Questions and answers with Dumpstech

Explanation

Barriers to entry is an economics and business term describing factors that can prevent or impede newcomers into a market or industry sector, and so limit competition. The most obvious barriers to entry are high start-up costs and regulatory hurdles which include the need for new companies to obtain licenses or regulatory clearance before operation. Also, industries heavily regulated by the government are usually the most difficult to penetrate. Other forms of barrier to entry that prevent new competitors from easily entering a business sector include special tax benefits to existing firms, patent protections, strong brand identity, customer loyalty, and high customer switching costs.

In the scenario, the new factory for chipset manufacturing costs billions of dollars, which indicates high set-up costs. Also, the incumbent manufacturers have reached economies of scale, allowing them to produce the components at optimal price.

The above descriptions are compiled from recent reports on current chip shortage (2021).

Explanation

As you can see from the scenario, ABC Group is developing the new product. It might be using value engineering. The latter sentences confirm this: the cross-functional team in ABC is mapping the functions and surveying the customers. Their method is known as Kano model.

Explanation

Products used in agriculture can be subject to shortage due to natural disasters.

Explanation

The bargaining power of supplier is a major determinant of the structure of an industry and also how much profit is available to organisation operating in that industry. Supplier is weak if:

- Substitutes are available and easy to access

- Suppliers are small and fragmented

- The industry is important to the seller

- The sellers' product or service is not an important of the industry's value chain

- The sellers' product or service is undifferentiated

- There are no significant switching costs

- There is no threat of forward integration.

Suppliers may have more power:

- If they are in concentrated numbers compared to buyers.

- If there are high switching costs associated with a move to another supplier.

- If they are able to integrate forward or begin producing the product themselves.

- If they have specific expertise or technology needed to manufacture goods.

- If their product is highly differentiated.

- If there are many buyers and none make up significant portions of sales.

- If there are no substitutes available.

- If there are strong end users who can exert power over the organization in favor of a supplier (This can be the case in labor situations).

In all of these cases, the bargaining power of suppliers is high to demand premium prices and set their own timelines.

LO 2, AC 2.2