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CIPS L4M5 Exam is suitable for individuals who are involved in procurement, supply chain management, sales, marketing, and any other commercial roles that require negotiation skills. L4M5 exam is particularly beneficial for those who are looking to enhance their negotiation skills and improve their ability to achieve successful outcomes in commercial negotiations. The CIPS L4M5 Exam is designed to help individuals develop a thorough understanding of the negotiation process, and it provides them with the tools and techniques needed to negotiate effectively in a wide range of commercial settings. Overall, the CIPS L4M5 Exam is an essential qualification for anyone who is interested in advancing their career in procurement, supply chain management, sales, or marketing.
Successfully passing the CIPS L4M5 exam demonstrates to employers and peers that the candidate has the expertise and practical skills required to negotiate complex commercial agreements confidently. It also provides a pathway to further professional development and career advancement within the procurement and supply chain domain.
NEW QUESTION # 35
Which of the following statements about oligopoly isincorrect?
- A. One firm's behaviour is a function of what its rivals do
- B. A few firms play an important role in the sale of a product
- C. Prices in oligopoly are predicted to fluctuate widely and frequently
- D. Oligopolistic firms recognize their interdependence
Answer: C
Explanation:
Explanation
An oligopoly exists when there are small number of producers that exert a significant influence in the market.
Oligopoly's main characteristics are discussed as follows:
- Interdependence
The most important feature of oligopolyis the interdependence in decision-making of the few firms which comprise the industry. This is because when the number of competitors is few, any change in price, output, product etc. by a firm will have a direct effect on the fortune of its rivals, which will then retaliate in changing their own prices, output or products as the case may be.
- Importance of advertising and selling costs
A direct effect of interdependence of oligopolists is that the various firms have to employ variousaggressive and defensive marketing weapons to gain a greater share in the market or to prevent a fall in their market share. For this various firms have to incur a good deal of costs on advertising and on other measures of sales promotion. Therefore, thereis a great importance of advertising and selling costs under conditions of market situation characterised by oligopoly
- Group behaviour
Another important feature of oligopoly is that for the proper solution to the problem of determination of price and output under, it analysis of group behaviour is impor-tant.
- Indeterminateness of demand curve facing an oligopolist
In this question, 'Prices in oligopoly are predicted to fluctuate widely and frequently' is an incorrect statement as producers in oligopoly often try to set up price. Prices fluctuate more frequently in perfect competition.
LO 2, AC 2.2
NEW QUESTION # 36
Which of the following is the best description of direct cost?
- A. Direct costs include raw materials, labour andoverheads
- B. Direct costs include raw materials, labour and other expenses attributable to the final product
- C. Direct costs include only raw materials and labour of making the final product
- 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 # 37
Which of thefollowing is the purpose of using stakeholder support level scale?
- A. To identify key stakeholders
- B. To identify stakeholder's needs and expectations
- C. To identify stakeholder level of influence and interest and plot them on stakeholder map
- D. To estimate the gap and the progress towards desired levels of support
Answer: D
Explanation:
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:
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LO 1, AC 1.1
NEW QUESTION # 38
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 # 39
Which of the following is a disadvantage of absorption costing method?
- A. Limited understanding of true costs incurred
- B. Variable costs are not taken into product final costs
- C. Using marginal cost of producing addition units
- D. Fixedcost allocated to products on the basis of the cost of activities used in producing them
Answer: A
Explanation:
Absorption costing is an approach to allocating overheads in which indirect costs are loaded or absorbed into direct costs related to specific jobs, processes or outputs, using an estimated basis of allocation.
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NEW QUESTION # 40
Which of the following are most likely to be direct costs of a steel manufacturer? Select THREE that apply.
- A. Insurance for production lines
- B. Cleaning services
- C. Hourly production wages
- D. Scrap metal
- E. Seniormanagement salary
- F. Coal
Answer: C,D,F
Explanation:
Direct costs are those costs of a product/service directly attributable/traceable to its production. Examples of direct costsincluding 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 # 41
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. Budgetlinkages
- B. Part substitution
- C. Volume pooling
- D. Compare total cost of ownership
- E. Value engineering
Answer: B,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 # 42
A procurement professional is preparing for anegotiation 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. PPCA
- C. RAQSCI
- 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 # 43
Which of the following is NOT a barrier to entry in amonopolized market?
- A. The costs of production make a single producer more efficient than a large number of producers
- B. The government gives a single firm the exclusive right to produce some good
- C. A key resource is owned by a single firm
- D. A single firm is very large
Answer: D
Explanation:
Monopolies exist in many markets in real life for very different reasons:
Ownership of a Key Resource: When one company exerts sole control over a resource that is necessary for the production of a specific product,the market may become a monopoly. For example, the only medication deemed acceptable to treat a disease comes from a particular ingredient X, and knowledge of this ingredient X is owned by a single family owned company. The company can, therefore, be saidto have a monopoly over ingredient X that is needed to cure the disease because it is the only company that can produce a product deemed acceptable.
Government Franchise: In certain instances, a monopoly may be explicitly created by the government if it grants a single company, whether private or government-owned, the right to conduct business in a particular market. For example, when a national railways transportation service is created by the government, in most cases they are granted a monopoly on the operation of passenger trains in the country. As a result, other firms are only able to offer passenger train services with the cooperation and/or permission of the government-owned provider.
Intellectual Property Protection: Extending intellectual propertyprotection to a company in the form of patents and copyrights is yet another way in which monopolies are created. When a government does this, it is in fact giving a single company an exclusive right to provide a particular product / service to the market. Patents and copyrights work in providing owners of intellectual property with the right to act as an exclusive provider of a new product for a specific length of time. This creates a temporary monopoly in the market with regards to new products and services.
Natural Monopoly: A market may also become a monopoly simply because it may be more cost-effective for one company to serve the whole market than to have several smaller firms in competition with one another. A company with virtually unlimited economies of scale is referred to as a natural monopoly. Such firms become monopolies due to their position and size, which makes it impossible for new entrants in the market to compete price-wise. Natural monopolies are common in industries with high fixed costsand low marginal costs of operation such as providers of television, telephone, and internet services.
In this question, 'A single firm is very large' is not enough to tell whether this market is monopolistic.
NEW QUESTION # 44
How contribution is calculated in break-even analysis?
- A. Variable costs subtracted from fixed costs
- B. Fixed costs divided by variable costs
- C. Price minus fixed costs
- D. Variable costs subtracted from price
Answer: D
Explanation:
Contribution = Price - Variable cost
Break-evenpoint (volume) = Fixed cost/Contribution
NEW QUESTION # 45
Which of the following is the area where two or more negotiating parties may find common ground?
- A. Zone of proximal development
- B. Zone of potential agreement
- C. Walk away area
- D. Best alternative to a negotiated agreement
Answer: B
Explanation:
Explanation
The zone of possible agreement (ZOPA) orbargaining range is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
The zone of proximal development refers to the difference between what a learner can do without help and what he or she can achieve with guidance and encouragement from a skilled partner.
There is no Walk away area. Walk away point is a position from which you cannot concede any more ground and must walk away/decline a deal.
Best alternative to a negotiated agreement is a fallback or backstop position if the negotiation fails to result in an agreement/no deal is agreed.
LO 1, AC 1.2
NEW QUESTION # 46
Distributive approach in negotiation is typified by which of the following?
- A. Both parties share 50:50 of the 'pie'
- B. Both parties understand each other's goals
- C. Each party attempts to maximise the value obtained at other's expense
- D. Distributive approaches are inherently inferior tointegrative approaches in commercial negotiation
Answer: C
Explanation:
Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Commercial situations often demand a distributive bargaining approach, if the 'pie' is inherently of a fixed size. In this case, any conflicts must be resolved by sharing it.
In win-lose approach, a negotiator wants to maximise the value obtained in a single deal, the relationship with the other party is not important. Therefore, a strong party may win more than 50% of the metaphorical 'pie'.
It should not be assumed that win-win can be applied to all commercial negotiations, or that win-lose approaches are inherently inferior.
NEW QUESTION # 47
Which of the following are most likely to beindirect costs of a garment manufacturer? Select THREE that apply.
- A. Packaging material
- B. Zips pads
- C. Textile
- D. Maintenance materials
- E. Depreciation of machinery
- F. Utilities
Answer: D,E,F
Explanation:
Indirect costs are those cost that are not directly attributable to production. Examples of indirect costs including the following:
Indirect labour: This covers every person in the factory who does not directly perform a production operation such as managers, supervisors, engineers, store personnel,clerks, maintenance staff, porters, canteen staff, security and cleaners etc.
Expenses: Included in this element is every fixed and variable expenses incurred in operating the factory, such as rent, rates, utilities, insurance, depreciation, maintenance, air conditioning and the various types of energy generation required by a clothing factory.
Indirect materials: Also known as consumables, this element contains all the materials not directly connected to the makeup of a garment. Some of the typical items involved are office materials, spare parts, marker paper, maintenance materials, chalk & pins.
Direct costs are those costs of a product/service directly attributable/traceable to its production. Examples of direct costs including the following:
Direct Materials: Direct materials are all the materials and trimmings which go into the construction and finish of the garment. Typically, these materials would include cloth, lining, fusible, zips pads, tapes, labels, tickets, hangers and packaging materials.
Direct Labour: This cover the cost of all the labor directly involved in producing the garment and could include cutting, fusing, regular sewing, special machine operations, pressing, finishing, inspection and packing. Labor of all types and grade has a directoverhead which include holiday pay, sick pay, fringe benefits etc and the statutory payments made by the employer for each employee. This is usually expressed as a percentage of salary and when this percentage is added to the employee's wage, it becomes the basis for calculating direct labor costs.
NEW QUESTION # 48
Collaborative approach in negotiation not only can fully satisfies the concerns of both, but also ensure that neither party will seek to be opportunistic in later time during the life of the contract. Is this statement true?
- A. Yes, because both parties have well understood each other's goals when they engage in collaborative negotiation
- B. No, because any party may leverage its own advantage during the contract
- C. Yes, because all parties must have exactly the same goals in integrative negotiation
- D. No, because the parties will always find a compromise solution in integrative approach
Answer: B
Explanation:
Integrative, interest-based negotiation can facilitate constructive, positive relationship and establish contracts between parties on a foundation of goodwill. It is important to note it can only facilitate these positive outcomes, it does not guarantee that the other party will not seek to be opportunistic at a later time during the life of the contract. Previous knowledge of the behaviours of the other party regarding honouring contractual and other commitments will be useful here in predicting long-term outcomes, not ensuring that they will not leverage their advantages.
NEW QUESTION # 49
Which of the following are most likely to be abilities of a person with high emotional intelligence? Select TWO that apply.
- A. Reasoning and problem solving
Abstract thinking - B. Complex idea comprehension
- C. Perceiving how others feel
- D. Controlling one's own emotions
Answer: C,D
Explanation:
Explanation
Emotional Quotient is the set of skills that enables us to make our way in a complex world - the personal, social and survival aspects of overall intelligence, the elusive common sense and sensitivity that areessential to effective daily functioning. It has to do with the ability to read the political and social environment, and landscape them; to intuitively grasp what others want and need; what strengths and weaknesses are; to remain unruffled by stress; andto be engaging. The kind of person others want to be around and follow.
EQ seeks to measure emotional intelligence and is centred on abilities such as the following:
- Identifying emotions
- Evaluating how others feel
- Controlling one's own emotions
- Perceiving how others feel
- Using emotions to facilitate social communication
- Relating to others
On the other hand, cognitive ability is defined as a general mental capability involving reasoning, problem solving, planning, abstract thinking, complex ideacomprehension, and learning from experience (Gottfredson,
1997).
LO 3, AC 3.3
NEW QUESTION # 50
It may be more difficult to buy on a credit from supplier who locates in a country with a hyperinflation? Is this assumption true?
- A. No, because the higher the inflation rate, the stronger the supplier's currency
- B. Yes, because thesupplier's currency will lose its value overtime
- C. Yes, because buyer has more advantage if they make payment in their own currency
- D. No, because supplier's bank will take risks from currency fluctuation
Answer: B
Explanation:
If theinflation rate is running high, then obtaining credit as a buyer is normally more difficult or expensive as money in the future will be worth less than money today.
NEW QUESTION # 51
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. 3 and 4 only
- B. 1 and 2 only
- C. 1 and 3 only
- D. 2 and 4 only
Answer: A
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 # 52
Which of the following are the most typical characteristics of integrative approach to negotiation? Select TWO that apply.
- A. Creating more value
- B. Short-term wins
- C. Claiming value
- D. Positional-based
- E. Interest-based
Answer: A,E
Explanation:
Integrative approach to negotiation used when the interested parties are attempting to create more of something of value to share, also known as collaborative approach or win-win. Integrative, interest-based negotiation can facilitate constructive, positive relationship and establishes contracts between parties on a foundation of goodwill. In integrative bargaining, both parties seek to 'expand the pie' by creating more value for both the buyer and the seller. Integrative negotiation 'shares thepie' and is interest rather than positional based.
In distributive bargaining, the focus is on claiming value and getting as much of the pie as parties can.
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LO 1, AC 1.2
NEW QUESTION # 53
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. Observer
- B. Commercial expert
- C. Chief negotiator
- D. Technical expert
- E. Secretary
(Correct)
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:
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As from the scenario, Jasmine will act as an observer and a scribe (or secretary).
NEW QUESTION # 54
Which of the following are most likely to harm trust between buyer and supplier in a commercial relationship?
Select TWO that apply.
- A. Reduced response time during contract performance
- B. Subjective assessment of performance
- C. Exploring a disagreement to learn from each other's insights
- 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 # 55
Stalemate is morelikely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
- A. Yes, because the negotiation will last endlessly if there aretoo many variables
- B. No, because the party who offers more variables will have lower bargaining power
- C. No, because more variables will facilitate more possible negotiated outcomes
- D. Yes, because more variables will cause more conflicts of interest
Answer: C
Explanation:
Explanation
Negotiation variables such as price or contract length, etc arethat can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
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LO 2, AC 2.3
NEW QUESTION # 56
Which of the following are most likely to help buyer become preferred customer in supplier's perspective?
Select TWO that apply.
- A. Ensuring an increased number of repeat orders
- B. Shorter payment period
- C. Reduction in delivery errors
- D. Onerous supplier terms and conditions
- E. Compliance with agreed repair lead time
Answer: A,B
Explanation:
Explanation
Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation.
Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:
- Simple procurement processes
- Simple contracting processes
- Clear and concise documentation
- Absence of onerous supplier terms and conditions (onerous supplier terms and conditions mean that obligations imposed on suppliers are greater than their gains)
- On-time payment: The reduction in hassle for both supplier and the buyer, if bills are paid on time, is significant. From the customer's perspective it could also be the opener to agreeing preferential payment terms. A supplier may weigh up that payment on time at 60 days is worth taking, over the current 30-day terms that slip to 90 days and beyond.
-Transparent processes
- Ethical behavior
LO 1, AC 1.3
NEW QUESTION # 57
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