CIPS L4M5 Commercial Negotiation Online Training
CIPS L4M5 Online Training
The questions for L4M5 were last updated at Feb 05,2025.
- Exam Code: L4M5
- Exam Name: Commercial Negotiation
- Certification Provider: CIPS
- Latest update: Feb 05,2025
Question #61
Which of the following method should be used in negotiation if both parties want to communicate verbally and non-verbally without having to meet face-to-face?
- A . Web conferencing
- B . Telephone
- C . Teleconferencing
- D . In-person meeting
Correct Answer: A
A
Explanation:
Using webcams in a web conference means you are able to communicate both verbally and non verbally.
Over the phone, you cannot see TOP, the only cue/signal you have regarding their mood, interest and attitude is person’s voice, intonation andany delay.
A teleconference is a telephone meeting among two or more participants involving technology more sophisticated than a simple two-way phone connection.
In-person meeting requires you team and TOP to be in the same place at the same time. LO 2, AC 2.4
A
Explanation:
Using webcams in a web conference means you are able to communicate both verbally and non verbally.
Over the phone, you cannot see TOP, the only cue/signal you have regarding their mood, interest and attitude is person’s voice, intonation andany delay.
A teleconference is a telephone meeting among two or more participants involving technology more sophisticated than a simple two-way phone connection.
In-person meeting requires you team and TOP to be in the same place at the same time. LO 2, AC 2.4
Question #62
Which of the following is the process enabling the buyer to share with 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 . Supply positioning
- C . Supplier appraisal
- D . Supplier conditioning
Correct Answer: D
D
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).
D
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).
Question #63
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 . A single firm is very large
- C . The government gives a single firm the exclusive right to produce some good
- D . A key resource is owned by a single firm
Correct Answer: B
B
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 property protection 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 costs and 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.
B
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 property protection 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 costs and 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.
Question #64
Which of the following are the most typical characteristics of integrative approach to
negotiation? Select TWO that apply.
- A . Positional-based
- B . Claiming value
- C . Interest-based
- D . Short-term wins
- E . Creating more value
Correct Answer: C,E
C,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.
C,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.
Table
Description automatically generated
LO 1, AC 1.2
Question #65
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
- A . Products are charged at a price based on supplier’s reputation
- B . This strategy is often used when supplier attempts to enter new market
- C . Price is based on cost structures
- D . Typically found in the early part of the product life cycle
- E . Premium price is determined by variable costs only
Correct Answer: A,D
A,D
Explanation:
There are several pricing strategies used by suppliers:
Cost-plus pricing C Total variable + Fixed cost + profit
Premium pricing C 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 C covers only variable cost
Market pricing C suppliers prices in line with what the market is willing to pay
A,D
Explanation:
There are several pricing strategies used by suppliers:
Cost-plus pricing C Total variable + Fixed cost + profit
Premium pricing C 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 C covers only variable cost
Market pricing C suppliers prices in line with what the market is willing to pay
Question #66
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 . Yielding to another’s point of view
- C . Resolving some conditions that would otherwise have them competing for resources
- D . Trying to win at any cost
- E . Trying to find a creative solution to current problem
- F . Seeking a quick middle-ground position
Correct Answer: A,C,E
A,C,E
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 the underlying 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.
A,C,E
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 the underlying 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.
Question #67
At the first stage of CIPSP rocurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
- A . Demand management
- B . Evaluating the interests from suppliers
- C . Undertaking ‘reverse marketing’
- D . Deciding whether RFQ or ITT should be used
Correct Answer: A
A
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. Demand management including: negotiation/challenge between procurement and internal stakeholders over the need/requirement/specification. Remember that in any process or product, the greatest opportunity for cost reduction is at the design stage.
A
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. Demand management including: negotiation/challenge between procurement and internal stakeholders over the need/requirement/specification. Remember that in any process or product, the greatest opportunity for cost reduction is at the design stage.
Question #68
At which stage in a negotiation would questions be asked to obtain missing information?
- A . The bargaining stage
- B . The proposing stage
- C . The opening stage
- D . The testing stage
Correct Answer: D
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.
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.
Question #69
Which of these personal power bases stems from the manager’s position in the organisation and the authority that lies in that position?
- A . Coercive power
- B . Legitimate power
- C . Expert power
- D . Reward power
Correct Answer: B
B
Explanation:
Legitimate power comes from the belief that a person has the formal right to make demands, and to expect others to be compliant and obedient. Legitimate power comes from rules, formal authority, organisation rank, staff grade or official position held. In commercial negotiation, legitimate power can be demonstrated by job title and rank. LO 1, AC 1.3
B
Explanation:
Legitimate power comes from the belief that a person has the formal right to make demands, and to expect others to be compliant and obedient. Legitimate power comes from rules, formal authority, organisation rank, staff grade or official position held. In commercial negotiation, legitimate power can be demonstrated by job title and rank. LO 1, AC 1.3
Question #70
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
- A . Purchase of aircraft
- B . Catering services
- C . Advertising and promotion
- D . Flightcrew training
- E . Fuel
Correct Answer: A,D
A,D
Explanation:
Fixed costs (FC) are costs that do not vary with volume. To an airline once aircraft are purchased, flight crews trained and departures scheduled, costs are disproportionately fixed.
Variable costs (VC) are those which vary with the amount produced. Fuel, catering services
and marketing are examples of variable.
LO 2, AC 2.1
A,D
Explanation:
Fixed costs (FC) are costs that do not vary with volume. To an airline once aircraft are purchased, flight crews trained and departures scheduled, costs are disproportionately fixed.
Variable costs (VC) are those which vary with the amount produced. Fuel, catering services
and marketing are examples of variable.
LO 2, AC 2.1
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