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The CIPS L4M5 exam covers a wide range of topics related to commercial negotiation, including the principles and techniques of negotiation, the legal and ethical considerations of negotiation, and the role of communication in negotiation. It also covers the various stages of the negotiation process, such as preparation, opening, bargaining, and closing. L4M5 exam is designed to test the candidate's ability to analyze a situation, identify objectives, and develop a negotiation strategy that is in line with the organization's goals and objectives.
CIPS L4M5 certification is recognized globally and is highly valued by employers. Commercial Negotiation certification is an excellent way for professionals to demonstrate their commitment to their careers and their willingness to invest in their professional development. The CIPS L4M5 certification is also a great way for professionals to stand out in a crowded job market and to increase their earning potential.
NEW QUESTION # 77
Which of the following is the purpose of using stakeholder support level scale?
- A. To estimate the gap and the progress towards desired levels of support
- B. To identify stakeholder level of influence and interest and plot them on stakeholder map
- C. To identify stakeholder's needs and expectations
- D. To identify key stakeholders
Answer: A
Explanation:
In order to estimate the gap and the progress towards desired level of support, a stakeholder support scale can be used by the procurement internally. The support level scale measures stakeholder commitment. Current support level for the procurement/negotiation objectives should be gained from engagement with key stakeholders. The following is an example of stakeholder support level scale:
Graphical user interface, application Description automatically generated
LO 1, AC 1.1
NEW QUESTION # 78
XYZ Ltd is importing goods from overseas. They prefer to pay theirsupplier in their own currency. Which of the following is a true statement?
- A. XYZ is able to pay less if their currency depreciates
- B. XYZ has to pay more if their currency depreciates
- C. Supplier will receive less if XYZ's currency appreciates
- D. XYZ has an advantage in negotiating discounts if their currency appreciates
Answer: D
Explanation:
Explanation
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
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LO 2, AC 2.2
NEW QUESTION # 79
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. Value engineering
- B. Total cost analysis
- C. Price analysis
- D. Spend analysis
Answer: D
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 # 80
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. No, a long-term relationship built on trust is required with the supplier
- B. Yes, Tony will get what he requires from the negotiations
- C. No, it does not guarantee Tony will get what he requires from the negotiations
- D. Yes, a long-term relationship is not required with the supplier
Answer: A
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 # 81
There are no commitments in hypothetical questions. Is this statement true?
- A. Yes, because hypothetical questions only mention possible situations
- B. No, because the party who makes hypothetical questions cannot withdraw their proposals
- C. No, because hypothetical questions are made explicitly to the other party
- D. Yes, because hypothetical questions generate a specific response
Answer: A
Explanation:
There are four types of questions that can be used in a commercial negotiation:
Hypothetical questions, where you ask about a possible situation or abstract concept, are very useful at the testing and proposal phases. Hypothetical question does not state any commitment as it is only about 'if something happens, then ...'. This type of question can be useful at giving suggestion.
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LO 3, AC 3.3
NEW QUESTION # 82
The National Schools Purchasing Forum (NSPF) is a procurement organisation that purchases goods and services on behalf of schools on a national scale. NSPF is close to concluding negotiations in a meeting with Hygienics For All (HFA) for the supply of consumables to school washrooms. Both parties have reached an agreeable position, and NSPF feels it is important that they conclude the negotiation at this point. What type of questions should NSPF ask HFA to achieve this?
- A. Closed questions
- B. Open questions
- C. Hypothetical questions
- D. Probing questions
Answer: A
Explanation:
Closed questions are effective for concluding negotiations, as they often elicit straightforward yes-or-no responses, helping to finalize terms and confirm agreement on specific points. This approach facilitates a clear and concise close to discussions, ensuring that both parties confirm their commitment to the agreed terms, as recommended by CIPS negotiation strategies.
NEW QUESTION # 83
Which of the following are variable costs?
- A. Packaging
- B. Insurance
- C. Loan repayments
- D. Rent
Answer: A
Explanation:
Packaging is considered a variable cost because it fluctuates with the level of production or sales activity.
Variable costs change directly in relation to the volume of output or service. In contrast:
Rent (A), Loan repayments (B), and Insurance (C) are fixed costs, as they generally do not vary with production levels within a certain range. These are recurring costs that remain constant over time, aligning with CIPS's cost classification in procurement.
NEW QUESTION # 84
Ma Bell was the sole provider of landline telephoneservice to most of the US in 1980s. This is an example of...?
- A. Monopoly
- B. Monopolistic competition
- C. Perfect competition
- D. Monopsony
Answer: A
Explanation:
Explanation
A monopoly exists when only one company can supply an essential product or service in a givenregion because of significant barriers to entry for any competitor. The barriers can be legal, regulatory, economic, or geographic. Ma Bell case is an example of monopoly. The company was broken up in 1982.
A monopsony is a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers.
Pure or perfect competition is a theoretical market structure in which the following criteria are met:
- All firms sell an identical product (the product is a "commodity" or "homogeneous").
- All firms are price takers (they cannot influence the market price of their product).
- Market share has no influence on prices.
- Buyers have complete or "perfect" information-in the past, presentand future-about the product being sold and the prices charged by each firm.
- Resources for such a labor are perfectly mobile.
- Firms can enter or exit the market without cost.
Monopolistic competition characterizes an industry in which many firms offerproducts or services that are similar, but not perfect substitutes. Barriers to entry and exit in a monopolistic competitive industry are low, and the decisions of any one firm do not directly affect those of its competitors. Monopolistic competition is closely related to the business strategy of brand differentiation
NEW QUESTION # 85
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
- A. Evaluating the interests from suppliers
- B. Deciding whether RFQ or ITT should be used
- C. Demand management
- D. Undertaking 'reverse marketing'
Answer: C
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 to proportionately 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.
Demand management 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 # 86
Are tactical ploys only used in distributive approach?
- A. Yes, because tactical ploys will help to gain insights into the other party's interests
- B. No, because tactical ploys strengthen the other party's position
- C. Yes, because they will be irritants to long-term relationship
- D. No, because tactical ploys will be more effective with integrative approach
Answer: C
Explanation:
There are many tactics and ploys that can be used to persuade others, particularly those not trained in negotiation. But in generalthese tactics should be used with care, as they can backfire; and in situations where a long-term relationship is desired, they can be, if detected, become an irritant to TOP.
Tactics are particularly effective if and when you are dealing with untrained negotiators, in consumer's buying situation and in once-off encounter.
NEW QUESTION # 87
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. Order quantity
- B. Forward integration
- C. Regulations on health and safety
Switching costs of buyer - D. Digitalisation of medicine
Answer: C,D
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 # 88
A procurement professional is preparing for a negotiation with supplier. She is setting targets for price which her company is seeking to achieve. Which of the following acronyms can help her identify limits before engaging in the negotiation?
- A. MIL
- B. RAQSCI
- C. PPCA
- D. TIMWOOD
Answer: A
Explanation:
:
MIL criteria indicate 3 limits that negotiator should establish:
M - Must achieve: minimum target/maximum you can concede on this point; the mandatory requirement or fall back position I - Intend to achieve: realistic target you are aiming for on this point L - Like to achieve: stretch target to achieve on this point.
PPCA is purchase cost analysis
TIMWOOD indicates 7 types of waste in Lean principles
The RAQSCI model is a mnemonic summary of a business model used to define and structure business requirements
NEW QUESTION # 89
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
- A. Absorption costing
- B. Marginal costing
- C. Cost plus costing
- D. Activity-based costing
Answer: B
Explanation:
:
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
NEW QUESTION # 90
Which of the following types of questions are likely to be the most effective to check facts in negotiations?
- A. Hypothetical
- B. Open
- C. Closed
- D. Leading
Answer: C
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 # 91
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier, Top Teds. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
- A. Proposing
- B. Opening
- C. Bargaining
- D. Closure
Answer: C
Explanation:
Bargaining is the negotiation stage where tradeables are typically introduced and discussed. During this phase, both parties exchange offers and concessions, using tradeables such as lead times and order quantities to find a mutually acceptable agreement. This aligns with CIPS's guidance on the stages of negotiation.
NEW QUESTION # 92
A procurement professional is negotiating with a supplier on cleaning service. She realises that there are huge cost-saving opportunities if the supplier agrees to reduce its mark-up and unnecessary employee benefits.
Supplier's mark-up and employee benefits are examples of which of the following?
- A. Addressable spend
- B. Spend cube
- C. Spend tree
- D. Spend waterfall
Answer: A
Explanation:
Explanation
A key consideration when seeking to negotiate prices is to establish what proportion of the spend is addressable by procurement action such as negotiation. Addressability of spend is influenceable through negotiations or application of other saving effort or leverage with suppliers.
LO 2, AC 2.1
NEW QUESTION # 93
'What specific tests do you carry out to ensure quality is achieved?' This is an example of which type of negotiation question?
- A. Closed
- B. Reflective
- C. Probing
- D. Leading
Answer: C
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 the open 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 # 94
A senior buyer analyses the supply market and he realises that his organisation is treated as Exploit according to supplier's perspective model. What does he need to do?
- A. Pay the suppliers on time
- B. Adopt opaque processes
- C. Increase the spend value
- D. Raise the transactional costs to do business
Answer: A
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 pain they 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
- Eliminate onerous supplier terms and conditions
- Make the payment on time
- Use transparent processes
- Promote ethical behaviours
LO 1, AC 1.4
NEW QUESTION # 95
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