L4M5 Exam Dumps | XYZ Ltd needs to purchase a bundle of IT products from suppliers. The procurement manager requests details

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Question 59/175

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?

A. Premium pricing

B. Cost plus arrangement

C. Market skimming

D. Market penetration pricing

Correct Answer: B

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

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