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Free L4M5 Exam Braindumps (page: 17)

Page 16 of 41
PDF with 223 Questions

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?

  1. Premium pricing
  2. Cost plus arrangement
  3. Market skimming
  4. Market penetration pricing

Answer(s): B

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



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

  1. The bargaining stage
  2. The proposing stage
  3. The opening stage
  4. The testing stage

Answer(s): 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 position they are.



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?

  1. Purchase price cost analysis
  2. Competitive rivalry analysis
  3. Volume concentration
  4. STEEPLE analysis

Answer(s): A

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.



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?

  1. No, this approach requires honest and open discussion
  2. Yes, the supplier must know what buyer wants and how to provide that even when the buyer is silent on these matters
  3. Yes, the buying organisation must maximise its gain, even at the detriment of the other party
  4. No, holding back information will prompt the supplier gain higher negotiation power

Answer(s): A

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






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