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L4M5 Free Demo Questions
A sample from the full question set for this exam.
QUESTION 1 OF 5
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. Spend waterfall
Correct Answer: A
Understanding where and with whom your supplier spends their money, or understanding the 'cost
breakdowns' or 'price build - up' of the goods and services 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 a style 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.
breakdowns' or 'price build - up' of the goods and services 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 a style 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.
QUESTION 2 OF 5
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
Correct Answer: A,D
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, not
connected 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
Cost - plus pricing – Total variable + Fixed cost + profit
Premium pricing – based on branding. Supplier determines to charge a very high price, not
connected 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
QUESTION 3 OF 5
A purchasing manager is having a negotiation with a supplier to extend the duration of the contract. In order to persuade 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?
Correct Answer: A
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.
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.
QUESTION 4 OF 5
According to Professor Gavin Kennedy, in which of the following forms of dispute resolution, both parties will voluntarily exchange their ideas and beliefs?
Correct Answer: C
Professor Gavin Kennedy highlights that we need to distinguish negotiation from other forms of
decision - making by focusing on what is unique about it (the voluntary exchange) and not shared by
other
techniques such as persuasion, gambling (e.g., coin tossing), command decision, instruction,
litigation and coercion.
decision - making by focusing on what is unique about it (the voluntary exchange) and not shared by
other
techniques such as persuasion, gambling (e.g., coin tossing), command decision, instruction,
litigation and coercion.
QUESTION 5 OF 5
Sumitomo Rubber Industries (SRI) is a Japan - based tyre manufacturer. In order to increase production, SRI is sourcing rubber from Southeast Asian firms. Which of the following micro factors are most likely to shift the balance of power to supplier? Select TWO that apply
Correct Answer: B,E
There are many factors that can influence the balance of power in a negotiation. These factors are classified into 3 levels: Macro level: STEEPLE framework: social, technological, economic, environment, political, legal and ethical Micro level: Porter's five forces:
One - to - one buyer - supplier dynamics. The question asks about the micro factors that increases supplier's bargaining power. Among 5 answers, only 2 are likely to increase buyer's power: There are no close substitutes for rubber: the buyer has to buy rubber, not any other material. Costs of changing suppliers are high: buyer entails a large barrier if they want to switch supplier. Other answers cannot be correct because: SRI sets up its own rubber plantation: Buyer secures its own supply SRI's purchase amount makes significant proportion of supplier revenue: Suppliers are reliant on buyer. If the buyer stops buying from them, they can face serious cash flow problems Rubber from different suppliers is virtually similar: undifferentiated product would shift the power balance towards buyer.
One - to - one buyer - supplier dynamics. The question asks about the micro factors that increases supplier's bargaining power. Among 5 answers, only 2 are likely to increase buyer's power: There are no close substitutes for rubber: the buyer has to buy rubber, not any other material. Costs of changing suppliers are high: buyer entails a large barrier if they want to switch supplier. Other answers cannot be correct because: SRI sets up its own rubber plantation: Buyer secures its own supply SRI's purchase amount makes significant proportion of supplier revenue: Suppliers are reliant on buyer. If the buyer stops buying from them, they can face serious cash flow problems Rubber from different suppliers is virtually similar: undifferentiated product would shift the power balance towards buyer.
Question 1 of 5