CIPS Exam L4M2 Topic 5 Question 56 Discussion

Actual exam question for CIPS's L4M2 exam

Question #: 56
Topic #: 5

[All L4M2 Questions]

Which of the following will help the bargaining strength of a buyer?

The buyer has the option to make the product in-house

There are a limited number of suppliers available to the buyer

The buyer's switching costs are high

The buyer's spend is a high proportion of the supplier's revenue

A1 and 2 only

B2 and 4 only

C1 and 4 only

D2 and 3 only

Show Suggested Answer

Suggested Answer: C

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.

by Aracelis at Mar 23, 2025, 07:26 PM

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Cherrie

4 days ago

That's a good point, I see your rationale. Maybe C) 1 and 4 only is the correct answer after all.

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Belen

4 days ago

I'm going with B) 2 and 4 only. It's a no-brainer - the fewer the suppliers, the more the buyer holds the cards. And the supplier's revenue depends on the buyer, so that's a big bargaining chip.

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Solange

5 days ago

But if the buyer has the option to make the product in-house and their spend is a high proportion of the supplier's revenue, wouldn't that increase their bargaining strength?

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Cherrie

6 days ago

I disagree, I believe the answer is C) 1 and 4 only.

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Stanton

6 days ago

D) 2 and 3 only. High switching costs for the buyer are a clear disadvantage, so that can't be the right answer. The limited suppliers and the buyer's spend are the key factors here.

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Solange

10 days ago

I think the answer is A) 1 and 2 only.

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Junita

11 days ago

C) 1 and 4 only. If the buyer can make the product in-house, that's a huge advantage. And a high proportion of the supplier's revenue is definitely a win for the buyer.

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Dewitt

14 days ago

I think the answer is B) 2 and 4 only. The more limited the suppliers and the higher the buyer's spend, the stronger the buyer's bargaining position.

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