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CIPS L4M5 Exam Syllabus Topics:
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NEW QUESTION 26
Which of the following statements about oligopoly isincorrect?
- A. A few firms play an important role in the sale of a product
- B. One firm's behaviour is a function of what its rivals do
- 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 27
At the first stage of CIPSProcurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
- A. Evaluating the interests from suppliers
- B. Demand management
- C. Undertaking 'reverse marketing'
- D. Deciding whether RFQ or ITT should be used
Answer: B
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 28
Which of the following is the area where two or more negotiating parties may find common ground?
- A. Best alternative to a negotiated agreement
- B. Zone of potential agreement
- C. Zone of proximal development
- D. Walk away area
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 29
Are tactical ploys only used in distributive approach?
- A. No, because tactical ploys strengthen the other party's position
- B. No, because tactical ploys will be more effective with integrative approach
- C. Yes, because they will be irritants to long-term relationship
- D. Yes, because tactical ploys will help to gain insights into the other party's interests
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 30
Which of the following will positively affect reputational strength of an organisation? Select TWO that apply.
- A. Weak internal coordination
- B. Great gap between reputation and reality
- C. High ethical standards
- D. Strong customer focus
- E. Adopting out-of-date technology
Answer: C,D
Explanation:
Explanation
In a globalisedcommercial world characterised by dynamic market and multiple companies competing for business, a positive corporate reputation can be an enormous asset. Reputational strength in one organisation might be based on some or all of the following characteristics:
- Quality of products or services
- Low cost/high value for money
- High ethical standards
- Reliability
- Cutting-edge technology
- Strong customer focus
- Engineering excellence
LO 1, AC 1.4
NEW QUESTION 31
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 buyer should focus on wider costs and risk elements
- C. The approach must be collaborative
- D. There will be only limited negotiation
Answer: D
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 32
Which of the following should be done by the procurement team at the closing stage of a negotiation? Select TWO that apply.
- A. Gloat publicly about the deal
- B. Seek agreement in principle if TOP does not have the final authority
- C. Accept ambiguity or uncertainty
- D. Leave the meeting as soon as possible
- E. Tell TOP that they could have got a better deal
Answer: B,D
Explanation:
Explanation
The agreement and closingphase is the phase when it is either clear through explicit language, or strongly suggested through non-verbal signals, that TOP is ready to move to agreement. Judging when to close can be difficult and as with phases of the negotiation, experience, observation, practice and reflection will be the best ways to learn here.
In the closing phase, procurement should:
- Watch for closing/buying signals
- Check to ensure all issues have been resolved
- Consider using visual aids to summarise
- Use 'summary close'
- Make a decision to conclude/close
- Seek agreement in principle if TOP does not have the final authority
- Make your own private notes on the final agreement
- Shake hands on the agreement
- Leave the meeting as soon as possible thereafter.
LO 3, AC 3.1
NEW QUESTION 33
Which of the following are macroeconomic factors that may have influence to the commercial negotiation?
Select TWO that apply
- A. Bargaining power of supplier
- B. Supply curve
- C. Unemployment rate
- D. Rising import tariffs
- E. Equilibrium price
Answer: C,D
Explanation:
Explanation
There are many macro economic factors that could influence procurement in general andcommercial negotiation in particular. Below are six factors that are agreed to be fairly significant:
* Economy growth rate
* Inflation rates
* Interest rates
* Currency exchange rate
* Unemployment rate
* Protectionism
LO 2, AC 2.2
NEW QUESTION 34
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 negotiator should rely on non-verbal communications only
- B. No, because nodding and smiling are etiquette of polite rejection
- C. Yes, because smiling shows supplier's readiness in signing the deal off
- 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 35
Which of the following are intangible values created by trust in business relationships? Select TWO that apply.
- A. Frequent conflict escalation
- B. Increasing response time to request
- C. Higher revenues
- D. Positive feedbacks from customers
- E. More focus oncore business
Answer: D,E
Explanation:
Explanation
Trust may create value as following:
Text Description automatically generated with low confidence
LO 1, AC 1.4
NEW QUESTION 36
Which of the following is the first step in the development of negotiation strategies?
- A. Recognising TOP'sneeds and wants
- B. Defining overarching objectives
- C. Determining your BATNA
- D. Developing scenarios around possible options
Answer: B
Explanation:
Developing specific negotiation strategies in areas where risk or spend is high involves analysing a wide range of objectives and variables within the context of the organisation'sbusiness requirements. The first stage in any negotiation preparation is to define your overall objectives which may be related to a single variable such as price in the case of a standardised requirement, or many variables in the case of capital equipment. Your negotiating strategies and tactics will all be focused on achieving overall objectives.
NEW QUESTION 37
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. Reward
- B. Informational
- C. Expertise
- D. Coercive
Answer: A
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 38
In a commercial negotiation, a procurement professional negotiates on his company's behalf. The power of buying organisation is the only factor that influences the behaviours of the other party. Is this assumption true?
- A. Yes, because the outcomes of negotiation are attributable to the buying organisation
- B. No, because personal power of negotiators also attributes tothe outcomes
- C. No, because power of supplier is the only factor that influences the other party
- D. Yes, because buyer's brand, reputation and purchasing spend largely determine the outcomes
Answer: B
Explanation:
The assumption is false, because when aprocurement professional negotiates on behalf of his employer, he brings the power of his organisation (its brand, reputation and purchasing spend) as well his own personal power (that which is embedded within him) to the negotiation.
From a negotiation perspective, both organisational and personal power have the ability to influence the behaviours of other or the cause of event. This power is clearly core to negotiation, and of enormous important in seeking to achieve the objectives.
NEW QUESTION 39
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 supplier's bank will take risks from currency fluctuation
- B. Yes, because buyer has more advantage if they make payment in their own currency
- C. Yes, because thesupplier's currency will lose its value overtime
- D. No, because the higher the inflation rate, the stronger the supplier's currency
Answer: C
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 40
Personal power is only used in distributive approach. Is this statement true?
- A. No, because only organisational power will optimise the negotiation outcomes
- B. Yes, because one party will abuse coercive power to maximise the gain
- C. Yes, because only distributive approach to negotiation requires strong personal power
- D. No, because personal power can be veryhelpful in integrative approach
Answer: D
Explanation:
Explanation
Power, or more precisely perceptions of power,are critically important in understanding the commercial negotiation process. From a commercial negotiation point of view (under any circumstances, either integrative or distributive approach), CIPS is interested in power from both a personal and organisational perspective.
When you are negotiating on behalf of your employer, you bring the power of your organisation (its brand, reputation and purchasing spend) as well your own personal power (6 sources of personal power, based on French and Raven's power base model) to the negotiation.
In both integrative and distributive approaches, personal power plays an important role. It helps both parties push through negotiating barriers and secure commitment and final agreement LO 1, AC 1.3
NEW QUESTION 41
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