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CIPS L4M5 Exam Syllabus Topics:
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NEW QUESTION 68
Which of the following isthe definition of safety margin?
- A. The amount of revenue that remains after subtracting costs directly associated with production
- B. The incremental money generated for each product/unit sold after deducting the variable costs
- C. The difference between current or forecasted sales and sales at the break-even point
- D. The production level at which total revenues for a product equal total expenses
Answer: C
Explanation:
As a financial metric, the margin of safety (safety margin) is equal to the difference between current or forecasted sales and sales at the break-even point. The margin of safety is sometimes reported as a ratio, in which the aforementioned formula is divided by current or forecasted sales to yield a percentage value. The figure is used in both break-even analysis and forecasting to inform a firm's management of the existing cushion in actual sales or budgeted sales before the firm would incur a loss.
This is a question that a student met in her actual exam. The margin of safety is not even mentioned in the CIPS study guide.
NEW QUESTION 69
IHL has beensupplying to XYZ Ltd for months. XYZ Ltd procurement manager Diana realises that the IHL's input prices are dropping and this is a good time to re-negotiate the price of the contract. She invites IHL representative to XYZ headquarter to make a bargain on the current price. At the opening stage of the negotiation, Diana requests a 10% reduction in price with an increase in volume purchased.
Is Diana's action appropriate in the opening phase?
- A. No, because Diana should state exactly the increasing quantity
- B. Yes, because Diana's proposal is a fair trade for both parties
- C. No, because Diana has put the markers down too soon
- D. Yes, because the negotiation should be done as quick as possible
Answer: C
Explanation:
The opening stage of the negotiation coversthe very first few minutes when the parties meet and greet each other and are seated in the negotiation room in preparation for the main event.
Typical behaviours at the opening stage: 'dos' and 'don'ts'
Do's
Be punctual and well presented (welcome theirarrival)
Break the ice with small talks
Start the conditioning process
Check authority
Check agenda
Consider using visual aid to set out key objectives or make key points
Don'ts
Use strong, pushy, cold or tough style at the opening
Put down marker at thisstage
Criticise other organisations/TOP's previous contacts/third parties.
In this scenario, Diana has made her proposal right at the opening stage. This is an example of 'don'ts'. Good negotiators are very careful about 'red lines'. If she puts such barrier up too early, the supplier may not try to look for more creative solutions later in the negotiation.
NEW QUESTION 70
A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?
- A. Yes, because smiling shows supplier's readiness in signing the deal off
- B. No, because nodding and smiling are etiquette of polite rejection
- C. Yes, because negotiator should rely on non-verbal communications only
- D. No, because nodding and smiling are not clear signs of neither acceptance nor rejection
Answer: D
Explanation:
Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values.
A smile, a 'yes' and the type of hospitality received, (in thebusiness context), can mean very different things in different international business cultures.
Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide to what TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.
NEW QUESTION 71
If the value of the British Pound in other currencies is strong, which of the following is most likely to occur?
- A. The price of UK products in the UK will rise
- B. The price of UK products in the UK will fall
- C. The price of UK products abroad in foreign currency will fall
- D. The price of UK products abroad in foreign currency will rise
Answer: D
Explanation:
Explanation
Currency exchange rates are determined bymacroeconomic factors and demand and supply. In general, countries with stable political and economic systems, a growing economy and a strong rule of law will have stronger and more stable currency than those without these characteristics. In this question, the British Pound is stronger than other currency, which means that buyers who import goods from the UK have to pay higher in their own currencies.
LO 2, AC 2.2
NEW QUESTION 72
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 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 73
At which stage in a negotiation would questions be asked to obtain missing information?
- A. The proposing stage
- B. The bargaining stage
- C. The opening stage
- D. The testing stage
Answer: D
Explanation:
There are 5 key phases of negotiation:
The opening phase: confirm understanding and get the issue on the table The testing phase: check assumption and confirm understanding The proposing phase:asking 'if' The bargaining phase: using tradeables The agreement and closing phase The testing could take the form of questions following a presentation by either side or questions on a tender or proposal document received by the buyer from the potential supplier. The testing phase is necessary to confirm that your approach and objectives are appropriate for the negotiation situation you now find yourself in.
Careful listening, observation and interpretation of TOP's responses may give indication of the following:
Areas where TOP is willing and unwilling to make concessions
What factors or issues TOP places a high value on
If there are any non-commercial or emotional factors that may be pertinent TOP's underlying interests - why they are taking the positionthey are.
NEW QUESTION 74
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.
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LO 1, AC 1.4
NEW QUESTION 75
Which of the following should be adopted to minimise the conflict between parties in commercial negotiation?
- A. The rule of law
- B. Ground zero
- C. Ground rules
- D. Ground beam
Answer: C
Explanation:
Ground rules are the basic rules for doing something (Cambridge Dictionary). A negotiation goes more smoothly if ground rules are adopted. Then if something goes awry at a later time, you can point out the ground rule that has been violated.Procurement professional should seek to minimise conflict over process through agreeing 'ground rules' and approach as far as possible with the other party in advance of any negotiation meetings.
There should be two sets of ground rules: 1) groundrules for the negotiations between the two parties and 2) ground rules for the negotiating team itself. This article is about the negotiating team ground rules.
The rule of law is the condition in which all members of society, including its political leaders, accept the authority of the law.
Ground zero describes the point on the Earth's surface closest to a nuclear detonation. In the case of an explosion above the ground, ground zero refers to the point on the ground directly below the nuclear detonation.
The Ground Beam is the beam which is provided usually at the foundation level to support building walls, joists, etc.
NEW QUESTION 76
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 more variables will facilitate more possible negotiated outcomes
- C. Yes, because more variables will cause more conflicts of interest
- D. No, because the party who offers more variables will have lower bargaining power
Answer: B
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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Table Description automatically generated
LO 2, AC 2.3
NEW QUESTION 77
Which of the following is definition of elasticity of demand in microeconomics?
- A. The percentage change in the quantity demanded divided by the percentage change in income
- B. The percentage change in the quantity demanded of a good divided by the percentage change in the price of that good
- C. Thepercentage change in price of a good divided by the percentage change in the quantity demanded of that good.
- D. The percentagechange in income divided by the percentage change in the quantity demanded
Answer: B
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 78
How contribution is calculated in break-even analysis?
- A. Fixed costs divided by variable costs
- B. Price minus fixed costs
- C. Variable costs subtracted from price
- D. Variable costs subtracted from fixed costs
Answer: C
Explanation:
Contribution = Price - Variable cost
Break-evenpoint (volume) = Fixed cost/Contribution
NEW QUESTION 79
Which of the following best describes Leverage quadrant in Kraljicmatrix?
- A. High complex, low importance
- B. Low risk, high importance
- C. Low risk, low importance
- D. High value, high complex
Answer: B
Explanation:
Explanation
In 1983, Peter Kraljic devised a means to segment the supplier base in the article in HBR. In this, heargued that supply items should be mapped against two key dimensions: risk and profitability.
Risk relates to the likelihood for an unexpected event in the supply chains to disrupt operations. For instance, in important areas of spend, such as tire suppliers for an automotive are business critical, and should a disruption occur, the auto company is likely itself to face substantial problems.
Profitability describes the impact of a supply item upon the bottom line. For certain areas of spend, such as stationery, supplies have only a negligible effect on profits. In other categories, a single source of supply can make or break a business.
Putting these two dimensions together yields a classic two-by-two matrix.
Diagram Description automatically generated
Source: Peter Kraljic, HBR
NEW QUESTION 80
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. Regulations on health and safety
Switching costs of buyer - C. Digitalisation of medicine
- D. Forward integration
Answer: B,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:
Table Description automatically generated
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 81
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. Myers-Briggs Type Indicator
- D. Intelligence quotient
Answer: C
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 82
Which of thefollowing is an objective of proposing phase?
- A. Start making tentative offers
- B. Trade concessions
- C. Create atmosphere conducive to agreement
- D. Check hypothesis and assumptions
Answer: A
Explanation:
In the study guide, CIPS lists 5 stages of an negotiation:
The opening phase: confirm understanding and get the issues on the table. At this stage, both parties should check agenda, authority and create atmosphere conducive to agreement The testing phase is an information gathering stage where the hypothesis and assumptions you have made in the planning stage can be tested and confirmed or disconfirmed The proposing phase: Both sides may start making tentative proposals regarding their offering.
The bargaining phase: Both parties trade concessions; the preliminary stages are over and proposals move from being tentative and general to being more definite and specific.
The agreement and closing phase: both parties should seek agreement or if TOP does not have the final authority, some sort of acknowledgement of what key terms are should be sought.
NEW QUESTION 83
Which of the following would cause a demand curve for a good to be price inelastic?
- A. There are a great number of substitutes for the good
- B. The necessary goods
- C. The consultancy service
- D. The luxury goods
Answer: B
Explanation:
Explanation
Essential goods andservices such as electricity, fuel, basic food stuffs, commuter transport and habitual products such as tobacco, alcohol and sugar-based drinks are often sited as facing a relatively inelastic demand curve. This means when the price goes up, the quantity demanded does not decrease very much and so they are often the target of government taxation.
LO2, AC 2.2
NEW QUESTION 84
A purchasing manager is having a negotiation with a supplier to extend the duration of the contract. In order topersuade the supplier to cut the cost by 10%, she promises to shorten the payment period from
45 days to 30 days for each delivery. The supplier's representative does not agree the offer and clearly states that his proposed price is already lower than the market price. The purchasing manager has used which type of power?
- A. Expertise
- B. Informational
- C. Reward
- D. Coercive
Answer: C
Explanation:
In the scenario, to exchange cost cutting, the purchasing manager promises to 'reward' supplier shorter payment period. This is an example of reward power, which results from one person's ability to compensate or reward another for compliance.
The reward does not need to be money, but could be introduction to other buyers in the group, positive references, agreement to trial new product, quicker payment or indeed any other variable that the buyer knows is attractive and valued by the supplier.
NEW QUESTION 85
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 86
Which of the following are hardball tactics in negotiations? Select TWO that apply.
- A. Snow job
- B. Bridging
- C. Sweetening the deal
- D. Expand the pie
- E. Good cop, bad cop
Answer: A,E
Explanation:
In difficult negotiations and disputes, hardball tactics like punishment and threats often seem like the only way to win concessions. Some negotiators seem to believe that hardball tactics are the key to success in any negotiation. They resort to extreme demands and even unethical behaviour to try to get the upper hand in a negotiation.
The following are 8 typical hardball tactics:
1. Good cop / Bad cop
2. Low ball / High ball
3. Bogey
4. The Nibble
5. Chicken
6. Intimidation
7.Aggressive Behaviour
8. Snow Job
You can read the details of each tactic here.
In the contrary to hardball tactics, negotiators can adopt integrative approach to the negotiation. Some of integrative tactics are:
1. Expand the Pie
2. Bridging
3. Post Settlement -Settlement
Et cetera
NEW QUESTION 87
Telephone is most likely to be used for which of the following negotiations?
- A. High value contract
- B. Complex one-off purchase
- C. Routinetransactions
- D. Contract for purchasing a specialised product
Answer: C
Explanation:
Explanation
Many commercial negotiations could be considered routine or just not worth the investment for buyers, and using the phone can make more sense and can be more immediate.
LO 2, AC 2.4
NEW QUESTION 88
Which of the following is the process enabling the buyer to sharewith the supplier their purposes and needs to focus on some specific areas such as quality, cost, social and environmental standards, etc in the supplier's bids?
- A. Supplier selection
- B. Supplier conditioning
- C. Supplier appraisal
- D. Supply positioning
Answer: B
Explanation:
Supplier conditioning is the process of influencing a supplier or suppliers to behave in a certain way, or to accept certain circumstances. Within a negotiation, the buyer needs to make sure that the supplier has a number of messages in mind, about the outcomes that the buyer needs to achieve and about the shared sense of purpose that buying organisation has in achieving these outcomes.
Supplier appraisal is a process of evaluating a supplier's ability to carry out a contract in term of quality, delivery, price and other contributing factors.
Supplier positioning is the process of classifying spend with a supplier in terms of the profit potential and supply risk and assists in prioritising categories of spend and developing the rightstrategy.
Supplier selection is the process of selecting a supplier to acquire the necessary materials to support the outputs of organisations. Selection of the best and/or the most suitable suppliers is based on assessing supplier capabilities (Shih et al., 2004).
NEW QUESTION 89
Which of the following are rules of attentive listening? Select TWO that apply.
- A. Only focus on verbal cues
- B. Prepare for whatto say next
- C. React to the person who is speaking
- D. Listen deliberately
- E. Do not interrupt when the other party is speaking
Answer: D,E
Explanation:
Explanation
Hearing is passive but listening is active, and some people need to learn to be a good, attentive listener. The following rules of attentive listening will help you to become a successful negotiator:
* Be motivated to listen
* Be alert to non-verbal cues
* Do not interrupt the other party when they are speaking
* Fight off distractions
* Write everything down
* Listen with a goal in mind
* Give the other party your undivided attention
* React to the message, not the person
LO 3, AC 3.3
NEW QUESTION 90
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