CIPS L4M5 Real Exam Questions Test Engine Dumps Training With 165 Questions
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CIPS L4M5 certification exam is a valuable investment for anyone who wants to build a successful career in commercial negotiation. It provides a comprehensive and practical approach to negotiation, equipping professionals with the skills and knowledge they need to succeed in today's fast-paced business environment.
CIPS L4M5 (Commercial Negotiation) Exam is an essential qualification for procurement professionals looking to enhance their skills and progress their careers. Commercial Negotiation certification provides individuals with the knowledge and expertise needed to negotiate effectively with suppliers and stakeholders, while navigating complex legal and ethical considerations. With a globally recognized CIPS qualification, individuals can demonstrate their proficiency in commercial negotiation, and gain a competitive edge in the procurement job market.
NEW QUESTION # 14
Cost and price analysis is very important for buyers when they are preparing for a negotiation with supplier.
Which of the following is a benefit of knowing supplier's fixed costs?
- A. The buyer would be able to get a comprehensive picture of supplier's efficiency
- B. With the sole understanding of supplier's fixed cost, the buyer would be able to know the volume at which supplier maximises their profit in short-run
- C. The buyer would be able to know the right volume to reach break-even point
- D. The buyer would be able to know the point at which the supplier would reject the offer
Answer: C
Explanation:
Explanation
Knowing supplier's fixed and variable costs is beneficial for the buyer in a negotiation. With these insights, the buyer would know the volume atwhich the supplier reaches break-even points and then offers significant discount due to economies of scale.
NEW QUESTION # 15
Rose is a senior buyer from a skiing equipment retailer. Rose is concerned about the current ski boot shortage and the number of invoicing problems from a key supplier. Shehas decided to have a video conference with Victor, CEO of the supplier. Initially, she intends to threaten Victor with contract termination unless he can improve the situation. However, she is a little wary of doing this as the switching costs are high. Eventually, she decides to seek solutions by encouraging the other party to offer their views and ideas. Rose also prepares some ideas to discuss with Victor. Which of the following is the persuasion method that Rose intends to use in the forthcoming conference?
- A. Collaborative (pull)
- B. Visionary (pull)
- C. Persuasive reasoning (push)
- D. Directive (push)
Answer: A
Explanation:
There are two major persuasion methods: 'push' and 'pull'.
Persuasion can be defined as encouraging someone to dosomething that you want them to do for you.
Persuasion is reasoning with someone so that they will believe or do something they might not otherwise do.
Persuasion can be considered as 'pushing' on TOP so that they can accept the change in attitude or behaviour as a result of your actions.
Influence is the ability to affect the manner of thinking of another. Influence can be considered as pulling on TOP so that you achieve the same result, but TOP feels they have changed their attitude or behaviour as a result of their reflection and thinking, and not your direct actions.
There are multiple variables to consider when choosing between 'push' and 'pull'. Professor Fiona Dent of Ashridge Business School proposes situations when each style might be most appropriate, breaking down push into 'directive' and 'reasoning' and 'pull' into 'collaborative' and 'visionary':
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In the scenario, Rose intends to let both parties exchange their views and ideas so that solutions to current problems can be found. This is the typical characteristic of collaborative (pull) method.
NEW QUESTION # 16
Which of the following is the most appropriate pricing arrangement in contracts where major inputs are commodities?
- A. Cost reimbursable pricingarrangement
- B. Price adjustment mechanism
- C. Standard schedule of rates
- D. Fixed pricing arrangement
Answer: B
Explanation:
In contracts which have major commodity input, the price is determined by market forces with no individual supplier or buyer able to influence it significantly.Prices are much more variable even within long term contracts and seeking a fixed price would create financial risks for both the buyers and the suppliers. It is often intelligent to agree a contract price adjustment mechanism to allow for market price changes so both sides share risk.
NEW QUESTION # 17
Which of the following is considered a weakness of a 'dealer' style negotiator?
- A. Focuses on the facts and not the people
- B. Very precise
- C. May be too assertive
- D. May shift position quickly
Answer: D
Explanation:
Explanation
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor:
'warm', 'tough', 'logical' and 'dealer', which can beapplied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of dealer style are described below:
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LO 2, AC 2.4
NEW QUESTION # 18
Which of the following are factors that might shift the demand curve for a consumer good to the right?
1. Prices of complementary goods decrease
2. Price of the consumer good decreases
3. Customers' expectation of higher prices in the future
4. Consumer tastes shift toward substitute products
- A. 4 and 2 only
- B. 1 and 2 only
- C. 3 and 4 only
- D. 1 and 3 only
Answer: D
Explanation:
Explanation
A shift in demand occurs when an influencing factor other than price changes. Those factors are:
- The income ofbuyers
- The tastes and preferences of buyers
- The prices of other goods and services, especially substitutes and complements
- Expectations of buyer about the future
In this question:
- 'Prices of complementary goods decrease' will lead toquantity demanded for that complements rising, then demand for consumer good will increase accordingly.
- 'Price of the consumer good decreases' will increase the quantity demanded for that good, but it will not shift the demand curve
- 'Customers' expectation of higher prices in the future': in this scenario, customers tend to buy more to store in present, which leads to demand curve shifting to the right
- 'Consumer tastes shift toward substitute products': Demand for substitutes will rise, so demand forthat consumer good will decrease and the demand curve shifts to the left.
LO 2, AC 2.2
NEW QUESTION # 19
Which ofthe following is a true statement regarding macroeconomic factors and their potential impact on negotiations?
- A. Macroeconomic factors always directly influence the negotiations
- B. Macroeconomic factors cannot be influenced by anyone's expectation or sentiment
- C. Changes in macroeconomic factors may affect businesses and individuals differently
- D. Expectations on macroeconomic prospect are always correct
Answer: C
Explanation:
Explanation
'Macroeconomic factors always directly influence the negotiations': This statement is false. For any given negotiation it is not the macroeconomic factor itself that necessarily influences the negotiation but the change or rate of change that factor.
'Changes in macroeconomic factors may affect businesses and individualsdifferently': This statement is true.
Macroeconomic factors are factors that have general effects on the economy and many businesses may be completely unaffected or affected more or less than others in the same industry by a change in a factor.
'Macroeconomic factors cannot be influenced by anyone's expectation or sentiment': This statement is false.
When it comes to macroeconomic factors another key consideration is expectation regarding what might happen to these factors, or specifically the measures, metrics or percentage rates associated with these factors in the future.
'Expectations on macroeconomic prospect are always correct': This statement is false. Expectations are not always correct.
LO 2, AC 2.2
NEW QUESTION # 20
Which of the following is definition of elasticity of demand in microeconomics?
- A. Thepercentage change in price of a good divided by the percentage change in the quantity demanded of that good.
- B. The percentagechange in income divided by the percentage change in the quantity demanded
- C. The percentage change in the quantity demanded divided by the percentage change in income
- D. The percentage change in the quantity demanded of a good divided by the percentage change in the price of that good
Answer: D
Explanation:
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor:
The price of a product can be described as being elastic if a small change in price leads to a big change in demand.
The price of a product can be described as being inelastic if a big change in price leads to a small change in demand.
The formulae of elasticity of demand is known as the following:
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NEW QUESTION # 21
Procurement team is required to improve leverage with their suppliers through spend consolidation. To check whether there is any opportunity to consolidate spend, which of the following should be priority of procurement team?
- A. Price analysis
- B. Value engineering
- C. Spend analysis
- D. Total cost analysis
Answer: C
Explanation:
Explanation
In order to identify opportunities where you can increase your leverage with supplier, you need to understand your spend. Undertaking spend analysis of your accounts payable (AP) data is an essential first step here.
NEW QUESTION # 22
A senior buyer analyses the supply market and he realises that his organisation is treated asExploit according to supplier's perspective model. What does he need to do?
- A. Increase the spend value
- B. Adopt opaque processes
- C. Raise the transactional costs to do business
- D. Pay the suppliers on time
Answer: D
Explanation:
Explanation
The supplier's perspective model has two axes: Spend value and Attractiveness:
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Exploit is the quadrant where the buyer has high spend but low attractiveness. Overarching supplier objective would be: "Milk this customer and charge a high price to compensate for all the painthey put us through".
The buyer should increase its attractiveness to raise the position to Core customer. To do this, a buyer may:
- Simplify procurement processes
- Simplify contracting processes
- Use clear and concise documentation
- Eliminateonerous supplier terms and conditions
- Make the payment on time
- Use transparent processes
- Promote ethical behaviours
LO 1, AC 1.4
NEW QUESTION # 23
An automotive company purchases high quality steel to produce components. The steel is an important raw material and the contract value is enormous. They sources the steel from oversea and contact some potential suppliers. One of the potential suppliers invites the procurement team to their premise for a new business opportunity. Should the procurement team accept the invitation?
- A. No, because negotiating over telephone is enough to collect information on supplier's capability
- B. Yes, because the visit would increase the buyer's bargaining power
- C. Yes, because this is an opportunity to assess the supplier's capacity
- D. No, because the travel would incur unnecessary costs
Answer: C
Explanation:
Explanation
In the scenario, the value of contract as well as the importance of purchased item justify the procurement's travel. Visiting a supplier at their HQ or operational facility may facilitate the procurement team in assessing, albeit briefly, the culture of the organisation, how busy they seem and how staff engage with each other. A visit is a good opportunity to assess supplier's capacity.
LO 2, AC 2.2
NEW QUESTION # 24
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
- A. Yielding to another's point of view
- B. Trying to win at any cost
- C. Seeking a quick middle-ground position
- D. Exploring a disagreement to learn from each other's insights
- E. Resolving some conditions that would otherwise have them competing for resources
- F. Trying to find a creative solution to current problem
Answer: D,E,F
Explanation:
Collaborating is both assertive and cooperative. When collaborating, an individual attempts to work with the other person to find a solution that fully satisfies the concerns of both. It involves digging into an issue to identify theunderlying concerns of the two individuals and to find an alternative that meets both sets of concerns. Collaborating between two persons might take the form of exploring a disagreement to learn from each other's insights, resolving some condition that would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
NEW QUESTION # 25
'What specific tests do you carry out to ensure quality is achieved?' This is an example of which type of negotiation question?
- A. Probing
- B. Closed
- C. Leading
- D. Reflective
Answer: A
Explanation:
Explanation
The question requires more detailed answer, it is an example of probing question.
Probing questions are typically follow-up questions, and aim to elicit more detailed information on the back of the answer elicited from theopen questions. Probing question are also useful to check that the supplier fully understand their offering, as well as your needs, can also be used to communicate to the suppliers that you know this category well.
LO 3, AC 3.3
NEW QUESTION # 26
To buying organisation, savings can be achieved from different saving levers or tactics. Which of the following are means that deliver savings through optimising specifications?
- A. Value engineering
- B. Compare total cost of ownership
- C. Volume pooling
- D. Budgetlinkages
- E. Part substitution
Answer: A,E
Explanation:
If driving greater value and efficiency from your supply base is your end, you should remember that there are many ways to do this without seeking to negotiate lowerprices. Below are 7 types of saving levers:
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NEW QUESTION # 27
Which of the following is the best description of direct cost?
- A. Direct costs include only raw materials and labour of making the final product
- B. Direct costs include raw materials, labour and other expenses attributable to the final product
- C. Direct costs include raw materials, labour andoverheads
- D. Direct costs are only variable raw materials that constitute a product
Answer: B
Explanation:
Direct costs are those costs of a product/service directly attributable/traceable to its production, for example, the costs of labour and materials directly used to produce the goods/services which the organisation sells.
NEW QUESTION # 28
Which of the following is mostlikely to be a reason why a supplier charges its customer higher price after it has reached the break-even point?
- A. Supplier may want to encourage buyer's demand
- B. The supplier may have reached economy of scale
- C. Supplier may have high fixed cost - variable cost ratio
- D. Supplier may need to open new facilities to meet increasing customer's demand
Answer: D
Explanation:
Explanation
'Supplier may want to encourage buyer's demand': the buyer tends to prefer lower price, if supplier wants to encourage its customers tobuy more, it needs to offer discount at bulk amount. So this option is not acceptable.
'Supplier may have high fixed cost - variable cost ratio': Supplier with high fixed cost needs high volumes to break even, but once achieved, it may be able to offer significant discounts for bulk orders
'The supplier may have reached economy of scale': when economy of scale is reached, cost per unit will be minimal which often leads to more favourable price.
'Supplier may need to open new facilities to meet increasing customer's demand': Increasing customer's demands may excess supplier's current capacity. Therefore, supplier may need to extend its capacity by investing more in facilities. To cover these fixed cost investment, supplier may charge higher price.
LO 2, AC 2.1
NEW QUESTION # 29
Which of the following are most likely to harm trust between buyer and supplier in a commercial relationship?
Select TWO that apply.
- A. Exploring a disagreement to learn from each other's insights
- B. Subjective assessment of performance
- C. Reduced response time during contract performance
- D. Avoidance of submitting important documentations
- E. Resolving some conditions that would otherwise have them competing for resources
Answer: B,D
Explanation:
Explanation
Trust-destroying behaviours:
- Rumours of partnership or relationship breaking down
- Emotion-based assessment of performance
- Avoiding accountability, passing the blame to others
- General mood - resentment, distrust,frustration, etc
LO 1, AC 1.4
NEW QUESTION # 30
Which type of power is considered the opposite of coercive power?
- A. Referent power
- B. Informational power
- C. Expert power
- D. Reward power
Answer: D
Explanation:
Explanation
The coercive power comes from the belief that a person can punishothers for non-compliance. It can be considered as opposite to reward power, which results from one person's ability to compensate or reward another for compliance.
LO 1, AC 1.3
NEW QUESTION # 31
Which of the following should be done by the procurement team at the closing stage of a negotiation? Select TWO that apply.
- A. Seek agreement in principle if TOP does not have the final authority
- B. Leave the meeting as soon as possible
- C. Accept ambiguity or uncertainty
- D. Tell TOP that they could have got a better deal
- E. Gloat publicly about the deal
Answer: A,B
Explanation:
Explanation
The agreement and closingphase is the phase when it is either clear through explicit language, or strongly suggested through non-verbal signals, that TOP is ready to move to agreement. Judging when to close can be difficult and as with phases of the negotiation, experience, observation, practice and reflection will be the best ways to learn here.
In the closing phase, procurement should:
- Watch for closing/buying signals
- Check to ensure all issues have been resolved
- Consider using visual aids to summarise
- Use 'summary close'
- Make a decision to conclude/close
- Seek agreement in principle if TOP does not have the final authority
- Make your own private notes on the final agreement
- Shake hands on the agreement
- Leave the meeting as soon as possible thereafter.
LO 3, AC 3.1
NEW QUESTION # 32
Which of the following are examples of connected stakeholders in a private organisation? Select TWO that apply.
- A. Customers
- B. Media
- C. Shareholders
- D. Government
- E. Local community
Answer: A,C
Explanation:
Connected stakeholders are those who, by contractual or commercial relationships, have a significant stake in organisation activity. As a general rule, connectedstakeholder (with the exception of suppliers) have a low level of influence on procurement negotiations.
Examples of connected stakeholders are: suppliers, customers, bank where the organisation opens its account, shareholders.
NEW QUESTION # 33
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
- A. Competence trust
- B. Contractual trust
- C. Goodwill trust
- D. Irrevocable Trust
Answer: A
Explanation:
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of
3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwilltrust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically.
This is potentially the strongest type of trust, but it takes the longest time to build.
NEW QUESTION # 34
After studying Thomas-Kilmann conflict resolution model and considering different approaches carefully, the procurement team of XYZ Ltd. decides to adopt an avoiding approach to the upcoming negotiation with one of their suppliers.Which of the following will be the objective of XYZ procurement team in this negotiation?
- A. Seeking a quick middle-ground position
- B. Confronting and trying to find a creative solution immediately
- C. Postponing the issue
- D. Yielding the supplier's point of view
Answer: C
Explanation:
Explanation
Avoiding is unassertive and uncooperative. When avoiding, an individual does not immediately pursue his or her own concerns or those of the other person. He or she does not address the conflict. Avoiding might take the form of diplomatically sidestepping an issue, postponing an issue until a better time, or simply withdrawing from a threatening situation.
LO 1, AC 1.1
NEW QUESTION # 35
A public agency opens a tendering process for a road building project that lasts approximately 1 year. They post theirrequirements on public journal and receive some interests. After conducting due diligence process and selecting the lowest bidder, the project commences. However, the supplier complains that price of material increases because of a shortage of supply, thenthey demands an 5% uptick in contract value. The agency investigates the increment and sees that there is indeed a fluctuation in prices of supplier's input. They are likely to accept the proposal, but they are also concerned that supplier may demand more. To avoid making another concession with the supplier, which of the following should be a priority action of the agency?
- A. Postpone the decision making until the budget is ready
- B. Document a contract variationthat only allows another concession if some specific conditions arise
- C. Disapprove supplier's demands until they finish the project
- D. Seek approval from higher authority
Answer: B
Explanation:
Explanation
The agency (buyer) has made a concession about the price. Possibly the supplier will request another concession (the salami tactics). To avoid this to be happened, the agency should only allow a concession as an exception, make sure that the concession is documented and only permitted against some exceptional circumstances, and seek agreement to this from the supplier.
LO 3, AC 3.2
NEW QUESTION # 36
Representatives from South African Department of Health is negotiating the price of hospital drugs with US pharmaceutical companies. Which of the following are most likely to be macro factors that influence the outcomes of the negotiation? Select TWO that apply.
- A. Digitalisation of medicine
- B. Order quantity
- C. Regulations on health and safety
Switching costs of buyer - D. Forward integration
Answer: A,C
Explanation:
Explanation
All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forceswhich both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
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Particularly, pharmaceutical industry is a heavily regulated sector, therefore, legal and regulatory matters in theindustry is highly important. Otherwise, technological trends also permeate into pharmaceutical companies, technologies like digitalisation may transform the balance of power in such negotiation.
LO 1, AC 1.3
NEW QUESTION # 37
During a negotiation, the supplier requests for payment term shortened to 45days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
- A. Yes, the procurement manager should keep that 5% for himself because that amount is a fair compensation for his effort
- B. No, procurement should insist the payment term remains 60 days
- C. Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status
- D. No, it is unethical to exploit the weakness of the other party
Answer: C
Explanation:
Explanation
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be "Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status" Table Description automatically generated
LO 2, AC 2.3
NEW QUESTION # 38
When is the best time in procurement process in which procurement should get involved so that the cost-saving opportunities are the greatest?
- A. Post-tender stage
- B. Market consult stage
- C. Post-contract stage
- D. Specification stage
Answer: D
Explanation:
Explanation
The earlier procurement get involved in the procurement processes, the better. If procurement are involved in design at the specification stage they can feed in prices and costs to designer so they know the likely budget implication of choices made. Sending in a procurement team to negotiate at or close to the end ofthe procurement process effectively ties their hands and limits their negotiation leverage. This is illustrated in the graph below:
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LO 2, AC 2.1
NEW QUESTION # 39
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