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CIPS L4M5 시험

Commercial Negotiation 온라인 연습

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Question No : 1


A procurement professional is sourcing low value items. He conducts market analysis and realise that these items can be provided by many suppliers and switching cost between suppliers is relatively low. He also assume that the relationship between buyer and supplier will be transactional rather than long-term.
According to Thomas-Kilmann conflict model instrument, which of the following is the most appropriate style that the procurement professional should adopt when negotiating with these suppliers?

정답:
Explanation:
According to Thomas-Kilmann conflict model instrument, there are 5 conflict management styles:
In this scenario, the buyer's bargaining power is stronger than suppliers', and the relationship is transactional. Therefore, to get the most preferable outcome, the procurement professional can take an assertive approach, while he doesn't need to co-operate closely with these suppliers. Competing will be the most appropriate approach to negotiation in this scenario so that the buying organisation can get a better deal.

Question No : 2


A procurement manager is preparing for a 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?

정답:
Explanation:
Integrative negotiation is a negotiation strategy in which the involved parties work together to find a solution that satisfies the needs and concerns of 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.
Reference: CIPS study guide page 29-31
Integrative Negotiation: Definition, Tips and Examples | Indeed.com

Question No : 3


A new manager has been appointed with responsibility for an organisation's category which has major impact on organisational cost base and there are little competitions in the supply market. They have an objective to improve supplier cost structures over time.
Which of the following should they carry out first?

정답:
Explanation:
The objective of the buyer here is to improve supplier cost structures over time, which requires them to have insight into supplier's current cost information. Purchase price cost analysis (PPCA) can help here. PPCA is a method for gathering, analysing and using price and cost information in a systematic way. The process allows the identification of future savings and opportunities to improve current costs.
STEEPLE analysis is used to analyse the macro environment that may have impact on an organisation.
Competitive rivalry is a part of Porter's Five Forces which is a tool for strategy making.
Volume concentration is a way to increase the purchasing quantities in order for a buying organisation to improve its leverage in negotiation.

Question No : 4


At which stage in a negotiation would questions be asked to obtain missing information?

정답:
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 position they are.

Question No : 5


XYZ Ltd needs to purchase a bundle of IT products from suppliers. The procurement manager requests details of costs regarding designing and managing those products. After receiving reports from suppliers, she realises that they have charged up to a 1,095% mark-up on IT products.
In order to ensure value for money, which of the following should be a priority pricing arrangement of the procurement manager in the negotiation with these IT suppliers?

정답:
Explanation:
In the scenario, the main cost driver is suppliers' mark-up. The priority should be limit the margin to be added. XYZ Ltd can agree “cost plus” contracts with their suppliers to ensure no IT product purchased exceeds an agreed maximum margin level. Procurement teams can use their benchmarking tools to police these contracts. Cost plus contracts are agreements where the contractor's pricing is based on itemising allowable costs and then adding an agreed margin.
Market penetration pricing - pricing low to win a large share of the market
Market skimming - pricing a new product high in order to make a large profit from the purchases by initial customers. This is an effective strategy only in the absence of competition. When competition appears, market skimmers usually drop their prices
Premium pricing - usually pricing high because the market is prepared to pay extra for the kudos associated with the product, thanks to, say, a reputation for quality, or a highly fashionable brand name, and so on

Question No : 6


Eliminating requirements in the specification that prioritises monopoly suppliers

정답:
Explanation:
In most commercial negotiations with monopolistic organisations, one can expect that in general they will have far greater bargaining power - you will need them more than they need you. There BATNA is stronger in the short run, but over time their power can be challenged effectively.
Ways of dealing with monopoly suppliers include the following:
Making yourself an attractive buyer
Seeking out alternatives / substitutes in a private or public manner
Designing out the requirement that forces you to go to the monopoly suppliers, or seek to make the product, or threaten to make it yourself if feasible
Lobbying government or campaigning, as part of an industry or trade body, for a reduction in barriers to entry that support the monopoly

Question No : 7


Which of the following is categorised as fixed cost?

정답:
Explanation:
An organisation's expense can be categorised into three groups:
Fixed Costs C costs that do not change with output.
Variable Costs C costs that vary in direct proportion to output.
Semi-variable costs C costs that are a combination of the above, with both a fixed and variable element.
Among the four options:
"Land rental paid in advance": This is fixed cost. The rental won't increase when the production increases.
"Additional pallet hires due to higher demand in year-end season": This can be identified as semi-variable cost (or step cost).
"Governments taxes": The taxes are often levied by a percentage of income or revenue. Therefore, it is variable
"Raw materials for next year production": This is obviously variable cost.
Reference: CIPS study guide page 79-84
Study tips: Fixed variable and semi-variable costs - AAT Comment

Question No : 8


Which of the following are behaviours that builds trust between the buyer and the supplier in business relationship? Select TWO that apply.

정답:
Explanation:
Trust-building behaviours are as following:
Joint-effort issue resolution
Open sharing of information
Open and honest discussion on root cause of failures
Joint planning focusing on value for money and risk sharing
Commercial transparency and co-proposition of cost reduction and service improvement programmes
Joint recognition and celebration of successes

Question No : 9


Which of the following is definition of elasticity of demand in microeconomics?

정답:
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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Question No : 10


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?

정답:
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 at quieter 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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Question No : 11


Which of the following is NOT a barrier to entry in a monopolized market?

정답:
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 said to 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 No : 12


SBL provides contract bathroom furniture and fittings for a wide variety of domestic and commercial clients. To some suppliers, SBL spend claims a large portion of their revenue. But SBL is famous for imposing draconian obligations on these suppliers.
Which of the following is most likely to be overarching objective of these suppliers to SBL?

정답:
Explanation:
According to Paul Steele's 'The Seller's Perspective', customer can be classified into 4 categories as below:
In this scenario, although SBL's spend claims large portion in suppliers' revenues, their draconian treatment will reduce SBL's attractiveness in supplier's perspective. SBL falls into Exploit quadrant. With exploitable customers, suppliers tend to 'milk' the customer and charge a high price to compensate for all the pain customer put on them.

Question No : 13


Which of the following are examples of push techniques in commercial negotiations? Select TWO that apply.

정답:
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 result of their reflection and thinking, and not your direct actions.
There are 5 options in this question:
'Threat of punishment, costs and damage': The influencer tries to 'push' the other party to act as he/she wants by using force. This method is effective but short-lived. The influencer also risks to developing reputation for being heavy handed and dictatorial.
'Argument based on information, logic and reason': The influencer uses logic and reasons to persuade the other party. This is also known as 'Persuasive Reasoning' (Push)
'Using language and imagery to ‘paint a picture others can see’': The influencer seeks to influence another by understanding the other's emotions, and stimulating that party's imagination to visualise the desired future goal of the influencer. This is also known as 'visionary (pull)'
'Working together to define the problem, the goals and the best solution': In this technique, the person seeking to influence another involves the other party in the decision making process. This is known as 'collaborative (pull)'
'Listening to, involving and supporting others': In this technique, the person seeking to influence another tries to discover the other party's emotion and aims at mutual understanding. This is also a collaborative approach.

Question No : 14


An organisation is developing the specification for a capital purchase project. An important stakeholder has doubt on the draft specification. The buyer invites him to the product function meetings. In these meeting the attendees can raise their concerns, the specification development team takes in all the concerns and adjusts the specification accordingly.
What kind of technique is the specification development team using?

정답:
Explanation:
In the scenario, anyone who has concerns can join a meeting to raise their thoughts. The project team takes the stakeholders' ideas into account. This is known as coalition: A group of people or organisations come together and work collaboratively to achieve some goals. Specifically in this scenario, the goal is creating a high-quality and unified specification for an important project.
Reference: CIPS study guide page 164-165
What Is a Coalition Anyway?

Question No : 15


Which of the following are most likely to be direct costs of a steel manufacturer? Select THREE that apply.

정답:
Explanation:
Direct costs are those costs of a product/service directly attributable/traceable to its production.
Examples of direct costs including 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

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