2021 L4M5 dumps review - Professional Quiz Study Materials
L4M5 Test Prep Training Practice Exam Questions Practice Tests
NEW QUESTION 49
Stalemate is morelikely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
- A. Yes, because more variables will cause more conflicts of interest
- B. No, because more variables will facilitate more possible negotiated outcomes
- C. Yes, because the negotiation will last endlessly if there aretoo many variables
- 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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LO 2, AC 2.3
NEW QUESTION 50
Which of the following are the most typical characteristics of integrative approach to negotiation? Select TWO that apply.
- A. Short-term wins
- B. Positional-based
- C. Interest-based
- D. Creating more value
- E. Claiming value
Answer: C,D
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 51
Active listening in negotiation includes which of the following activities?
1. Hearing
2. Interpreting
3. Rapport
4. Influence
- A. 1 and 3 only
- B. 3 and 4 only
- C. 2 and 3 only
- D. 1 and 2 only
Answer: D
Explanation:
Explanation
Listening is a hugely important skill in the world of work. It's a key part of effective communication [...].
Regarding active listening, there is a model called 'The SIER Hierarchy of Active Listening'. It details four key stages required for effective listening. As with all models associated with active listening, its purpose is to help the listener be a better, more effective listener who really hears what is being said, connects with the individual with whom they are communicating andbuilds effective relationships.
The model is a hierarchical model meaning that each stage builds on the stage before it. While the model is sometimes used for training in the sales arena, it is helpful in all walks of life. The stages of the model are:
Sensing (including hearing and watching body language), Interpreting, Evaluating and Responding.
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NEW QUESTION 52
In addition to organisational power, personal power of each negotiator can influence the outcomes of a negotiation. A good negotiator can leverage different sources of power. Is this statement true?
- A. Yes, because the good negotiator recognises his own power in a negotiation
- B. Yes, because allsources of power have similar effectiveness in every situation
- C. No, because each person has only one superior source of personal power
- D. No, because only organisational power can be leveraged during a negotiation
Answer: A
Explanation:
Explanation
Both organisational and personal power have the ability to influence the outcomes of negotiation. Good negotiators recognises the different sources of relative personal power they possess in a negotiation. There is no one superior source of personal power; they will vary in their effectiveness based on the situation. The more personal sources available the better, even if some not used, these can be used as a fallback.
LO 1, AC 1.3
NEW QUESTION 53
How contribution is calculated in break-even analysis?
- A. Variable costs subtracted from price
- B. Fixed costs divided by variable costs
- C. Variable costs subtracted from fixed costs
- D. Price minus fixed costs
Answer: A
Explanation:
Contribution = Price - Variable cost
Break-evenpoint (volume) = Fixed cost/Contribution
NEW QUESTION 54
Which of the following are most likely to be characteristics of a perfectly competitive market? Select TWO that apply
- A. In a perfectly competitive market, each seller has a large impact on the market price A perfectly competitive market consists of products that are all slightly different from one another
- B. In a competitive market, both buyers and sellers areprice givers
- C. There are many buyers and sellers in the market
- D. Firms can freely enter or exit the market
Answer: C,D
Explanation:
Explanation
A perfectly competitive market is one with the following features:
- There are many firms producing identical or very similar (homogeneous) goods or services
- There are no barriers toentry to the market or exit from the market - anyone can enter or leave easily
- Both producers and customers have perfect knowledge of the market place, prices, costs of production and influences on demand and supply Under these conditions, the price andquantity will always tend toward equilibrium as any producer that sets a price above equilibrium will not sell anything at all, and any producer that sets a price below a equilibrium will obtain 100% market share in theory. The demand curve is perfectly elastic, which means that it will be horizontal. In a perfectly competitive market, it is difficult to increase profits through pricing, and suppliers instead must focus on their cost structure. As these conditions imply, there are few if any examples of perfectly competitive market.
LO 2, AC 2.2
NEW QUESTION 55
A procurement manager is preparing fora negotiation with an important supplier. He plans to withhold some crucial information so that his company gains the upper hand in the negotiation. Is this correct when considering using integrative approach to the negotiation?
- A. No,holding back information will prompt the supplier gain higher negotiation power
- B. Yes, the supplier must know what buyer wants and how to provide that even when the buyer is silent on these matters
- C. Yes, the buying organisation must maximise its gain, even at the detriment of the other party
- D. No, this approach requires honest and open discussion
Answer: D
Explanation:
Integrative negotiation is a negotiation strategy in which the involved parties work together to find a solution that satisfies the needs and concernsof each. This process often involves group brainstorming and creative thinking for individuals to suggest different ideas that benefit both parties.
Compromising is often common in integrative negotiation, and both sides may need to give up certain needs to reach a solution. Honesty can also promote successful integrative negotiation because it can lead to a comprehensive understanding of the issue and what each party needs to be satisfied with the result.
NEW QUESTION 56
According to Fiona Dent and Mike Brent, which of the following are characteristics of Push approach? Select TWO that apply.
- A. Seeking commitment
- B. Collaborative
- C. Persuasion
- D. Directive
- E. Inspirational
Answer: C,D
Explanation:
According to the book 'Influencing: Skills and techniques for business success' by Fiona Dent and Mike Brent, there are two major influencing styles. Push tends to be directive. It tells, and is clear and resolute, but needs to be employed in situations where firmness is required because of difficulties that exist or weakness is evident.
Pull is more participatory and collaborative. It seeks to incorporate everyone's perspective. It can appear wishy-washy if not skilfully employed. That approach should be followed which is most likely to secure commitment and not mere compliance.
The two divisions can be further divided into four style categories: directive; persuasive reasoning; collaborative - team oriented, people oriented to inspire them with a vision. The directive style relies on your expertise and reputation being respected by others, and where there really does seem to be one answer. It is "I" driven whereas persuasive reasoning is more "we" and issue driven. Directive styles can make the user appear as "a bull in a china shop"; persuasive reasoning can be portrayed as tough guy.
Collaborative influencing takes the "we" element further and seeks to mobilise everyone's ideas in a journey of discovery. It may have the flavour of "I'm your best friend", which may not go down too well. Visioning style is concerned to stir people's emotions in support of achieving an objective. This last one has been used by demagogues to stir people's hearts and minds for evil purposes as well as good.
A useful table offers the benefits, problems, words and body language associated with each style along with advice on when to use and when to avoid each. Cases and exercises illustrate these styles.
Empathy comes in for extended treatment with the definition of "standing in the other's shoes". This does not necessarily happen just intuitively, and therefore before a specific influencing effort there should bean intense effort to think about the other person or persons and to sense what it might feel like to be them - their hopes, fears, concerns, what turns them on, what turns them off, where are they coming from.
NEW QUESTION 57
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. No, because supplier's average costs will rise as the buyer's demand increases
- B. Yes, because larger order quantity will bring a considerable profit to supplier
- C. Yes, because larger order quantity will always enable the supplier to reach its economy of scale
- D. No, because the supplier may need to invest in new facility to meet buyer's demand
Answer: D
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 58
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
- A. Cost overruns
- B. Transparent decision makingprocess
- C. Decreasing percentage of missed delivery overtime
- D. Less frequent communication on business requests
Duplication of effort
Answer: B,C
Explanation:
Explanation
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
NEW QUESTION 59
Which of thefollowing should be the final step of a negotiation process if both parties cannot reach an agreement?
- A. Celebrating publicly about the deal
- B. Tempting TOP to reopen the negotiation
- C. Asking TOP for another concession
- D. Reflecting on performance
Answer: D
Explanation:
Explanation
Reflecting on performance should become a natural final step in the negotiation process.
'Celebrating publicly about the deal': Public gloating, even in success or failure, if it gets back to the supplier via the press or social media, will likely damage the relationship
'Tempting TOP to reopen the negotiation': whether TOP agrees to reopen the negotiation, procurement should reflect on their achievement and what can be improved.
'Asking TOP for another concession': TOP can agree or rejectthis concession. Eventually, reflecting should be the final step. Procurement can learn a lot from reflection on performance.
LO 3, AC 3.4
NEW QUESTION 60
Which of the following are tools that help procurement visualise cost breakdowns of products and services purchased from supplier?
1. Spend candlesticks
2. Spend tree
3. Aggregate expenditure model
4. Spendwaterfall
- A. 2 and 4 only
- B. 1 and 2 only
- C. 1 and 3 only
- D. 3 and 4 only
Answer: A
Explanation:
Understanding where and with whom your supplier spends their money, or understanding the 'cost breakdowns' or 'price build-up' of the goods andservices you purchase from the supplier, will help you know where and when they can offer price concessions.
Cost information can be expressed with more impact through graphs that can be created using Excel and PowerPoint or other softwares. There are two commonly used models known as 'spend waterfall' and 'spend tree'. Spend waterfall shows the build-up of costs, while the spend tree shows all the spends that an organisation makes.
There is no graph known as 'spend candlesticks'. Candlestick chart is astyle of financial chart used to describe price movements of a security, derivative, or currency.
The aggregate expenditure model is a method of calculating GDP. The aggregate expenditure model focuses on the relationships between production (GDP) and planned spending: GDP = planned spending = consumption + investment + government purchases + net exports.
NEW QUESTION 61
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
- A. Premium price is determined by variable costs only
- B. Price is based on cost structures
- C. This strategy is often used when supplier attempts to enter new market
- D. Typically found in the early part of the product life cycle
- E. Products are charged at a price based on supplier's reputation
Answer: D,E
Explanation:
There are several pricing strategies used by suppliers:
Cost-plus pricing - Total variable + Fixed cost + profit
Premium pricing - based on branding. Supplier determines to charge a very high price, notconnected with cost structures, usually based on its reputation and/or the perception that the product/service is of a superior quality. This strategy typically found in the early part of the product life cycle/when demand exceeds supply.
Penetration pricing - Supplier attempts to enter a new market or extend its share in an established one. It is characterised by price reductions to increase volume, followed by steady price increases; may even be loss leading at start (no profit made) Marginal cost pricing - covers only variable cost Market pricing - suppliers prices in line with what the market is willing to pay
NEW QUESTION 62
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. No, because the parties will always find a compromise solution in integrative approach
- B. Yes, because all parties must have exactly the same goals in integrative negotiation
- C. No, because any party may leverage its own advantage during the contract
- D. Yes, because both parties have well understood each other's goals when they engage in collaborative negotiation
Answer: C
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 63
Commercial negotiation ends at the award of a contract. Is this statement true?
- A. Yes, because the supplier will comply with legally binding obligations
- B. No, because real commercial negotiation begins after the contract is awarded
- C. No, because improvements can be achieved through post-award negotiation
- D. Yes, because there are no rooms for negotiation after the contract is awarded
Answer: C
Explanation:
Explanation
Negotiation doesn't end after the contract is awarded. The needs for negotiation can arise in anypost-award stages. For example, at supplier development and relationship management stage, improvement in supplier capability, capacity, and product/service range can be negotiated. Negotiations with long-term strategic critical suppliers should be carriedout in a partnering style, with a win-win starting point assumed.
In some sectors such as transport, utilities and infrastructure, tenderers may 'bid low' or even make a loss to win major contracts with a view to negotiating lucrative changes, variationsand 'add-ons' over the life of the contract when the supplier is bedded in and the buyer is in the weaker position to push back or challenge. Even in less complex contract, it is very likely that there will be a need to negotiate with that supplier again after the awarding of the contract.
LO 1, AC 1.1
NEW QUESTION 64
According to Dr. Mari Sako, which of the following is potentially the weakest trust to be built?
- A. Charitable trust
- B. Contractual trust
- C. Goodwill trust
- D. Competence trust
Answer: B
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, whichis 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.
Goodwill trust: 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.
Otherwise, trust also has legal meaning. A trust is a legal document that can be created during a person's lifetime and survive the person's death. A trust can also be created by a will and formed afterdeath. Charitable trusts are trusts which benefit a particular charity or the public in general.
NEW QUESTION 65
Which of the following is the true statement?
- A. Internal stakeholder support will be important for both negotiation and contract performance
- B. All connected stakeholders have a low level of impact on procurement negotiations
- C. Commercial negotiation objectives should be driven by just the instincts of procurement
- D. External stakeholders such as suppliers can largely influence an organisation's procurement negotiations
Answer: A
Explanation:
Internal stakeholder support will be important not just at the initial negotiation of the contract, but potentially throughout the life of the contract right through to exit.
As a general rule, connected stakeholders (with the exception of suppliers) have a low level of influence on procurement negotiations.
Suppliers are connected stakeholders who have contractual relationships with the organisation.
Commercial negotiation objective should be driven by thebusiness needs of the organisation, and not just the instinct of procurement.
NEW QUESTION 66
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 has an advantage in negotiating discounts if their currency appreciates
- B. Supplier will receive less if XYZ's currency appreciates
- C. XYZ has to pay more if their currency depreciates
- D. XYZ is able to pay less if their currency depreciates
Answer: A
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 67
In which of the following persuasion methods, the influencer uses logics and objective reasons to persuade the others to buy intoinfluencer's ideas?
- A. Persuasive reasoning (push)
- B. Directive (push)
- C. Visionary (pull)
- D. Collaborative (pull)
Answer: A
Explanation:
There are two major persuasion methods: 'push' and 'pull'.
Persuasion can be defined as encouraging someone to do something 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 resultof 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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Using logical and objective reasons is one of the typical characteristics of persuasion reasoning method.
NEW QUESTION 68
In general, which of the following is the consequence of a flatter demand curve?
- A. Quantityelastic
- B. Price inelastic
- C. Unit price elastic
- D. Price elastic
Answer: D
Explanation:
Explanation
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor.
In microeconomic graphs,elasticity and inelasticity can be shown by the slope of the demand curve. If a demand curve is almost horizontal, then the product pricing can be described as very elastic. If a demand curve is almost vertical, then the product pricing can be described asvery inelastic.
The formulae of elasticity:
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LO 2, AC 2.2
NEW QUESTION 69
Ma Bell was the sole provider of landline telephoneservice to most of the US in 1980s. This is an example of...?
- A. Perfect competition
- B. Monopsony
- C. Monopoly
- D. Monopolistic competition
Answer: C
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 70
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. Competitive power
- D. Legitimate power
- E. Trademark power
- F. Expert power
Answer: A,D,F
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 71
Neville is a senior procurement specialist in a automaker. He has good relationship with his team mates and other departments because of his amazing purchasing skills and kindness. Which of the following sources of power is Neville likely to possess?
- A. Legitimate
- B. Referent
- C. Reward
- D. Coercive
Answer: B
Explanation:
In 1959, French and Raven described five bases of power:
1. Legitimate - This comes from the belief that a person has the formal right to make demands, and to expect others to be compliant and obedient.
2. Reward - This results from one person's ability to compensate another for compliance.
3. Expert - This is based on a person's high levels of skill and knowledge.
4. Referent - This is the result of a person's perceived attractiveness, worthiness and right to others' respect.
5. Coercive - This comes from the belief that a person can punish others for noncompliance.
Six years later, Raven added an extra power base:
6. Informational - This results from a person's ability to control the information that others need to accomplish something.
In the scenario, Neville attracts and keeps good relationship with his colleagues not because of neither position nor reward nor coercion. He has good skills and kindness, which increase his charisma. His source of power is referent power.
NEW QUESTION 72
When prices of input materials increase, supply curve shifts to the left while demand remains stable. The shift of supply will tend to cause which of the following?
- A. A decrease in the equilibrium price and quantity
- B. A decrease in the equilibrium price and an increase in the equilibrium quantity
- C. An increase in the equilibrium price and quantity
- D. An increase in the equilibrium price and a decrease inthe equilibrium quantity
Answer: D
Explanation:
The case in the question is illustrated as below:
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The equilibrium price initially at P0 with quantity Q0, when supply curve shifts to the left, it will converge with demand curve at new equilibrium pointwith price P1 and quantity Q1. As you can see from the graph, P1 is greater than P0 and Q1 is smaller than Q0.
NEW QUESTION 73
Which of the following is the area where two or more negotiating parties may find common ground?
- A. Zone of proximal development
- B. Best alternative to a negotiated agreement
- C. Walk away area
- D. Zone of potential agreement
Answer: D
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 74
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