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CIPS L4M5 Certification Exam focuses specifically on enhancing the commercial negotiation skills of procurement professionals. L4M5 exam is designed to test candidates' negotiation skills through a series of scenarios and case studies. Commercial Negotiation certification equips procurement professionals with the necessary knowledge and skills to negotiate effectively with their suppliers, stakeholders, and customers.
To prepare for the CIPS L4M5 Certification Exam, candidates are encouraged to take CIPS training courses, which cover all the topics included in the exam. Candidates can also use CIPS study materials, such as textbooks, online resources, and practice exams, to help them prepare. Passing the exam demonstrates a candidate's knowledge and skills in commercial negotiation and can lead to career advancement opportunities in procurement and supply chain management.
NEW QUESTION # 114
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
- A. Price is based on cost structures
- B. Typically found in the early part of the product life cycle
- C. Premium price is determined by variable costs only
- D. Products are charged at a price based on supplier's reputation
- E. This strategy is often used when supplier attempts to enter new market
Answer: B,D
Explanation:
There are several pricing strategies used by suppliers:
Cost-plus pricing - Total variable + Fixed cost + profit
Premium pricing - based on branding. Supplier determines to charge a very high price, notconnected with cost structures, usually based on its reputation and/or the perception that the product/service is of a superior quality. This strategy typically found in the early part of the product life cycle/when demand exceeds supply.
Penetration pricing - Supplier attempts to enter a new market or extend its share in an established one. It is characterised by price reductions to increase volume, followed by steady price increases; may even be loss leading at start (no profit made) Marginal cost pricing - covers only variable cost Market pricing - suppliers prices in line with what the market is willing to pay
NEW QUESTION # 115
At the first stage of CIPSProcurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
- A. Demand management
- B. Deciding whether RFQ or ITT should be used
- C. Undertaking 'reverse marketing'
- D. Evaluating the interests from suppliers
Answer: A
Explanation:
At the first stage of CIPS Procurement and Supply Cycle (Understand need and develop a high-level specification), procurement professional mainly negotiate with internal stakeholders. They have a duty toproportionately and constructively challenge specification if there's genuine doubt over the need or how the need is expressed. This is called demand management. Their first duty is to the organisation's treasury, not to functional managers.
Demandmanagement including: negotiation/challenge between procurement and internal stakeholders over the need/requirement/specification. Remember that in any process or product, the greatest opportunity for cost reduction is at the design stage.
NEW QUESTION # 116
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 know the right volume to reach break-even point
- 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 get a comprehensive picture of supplier's efficiency
- D. The buyer would be able to know the point at which the supplier would reject the offer
Answer: A
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 at which the supplier reaches break-even points and then offers significant discount due to economies of scale.
NEW QUESTION # 117
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
- A. XYZ has an advantage in negotiating discounts if their currency appreciates
- B. Supplier will receive less if XYZ's currency appreciates
- C. XYZ is able to pay less if their currency depreciates
- D. XYZ has to pay more if their currency depreciates
Answer: A
Explanation:
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
Table Description automatically generated
LO 2, AC 2.2
NEW QUESTION # 118
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
- A. Catering services
- B. Flight crew training
- C. Advertising and promotion
- D. Purchase of aircraft
- E. Fuel
Answer: B,D
Explanation:
Fixed costs (FC) are costs that do not vary with volume. To an airline once aircraft are purchased, flight crews trained and departures scheduled, costs are disproportionately fixed.
Variable costs (VC) are those which vary with the amount produced. Fuel, catering services and marketing are examples of variable.
LO 2, AC 2.1
NEW QUESTION # 119
Which of the following is a source of information on microeconomic factors?
- A. The marketing and corporate communications of suppliers
- B. Published economic indices such as the Retail Price Index (RPI)
- C. Analysis published in the mainstream and financial media
- D. Data published by the financial markets and commodity markets and exchanges
Answer: D
Explanation:
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Reference: L4M5 Commercial Negotiation 2nd edition (CORE), Section 2.2 - Information Sources for Market and Economic Analysis
NEW QUESTION # 120
Which of the following types of questions are likely to be the most effective to check facts in negotiations?
- A. Hypothetical
- B. Closed
- C. Leading
- D. Open
Answer: B
Explanation:
Closed questions are useful for verifying facts, as they prompt specific, concise responses. These questions allow the negotiator to confirm details without ambiguity, which is crucial for clarity in negotiation settings, as highlighted in CIPS's guidelines on questioning techniques.
NEW QUESTION # 121
Maria is a professional services category buyer within the National Health Service. Due to severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
- A. Win-Win
- B. Win-Lose
- C. Lose-Lose
- D. Win-Perceived Win
Answer: A
Explanation:
Reference: CIPS L4M5 Study Guide, Section 1.2 - Approaches to Negotiation
NEW QUESTION # 122
Which of the following is potentially a major source of conflict?
- A. Information gathering
- B. Teamwork
- C. Shared goals and values
- D. Power imbalance
Answer: D
Explanation:
Reference: CIPS L4M5 Study Guide, Section 1.3 - Sources of Conflict in Negotiation
NEW QUESTION # 123
All of the following shift the supply of watchesto the right except...?
- A. An advance in the technology used to manufacture watches
- B. Manufacturers' expectation of higher watch prices in thefuture
- C. A decrease in the wage of workers employed to manufacture watches
- D. An increase in the price of watches
Answer: D
Explanation:
Explanation
A supply curve will slope upward from left to right showing more supply at higher prices, as illustrated in the graph below:
A picture containing chart Description automatically generated
A movement along the supply curve will be brought about by a change in price, but a shift of the whole curve will be caused by a determinant other than price:
- The physical feasibility and time and energy required to produce the products
- Technology and innovation
- The objectives of the producers and their future expectations
- Prices of other goodsand services
- Government's policies
LO 2, AC 2.2
NEW QUESTION # 124
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
- A. Exploring a disagreement to learn from each other's insights
- B. Trying to win at any cost
- C. Seeking a quick middle-ground position
- D. Trying to find a creative solution to current problem
- E. Yielding to another's point of view
- F. Resolving some conditions that would otherwise have them competing for resources
Answer: A,D,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 the underlying 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 # 125
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
- A. Yes, a long-term relationship is not required with the supplier
- B. No, a long-term relationship built on trust is required with the supplier
- C. Yes, Tony will get what he requires from the negotiations
- D. No, it does not guarantee Tony will get what he requires from the negotiations
Answer: B
Explanation:
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
NEW QUESTION # 126
Which of the following are most likely to be direct costs of a steel manufacturer? Select THREE that apply.
- A. Cleaning services
- B. Coal
- C. Senior management salary
- D. Insurance for production lines
- E. Hourly production wages
- F. Scrap metal
Answer: B,E,F
Explanation:
:
Direct costs are those costs of a product/service directly attributable/traceable to its production. Examples of direct costs including the following:
Materials and services bought-in: In steel manufacturer, raw materials are iron ores, scrap metal, coals, etc Labour or wages: money paid to staff for the work involved in producing the product.
Other expenses: other charges incurred that can be specifically attributed to a particular product, batch or service
NEW QUESTION # 127
Jasmine and the IHL sales team have a negotiation scheduled with one of AB's lead buyers, Samuel, at AB's premises. This is one of the biggest negotiations that Jasmine has been involved in and is eager not to make any mistakes. Jasmine has heard from a colleague that Samuel tends to adopt an integrative negotiation style.
IHL senior management decides to send a team of three members to the negotiation. Jasmine is among the team and she is assigned to check body language, reactions, feeds insight to her leader and to record important comments and information from the meeting for minutes. Which of the following are roles of Jasmine in the forthcoming negotiation? Select TWO that apply.
- A. Secretary(Correct)
- B. Commercial expert
- C. Chief negotiator
- D. Technical expert
- E. Observer
Answer: A,E
Explanation:
A negotiating team can be as few as two people, and one person can play one or more of these roles:
As from the scenario, Jasmine will act as an observer and a scribe (or secretary).
NEW QUESTION # 128
A procurement professional is preparing for a negotiation of purchasing non-critical commodity products. He knows that the product can be easily replaced by other substitutes in the market. The negotiation for these products is typified by which of the following?
- A. There will be regular structured negotiations
- B. The approach must be collaborative
- C. There will be only limited negotiation
- D. The buyer should focus on wider costs and risk elements
Answer: C
Explanation:
Explanation
With non-critical commodity products, the relationship will be transactional. Buyer should not spend too much time and effort into the negotiation.
Table Description automatically generated
LO 1, AC 1.4
NEW QUESTION # 129
Where can we find the data on macroeconomics?
1. From trade journal
2. From supplier's marketing catalogue
3. From stock exchange market
4. From government's statistics
- A. 2 and 4 only
- B. 1 and 3 only
- C. 1 and 2 only
- D. 3 and 4 only
Answer: D
Explanation:
Explanation
Macroeconomic indicators are statistics or data readings that reflect the economic circumstances of a particular country, region or sector. They are used by analysts and governments to assess the current and future health of the economy and financial markets.
Macroeconomic indicators will vary in their meaning and the impact that they have on the economy, but broadly speaking there are two main types of indicator.
- Leading indicators, which forecast where an economy might be heading. They are often used by governments to implement policies because they represent the first phase of a new economic cycle. These include the yield curve, interest rates and share prices.
- Lagging indicators, which reflect an economy's historical performance and only change after a trend has been established. They are used to confirm a trend is underway. These include gross domestic product (GDP), inflation and employment figures.
There is also the category of coincident indicators, but these are generally grouped in with lagging indicators as they either happen at the same time or after an economic shift.
The best macroeconomic indicator to watch will heavily depend on your personal preferences, what positions you are taking and which country your portfolio is focused on. However, there are some very common indicators that most traders and investors will keep an eye on.
For simplicity's sake, we have split these out into leading and lagging indicators.
Top leading indicators:
1. The stock market
2. House prices
3. Bond yields
4. Production and manufacturing statistics
5. Retail sales
6. Interest rates
Top laggingindicators:
1. GDP growth rates
2. The Consumer Price Index (CPI) and inflation
3. Currency strength and stability
4. Labour market statistics
5. Commodity prices
A procurement professional may find stock market data from the security exchange, whilemost lagging indicators (such as GDP, CPI, unemployment rate, currency and inflation rate, etc) can be found from government statistics data.
NEW QUESTION # 130
Sumitomo Rubber Industries (SRI) is a Japan-based tyre manufacturer. In order to increase production, SRI is sourcing rubber from Southeast Asian firms. Which of the following micro factors are most likely to shift the balance of power to supplier? Select TWO that apply
- A. SRI's purchase amount makes significant proportion of supplier revenue
- B. Costs of changing suppliers are high
- C. There are no close substitutes for rubber
- D. SRI sets up its own rubber plantation
- E. Rubber from different suppliers is virtually similar
Answer: B,C
Explanation:
There are many factors that can influence the balance of power in a negotiation. These factors are classified into 3 levels:
Macro level: STEEPLE framework: social, technological, economic, environment, political, legal and ethical Micro level: Porter's five forces:
Diagram Description automatically generated
One-to-one buyer-supplier dynamics.
The question asks about the micro factors that increases supplier's bargaining power. Among 5 answers, only 2 are likely to increase buyer's power:
There are no close substitutes for rubber: the buyer has to buy rubber, not any other material.
Costs of changing suppliers are high: buyer entails a large barrier if they want to switch supplier.
Other answers cannot be correct because:
SRI sets up its own rubber plantation: Buyer secures its own supply
SRI's purchase amount makes significant proportion of supplier revenue: Suppliers are reliant on buyer. If the buyer stops buying from them, they can face serious cash flow problems Rubber from different suppliers is virtually similar: undifferentiated product would shift the power balance towards buyer.
NEW QUESTION # 131
Which of the following will help to indicate personality preferences in four dimensions?
- A. Thomas-Kilmann Conflict Resolution model
- B. Mill's RESPECT mnemonic
- C. Intelligence quotient
- D. Myers-Briggs Type Indicator
Answer: D
Explanation:
The Myers-Briggs Type Indicator (MBTI) is an introspective self-report questionnaire indicating differing psychological preferences in how people perceive the world and make decisions. MBTI indicates personality preferences in four dimensions.
The Thomas-Kilmann Conflict Mode Instrument (TKI) is a conflict style inventory, which is a tool developed to measure an individual's response to conflict situations.
Mill's RESPECT mnemonic is set out by Harry A. Mills which describes seven steps to agreements An intelligence quotient (IQ) is a total score derived from a set of standardized tests designed to assess human intelligence.
NEW QUESTION # 132
Which of the following tactics would be appropriate in an integrative negotiation?
- A. Mother Hubbard
- B. Lowball/Highball
- C. Take it or leave it
- D. Expanding the Pie
Answer: D
NEW QUESTION # 133
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction. What is the mark-up profit percentage earned by the supplier on this transaction?
- A. 159%
- B. 33%
- C. 67%
- D. 50%
Answer: D
Explanation:
The mark-up percentage is calculated as the profit divided by the cost of production, then multiplied by 100 to convert it into a percentage.
Calculation:
(
80
/
160
)
×
100
=
50
%
(80/160)×100=50%
Thus, the supplier's mark-up percentage is 50%, as per standard pricing calculations used in procurement.
NEW QUESTION # 134
Which of the following is most likely a consequence of falling interest rate?
- A. Increase savings
- B. Increase aggregate demand
- C. Decrease investment
- D. Decreaseconsumption
Answer: B
Explanation:
If interest rate are too low and credit is too, cheap rates can fund a spending boom with consumers and businesses buying (investment) more than they can afford to pay back.
NEW QUESTION # 135
Jessica Taylor, a senior buyer, is reflecting on her most recent negotiation. She has been asked by her manager to create a written record of performance. Which of the following should Jessica include in this negotiation performance report? Select THREE that apply:
- A. Evaluation of the negotiator's performance
- B. Other suppliers that could have been used
- C. Travel expenses to attend the meeting
- D. A comparison of actual versus set objectives
- E. A checklist of for future
- F. A detailed pricing structure
Answer: A,D,F
Explanation:
Reference: CIPS L4M5 Study Guide, Section 3.3 - Reviewing Negotiation Outcomes
NEW QUESTION # 136
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