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CFA Level I · CFA Level I Exam · Business Models

A manufacturer adopts a sustainability-focused business model by redesigning products so used units are returned, refurbished and resold. Compared with its prior linear take-make-dispose model, this approach is most likely to:

A circular model of returning, refurbishing and reselling products most likely reduces exposure to raw material price volatility, because it relies less on newly extracted inputs. It lowers rather than raises virgin-material dependence, and it generally requires investment in collection and refurbishment capabilities.

  1. Araise dependence on newly extracted raw materials
  2. Breduce exposure to raw material price volatilityCorrect
  3. Celiminate the need for any capital investment

Explanation

A circular model reuses materials, so less virgin input is needed and cost exposure to commodity price swings falls. It would lower, not raise, reliance on new materials. Reverse logistics and refurbishing typically need investment, so that option is wrong.

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