[2023] Free L4M5 Exam Dumps to Pass Exam Easily
L4M5 Exam Dumps, L4M5 Practice Test Questions
The CIPS L4M5 (Commercial Negotiation) Certification Exam is designed to test the knowledge and skills of procurement and supply chain professionals in the area of negotiation. This certification is ideal for professionals who are involved in negotiating contracts, pricing, and terms and conditions with suppliers and vendors. The CIPS L4M5 exam is a globally recognized qualification that is highly valued by employers in various industries.
NEW QUESTION # 45
An oil refinery plant imports much of its crude oil from overseas. A procurement manager in the refinery suggests that fixing the crude oil contract price for 36 monthswould be beneficial for the company. Would this be a right thing to do?
- A. Yes, the supplier would bear the risk when the material price increased
- B. No, the refinery would not be able to reap the benefits from falling commodity price and currency rates
- C. Yes, financial budgeting task would be a lot easier with fixed pricing arrangement
- D. No, fixed price should be only applied to contracts that last 60 months or longer
Answer: B
Explanation:
Explanation
Fixed price contract is the contract in which the price is static throughout the contract period. A fixed-price contract may give certainty to budget and simplify contract management. However, it may lead to other problems since it requires bidders to estimate and bear the financial risks associated with price escalations. If the estimates are too high or events do not materialize, the buyer will pay a steep price that may affect the economy and efficiency of the contract. In the worst case, it may mean that the bid price is then above budget and may lead to a reduction in the requirements or rebidding. If the estimates are too low, it may appear as an abnormally low bid and disrupt contract execution.
On the other hand, price adjustment provisions include formulas designed to address problems, and can protect both theborrower and contractors from price fluctuations. Price adjustment formulas allow contractors to offer more realistic prices at the time of bidding. Despite concerns that they may lead to budget uncertainties, price adjustment formulas will estimate the actual cost implications that will be encountered. They use indexes that can be used for cost projection.
According to Asia Development Bank (ADB), any contract with a delivery or completion period beyond 18 months should contain an appropriate price adjustment clause.
In the scenario, the crude oil contract is planned to last 36 months. This period is pretty long with a fluctuating commodity. Therefore, the company should use price adjustment agreement.
NEW QUESTION # 46
Which of the following should be done when undertaking a reflection activity on negotiation? Select TWO that apply.
- A. Identify areas in your skill set where you need to improve
- B. Be honest and objective about your skills
- C. Use generalised or ambiguous language when describing your strengths and development areas
- D. Gloss over areas where you need to improve your skills or performance
- E. Be overly modest about your contribution to the outcomes of negotiation
Answer: A,B
Explanation:
Giving positive group and individual feedback is easy, as is self-congratulation and, in many cases, it is hoped, this will be an accurate reflection on actual performance. When it comes to developmental or difficult feedback, it is only natural to want to move on and not reflect on the negative or developmental points, or why a negotiation did not achieve its objectives. But this is a mistake. The best learning opportunities come from reflection on what could be done better, and this can beachieved without blame, threat or condemnation.
Everyone and every team will make mistakes and/or have areas where they could have improved. Clearly, if every reflection session concludes that an individual or team keeps making the same mistake, then thereis a case to change roles or consider alternative approaches.
About Dos and Don'ts of reflection, you can refer here:
https://offices.depaul.edu/human-resources/employee-relations/Documents/Self%20Assesement.pdf
NEW QUESTION # 47
Professional buyer is planning for the next negotiation of a simple one-off contract. This negotiation is typified by which of the following? Select TWO that apply.
- A. Arm's-length approach
- B. Continuous dialogue with supplier
- C. Pricing is the most important criterion
- D. Vendor ratings will be used
- E. Total cost of ownership is themost important criterion
Answer: A,C
Explanation:
Professional buyers, when planning or engaging in negotiation with suppliers, should always be aware ofwhere the intended and actual relationship with this supplier is positioned on the 'spectrum' or 'continuum' of commercial relationships. The relationship spectrum describes the range of commercial relationships between a buyer and supplier based on richness of communication, longevity and mutual dependence.
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In the question, the contract is simple one-off (or spot buy), which means the relationship will likely to be more transactional. In such relationship, price is the most important criteria and buyer may adopt arm's-length approach.
NEW QUESTION # 48
According French and Raven's base model, which of the following are sources of personal power that can be used in commercial negotiation? Select THREE that apply.
- A. Coercive power
- B. Purchasing spend power
- C. Legitimate power
- D. Expert power
- E. Competitive power
- F. Trademark power
Answer: A,C,D
Explanation:
A useful model of personal power that has survived the test of time and provide a simple way to analyse negotiation in French and Raven's Power BaseModel, which describes six bases of power:
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NEW QUESTION # 49
In a commercial negotiation,a procurement professional believe that the larger the order quantity from buyer, the lower the supplier's average costs. Is this assumption true?
- A. Yes, because larger order quantity will always enable the supplier to reach its economy of scale
- B. No, because the supplier may need to invest in new facility to meet buyer's demand
- C. No, because supplier's average costs will rise as the buyer's demand increases
- D. Yes, because larger order quantity will bring a considerable profit to supplier
Answer: B
Explanation:
In some markets, suppliers experience peaks and troughs in demand and so buyers can increase their leverage through developing an understanding of how busy their vendor are at particular time during the year or business cycle and targetting atquieter period. Similarly, if a buyer can develop an understanding of supplier capacity and to what extent have they covered their fixed cost, they may be able to target suppliers when their average costs are likely to be lowest. Vendor's average costs will be higher at low and high capacity utilisation.
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NEW QUESTION # 50
Which of the following is the internal factor that is taken intoprice of a product?
- A. Risk management
- B. Exchange rate
- C. Elasticity
- D. Customer tastes
Answer: A
Explanation:
Explanation
In order to answer this question, you should better consider each option:
'Exchange rate' is the value of one nation's currency versus thecurrency of another nation or economic zone.
This is a macroeconomic factor.
'Elasticity' refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. This is a microeconomic factor Consumer tastes refer to the products and services that consumers consciously choose over others. Consumer tastes are so powerful that they can change how businesses conduct their activity. Like elasticity, this is also a microeconomic factor.
Among 4 options, only risk management is the internal factor. Risk pricing is a strategy applied by many companies in the world. To learn how to price the risk, you can read an article from McKinsey:
https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-to-price-risk-to-win-and-pr This is a question that a student met in her actual exam. The knowledge section is unknown.
LO: Unknown, AC: Unknown
NEW QUESTION # 51
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. Directive (push)
- B. Persuasive reasoning (push)
- C. Visionary (pull)
- D. Collaborative (pull)
Answer: D
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 # 52
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. 1 and 2 only
- B. 2 and 4 only
- C. 1 and 3 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 # 53
When is the best time in procurement process in which procurement should get involved so that the cost-saving opportunities are the greatest?
- A. Market consult stage
- B. Post-tender 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 # 54
Which of the following is considered a strength of a 'logical' style negotiator?
- A. Interrelate issues easily and make quick decisions
- B. Methodical
- C. Friendly and accessible
- D. Assertive
Answer: B
Explanation:
A useful and simple shorthand for preferrednegotiation styles is summarised by four simple descriptor: 'warm',
'tough', 'logical' and 'dealer', which can be applied 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 logical style are described below:
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NEW QUESTION # 55
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. There will be only limited negotiation
- C. The buyer should focus on wider costs and risk elements
- D. The approach must be collaborative
Answer: B
Explanation:
Explanation
With non-critical commodity products, the relationship will be transactional. Buyer should not spend too much time and effort into the negotiation.
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LO 1, AC 1.4
NEW QUESTION # 56
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. Postponing the issue
- B. Yielding the supplier's point of view
- C. Seeking a quick middle-ground position
- D. Confronting and trying to find a creative solution immediately
Answer: A
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 # 57
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
- A. Fuel
- B. Catering services
- C. Advertising and promotion
- D. Flightcrew training
- E. Purchase of aircraft
Answer: D,E
Explanation:
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) arethose which vary with the amount produced. Fuel, catering services and marketing are examples of variable.
LO 2, AC 2.1
NEW QUESTION # 58
Economic growth can be measured by...?
- A. SBLI
- B. GDP
- C. The PPI
- D. The CPI
Answer: B
Explanation:
Gross Domestic Product (GDP) is the monetary value of the goods and services manufactured or supplied in a financial period. In general terms, when the GDP rate falls or slows down, there will be a fall in demand forgoods and services demanded in the economy, with a fall in firms' revenue and profit margins. When GDP is rising, there will be an increase in demand.
Consumer Price Index (CPI) is weighted measurement that evaluates the average cost of a basket of goods bought by a consumer.
Producer Price Index (PPI) is average changes in prices that a producer receives in return for its goods or services.
Small Business Lending Index (SBLI) is an indicator of small business lending trends.
NEW QUESTION # 59
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. Costs of changing suppliers are high
- B. SRI sets up its own rubber plantation
- C. There are no close substitutes for rubber
- D. SRI's purchase amount makes significant proportion of supplier revenue
- E. Rubber from different suppliers is virtually similar
Answer: A,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:
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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 # 60
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
- A. Goodwill trust
- B. Contractual trust
- C. Competence trust
- D. Irrevocable Trust
Answer: C
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 # 61
A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?
- A. Core
- B. Nuisance
- C. Develop
- D. Exploit
Answer: B
Explanation:
To answer this question, you should know The seller's perspective as in 'How to Negotiate Professionally':
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In the scenario, the buyer's spend is low, while they seem unattractive to seller (as they tend to pay late). So the buyer is classified as Nuisance in seller's perspective.
NEW QUESTION # 62
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