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CIPS Commercial Negotiation L4M5 Exam Questions
Question 1
Which type of question style is a negotiator using if they ask the other party
''Can you deliver our items by Friday 17th?''
Answer : B
This is a closed question because it requires a definite, factual response such as ''yes'' or ''no''. Closed questions are particularly useful in negotiations for confirming specific commitments, including delivery dates, prices, quantities, or contractual terms. They reduce ambiguity and are commonly used during the later stages of negotiation to confirm agreement and progress toward closure. Probing questions seek deeper explanation, leading questions influence the answer, and multiple questions combine several issues at once. CIPS highlights the importance of choosing question styles appropriately depending on the negotiation objective and stage.
Question 2
Commercial negotiations on price cover various aspects, including pricing arrangements. A buyer may negotiate a fixed-price agreement. Why is a fixed-price agreement advantageous to the buyer?
Answer : B
In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier's internal cost build-up (unlike cost-plus).
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Question 3
Which of the following is a challenge when calculating absorption costing?
Answer : A
Absorption costing allocates indirect overheads to units, which is inherently judgemental; selecting allocation bases that ''fairly'' load overhead to products is the well-known difficulty. (By contrast, option B describes activity-based costing concepts---cost pools and drivers.)
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Question 4
Fast & Easy Limited, a global fast food retailer, is in a negotiation with its major meat supplier. The supplier is asking for a 2% price increase, which Fast & Easy is strongly resisting. The supplier justifies this increase by stating that currency fluctuations, an unstable economic climate, and rising transport costs have necessitated this increase. Which influencing tactic is the supplier using?
Answer : A
The supplier is using Rational persuasion by providing logical reasons, such as economic conditions and increased costs, to justify the price increase. This approach uses factual information to influence the buyer's decision, aiming to present the price hike as a reasonable adjustment, which aligns with CIPS strategies on influencing tactics in negotiations.
Question 5
During which stage in the negotiation process would negotiators use tactics and exchange concessions?
Answer : A
Thebargaining stageis where both parties begin tomake concessionsand test options. This phase involves the use of strategic tactics, including the presentation of tradeables and adjustments in position to reach mutual agreement.
''The bargaining stage is characterised by movement, trade-offs, and deal-shaping. Tactics such as anchoring, making concessions, and introducing tradeables are employed to bridge the gap between opening offers.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Stages of the Negotiation Process)
Question 6
Lina Rawlins is a senior buyer working for a medical equipment company. Lina is in charge of the company's largest supplier account, Great Barrington Gas (GBG), a medical equipment supplier. Recently, GBG's performance has declined, leading to an increasing number of rejected items. Lina is aware of the seriousness of this and has asked GBG to attend an urgent meeting. In the meeting, Lina asked the GBG representative, ''Can you tell me exactly what you are doing to ensure quality?" What type of question is Lina asking?
Answer : A
Lina is asking a probing question to gather more detailed information on the actions GBG is taking to address quality issues. Probing questions are intended to delve deeper into a topic and elicit specific details, making them suitable for understanding underlying issues, as per CIPS's negotiation question types.
Question 7
Which of the following would help build trust in a relationship?
Mediation attendance
Regular meetings
Keep promises
Coercion
Answer : B
Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.
Question 8
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
Answer : B, C
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
Question 9
Maria fears her proposed pricing may be rejected by the supplier. To mitigate this risk, she is preparing a BATNA. Is this the correct approach?
Answer : B
BATNA (Best Alternative to a Negotiated Agreement) gives negotiators a fallback plan if discussions fail. It ensures they never accept worse terms than their minimum acceptable alternative. For Maria, developing a BATNA mitigates rejection risk, strengthens her bargaining power, and provides confidence. Without a BATNA, negotiators risk over-conceding or being locked into unfavourable deals. CIPS emphasises that BATNAs must be realistic, actionable, and aligned to organisational objectives---not merely theoretical alternatives.
Question 10
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way of analysing costs is to classify them into direct and indirect costs.
Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Direct costs are expenses that can be clearly attributed to the production of specific goods. These typically include raw materials, direct labor, and other costs tied directly to the manufacturing process. They are variable with production volume and help procurement teams analyze pricing more effectively during negotiations.
Question 11
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?
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.
Question 12
A skilled negotiator will use a range of questioning techniques. If they wish to explore options with the other party without making any formal commitment, which style would they use?
Answer : B
Hypothetical (''What if...'') questions test possibilities and invite creative options without binding either side. They help probe interests and packages while keeping commitment provisional.
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Question 13
Ben Dunne is a procurement manager and is responsible for a contract that supplies translation services to his organisation. Ben has the authorisation to extend the contract for a further two years, but has aimed for a further 2% discount. Ben is aware that the supplier's previous performance has been inconsistent, but during the negotiation Ben asks the supplier to present their performance to date on this contract. Which stage of the negotiation cycle is this?
Answer : D
The testing stage of the negotiation cycle is where each party explores and validates information provided by the other side. By asking the supplier to present their performance to date, Ben is testing claims, checking credibility, and assessing whether the supplier's performance supports or undermines their position in the negotiation. This is distinct from preparation (which happens before the meeting), bargaining (where concessions and tradeables are exchanged), and agreement (where final terms are confirmed). CIPS highlights that testing allows negotiators to challenge assumptions, clarify evidence, and strengthen their position before moving into bargaining or closure.
Question 14
Which of the following situations would increase a buyer's bargaining power?
Answer : A
When a buyer's purchase represents asignificant portion of a supplier's revenue, it increases the buyer's leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.
''Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer's ability to influence terms.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)
Question 15
Which of the following will help to indicate personality preferences in four dimensions?
Answer : D
The Myers--Briggs Type Indicator (MBTI) is an introspective self-report questionnaire indicating differing psychological preferences in how people perceive the world and make decisions. MBTI indicates personality preferences in four dimensions.
The Thomas--Kilmann Conflict Mode Instrument (TKI) is a conflict style inventory, which is a tool developed to measure an individual's response to conflict situations.
Mill's RESPECT mnemonic is set out by Harry A. Mills which describes seven steps to agreements
An intelligence quotient (IQ) is a total score derived from a set of standardized tests designed to assess human intelligence.
Question 16
John Browne, a junior buyer for a corporation, is analyzing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : C
Foreign exchange rates impact import costs, profit margins, and overall turnover when transactions are conducted in foreign currencies. Understanding these fluctuations allows buyersto anticipate changes in purchasing costs, supporting informed decision-making, as highlighted in CIPS guidance on global procurement considerations.
Question 17
What is a benefit to the buyer of having a BATNA (best alternative to a negotiated agreement) in a negotiation?
Answer : C
A BATNA provides the buyer with the confidence to walk away if terms are not favorable, ensuring they don't settle for a suboptimal agreement. Knowing the best alternative enables buyers to negotiate from a position of strength, as per CIPS's guidance on negotiation strategies.
Question 18
Mike is a junior buyer who has been working for a manufacturing organisation for two years, specializing in purchasing research. Over this time, he has built good relationships within his team and with other departments. Which of the following sources of power is Mike most likely to possess?
Answer : A
Referent power is based on personal relationships and the respect or admiration one earns within an organization. Given Mike's positive relationships and his rapport with team members and other departments, he is most likely to have referent power. This power type is influential in negotiation as people are more willing to work with someone they respect, as outlined in CIPS power dynamics in negotiation.
Question 19
An experienced procurement professional is developing strategies for forthcoming negotiations with her key supplier. To avoid negotiation deadlocks, she identifies the reasons why negotiations could fail. Which of the following are most likely to be reasons for negotiation failures? Select TWO that apply.
Answer : A, E
It has been said that most negotiations are won (or lost) at the preparation stage. Success in a negotiation cannot be claimed unless you can refer back to your objectives and show how you have achieve them. In broad terms, negotiation plans/strategies involve 4 key activities:
1. Developing and prioritising your objectives and limits
2. Seeking to understand TOP's objectives
3. Developing concession plans
4. Planning the resources and logistics required and agreeing team roles.
Questions to gain an understanding of why a negotiation failed
Did we collect and make effective use of all information available when preparing for the negotiation?
Did we set objectives for the negotiation that were stretching and achievable and established MIL objectives?
Did we determine a strategy for the negotiation?
Did the other party understand our needs correctly?
Were we aware of the underlying interests of the other party?
Were our proposals convincing enough for acceptance by the other party?
Did we explore different variables in the negotiation?
Did we fully understand all proposals?
Did we give any unplanned concessions and did we check the importance of these?
Did we focus on common interests?
Did we ask a range of questions?
Did we get answers to all our questions?
Could we answer all the questions addressed to us in a proper and positive way?
Did we summarise effectively?
Did we use different methods of persuasion in the negotiations?
Which tactics did we use and what effect did they have?
Did our negotiating team work well as a team?
Did we help to create a co-operative atmosphere
Question 20
An adversarial style of negotiation is appropriate when the buyer has greater bargaining power. In what other situation may the buyer adopt this style?
Answer : A
Adversarial (win--lose) negotiation is viable when buyers can leverage abundant alternatives and substitutes, reducing supplier power. In such cases, buyers can adopt tough tactics, knowing they can switch suppliers if necessary. By contrast, limited supply, single sourcing, or monopolist suppliers constrain buyer power, making adversarial strategies risky and often ineffective. CIPS stresses that negotiation style must be matched to market conditions and the power balance.
Question 21
Which of the following is a key element to developing high-trust supplier relationships?
Answer : C
Trust develops when organisations consistently deliver on commitments---meeting deadlines, respecting terms, and fulfilling promises. While audits, contract management, and data gathering support oversight, they do not in themselves build trust. In collaborative negotiations, reliability becomes the foundation of long-term partnerships, reducing the need for constant monitoring. CIPS highlights that trust is fragile and must be reinforced through transparency, consistent behaviour, and alignment of actions with words. This credibility is more persuasive than any formal monitoring.
Question 22
When planning a negotiation for sourcing internationally, which of the following divergent positions, and therefore potential conflict areas, should be prepared for? Select TWO that apply:
Answer : A, C, D
Question 23
Fast & Easy Limited, a global fast food retailer, is in a negotiation with its major meat supplier. The supplier is asking for a 2% price increase, which Fast & Easy is strongly resisting. The supplier justifies this increase by stating that currency fluctuations, an unstable economic climate, and rising transport costs have necessitated this increase. Which influencing tactic is the supplier using?
Answer : A
The supplier is using Rational persuasion by providing logical reasons, such as economic conditions and increased costs, to justify the price increase. This approach uses factual information to influence the buyer's decision, aiming to present the price hike as a reasonable adjustment, which aligns with CIPS strategies on influencing tactics in negotiations.
Question 24
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way of analysing costs is to classify them into direct and indirect costs.
Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Direct costs are expenses that can be clearly attributed to the production of specific goods. These typically include raw materials, direct labor, and other costs tied directly to the manufacturing process. They are variable with production volume and help procurement teams analyze pricing more effectively during negotiations.
Question 25
Win-lose approach is most likely to be associated with which of the following type of relationship?
Answer : A
Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Win-lose approach is useful when the relationship with the other party (TOP) is short-term and once-off.
The question mentions 4 types of relationship:
Adversarial: Both seek to maximize position at the expense of the other. Almost no trust, communication and cooperation. These suppliers will probably provide non-core products or services with the buyer purchasing them on a one-off basis.
Outsourcing relationship: Use competent suppliers to manage non-core businesses previously done in-house. Require high level of trust and collaboration
Partnership: Both work closely on long term development by sharing information, technology and ideas.High level of trust with the aim to benefit both parties (win-win)
Strategic alliance: Both parties identify areas where they could collaborate to create mutual benefits
Among these 4 types of relationship, only adversarial is once-off. Then it is the correct answer.
Question 26
A breakeven analysis uses which of the following aspects as part of the analysis?
Answer : A, D
Question 27
In which of the following scenarios could you adopt a distributive-based negotiation approach?
Answer : D
Question 28
Which of the following are most likely to turn buying organisation into an unattractive customer in supplier's perspective? Select TWO that apply.
Answer : A, D
Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation. Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:
Simple procurement processes: Using SRM technology may help to simplify the process
Simple contracting processes
Clear and concise documentation: Reduced paperwork helps both supplier and buyer save their time and resources.
Absence of onerous supplier terms and conditions
On-time payment
Transparent processes: Unclear tender award criteria can be seen as opaque. Suppliers who attended the tendering processes cannot know the reasons why their bids are rejected and hesitate to attend other tendering.
Ethical behaviour: Suppliers may prefer a buyer who adopts CSR policy because they can predict potential customer's behaviour. Demands for kickback are unethical behaviours.
Question 29
Which of the following is a variable cost?
Answer : D
Variable costs change in proportion to production volume, such as packaging, raw materials, and delivery. Fixed costs (rent, insurance, loan repayments) remain constant regardless of output. Recognising the difference is crucial when negotiating supplier pricing, as variable costs are often more open to tradeable adjustments (e.g., bulk discounts). Buyers who understand cost structures can challenge inflated fixed allocations or negotiate on genuine variable elements. This knowledge is vital in price breakdown discussions and in cost-modelling negotiations.
Question 30
According to Dr. Mari Sako, which of the following is potentially the weakest trust to be built?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Otherwise, trust also has legal meaning. A trust is a legal document that can be created during a person's lifetime and survive the person's death. A trust can also be created by a will and formed after death. Charitable trusts are trusts which benefit a particular charity or the public in general.
Question 31
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 32
A procurement team has discussed, in advance of a negotiation, what they will do if there is no agreement with the current supplier. They have decided that they will perform the services themselves in-house on a trial basis if no deal is made. Which of the following describes what they have prepared here?
Answer : A
Question 33
Which of the following are most likely to be direct costs of a steel manufacturer? Select THREE that apply.
Answer : B, E, F
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
Question 34
John Browne, a junior buyer for a corporation, is analysing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : A
Question 35
Hammad Alsuwaidi is a procurement professional leading a negotiation for a vehicle rental contract. Hammad has a clear goal to negotiate a two-year contract in exchange for a minimum of a 20% discount. During the negotiation, Hammad presents to the supplier the facts, figures, and justification for a 20% discount. Which of the persuasion methods below has Hammad chosen?
Answer : A
Hammad's approach of presenting facts, figures, and justifications aligns with the Push persuasion method. The Push strategy involves directly presenting information, data, and logical arguments to convince the other party of a certain outcome. In this scenario, Hammad is using objective evidence to influence the supplier towards agreeing to a discount, which is characteristic of the Push method, as per CIPS guidance on negotiation tactics.
Question 36
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as:
Answer : C
Question 37
Champion Toys (CT) is negotiating a large order with Top Teds. CT has identified lead times, order quantities, and delivery locations as tradeables. At which negotiation stage should CT introduce these tradeables?
Answer : A
Tradeables---variables such as price, delivery, quality, and payment terms---are introduced in the bargaining stage of negotiations. This is the phase where both parties test positions, make concessions, and trade issues to create acceptable packages. Proposing and opening are earlier stages focused on setting out agendas and clarifying needs, while closure comes after tradeables are resolved. Introducing tradeables too early can weaken leverage, and leaving them too late risks deadlock. Bargaining ensures the structured exchange of concessions while protecting the overall bargaining mix.
Question 38
Rose is a senior buyer from a skiing equipment retailer. Rose is concerned about the current ski boot shortage and the number of invoicing problems from a key supplier. She has decided to have a video conference with Victor, CEO of the supplier. Initially, she intends to threaten Victor with contract termination unless he can improve the situation. However, she is a little wary of doing this as the switching costs are high. Eventually, she decides to seek solutions by encouraging the other party to offer their views and ideas. Rose also prepares some ideas to discuss with Victor. Which of the following is the persuasion method that Rose intends to use in the forthcoming conference?
Answer : C
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 multiple variables to consider when choosing between 'push' and 'pull'. Professor Fiona Dent of Ashridge Business School proposes situations when each style might be most appropriate, breaking down push into 'directive' and 'reasoning' and 'pull' into 'collaborative' and 'visionary':
Table Description automatically generated
In the scenario, Rose intends to let both parties exchange their views and ideas so that solutions to current problems can be found. This is the typical characteristic of collaborative (pull) method.
Question 39
Which of the following are tactics of distributive bargaining?
Withholding information that may open up common ground
Coercing the other party to accept your position
Finding common ground between parties
Being open about all your common needs
Answer : C
Distributive bargainingfocuses onmaximizing one's own gainat the expense of the other party. Common tactics includewithholding informationandcoercion. It is typically used in zero-sum negotiations where parties compete over a fixed value.
''Tactics in distributive bargaining include withholding key information, making extreme opening offers, and using pressure to achieve concessions. These are aimed at maximizing individual outcomes.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.5 - Tactics of Distributive Bargaining)
Question 40
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 41
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
Question 42
A buyer is preparing for an upcoming negotiation with a large supplier on a contract renewal price. The buyer has undertaken some analysis and is concerned that changes in the organisation's macro-environment over the last year will result in a price increase. The buyer's analysis has identified changes in which of the following?
Answer : A
Question 43
Which of the following is the definition of safety margin?
Answer : A
As a financial metric, the margin of safety (safety margin) is equal to the difference between current or forecasted sales and sales at the break-even point. The margin of safety is sometimes reported as a ratio, in which the aforementioned formula is divided by current or forecasted sales to yield a percentage value. The figure is used in both break-even analysis and forecasting to inform a firm's management of the existing cushion in actual sales or budgeted sales before the firm would incur a loss.
This is a question that a student met in her actual exam. The margin of safety is not even mentioned in the CIPS study guide.
Question 44
A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?
Answer : B
To answer this question, you should know The seller's perspective as in 'How to Negotiate Professionally':
In the scenario, the buyer's spend is low, while they seem unattractive to seller (as they tend to pay late). So the buyer is classified as Nuisance in seller's perspective.
Question 45
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 46
Which of the following are examples of variable costs?
Building and site rent
Annual insurance premium
Raw materials expenditure
Delivery costs for materials
Answer : D
Variable costs fluctuate with production volume --- e.g., raw materials and delivery costs. Fixed costs such as rent and insurance remain constant regardless of output. In negotiations, suppliers may inflate fixed cost allocations to justify pricing; buyers should differentiate between fixed and variable costs to challenge pricing more effectively. Recognising true variable costs also allows negotiating for volume-related discounts.
Question 47
Maria fears her proposed pricing may be rejected by the supplier. To mitigate this risk, she is preparing a BATNA. Is this the correct approach?
Answer : B
BATNA (Best Alternative to a Negotiated Agreement) gives negotiators a fallback plan if discussions fail. It ensures they never accept worse terms than their minimum acceptable alternative. For Maria, developing a BATNA mitigates rejection risk, strengthens her bargaining power, and provides confidence. Without a BATNA, negotiators risk over-conceding or being locked into unfavourable deals. CIPS emphasises that BATNAs must be realistic, actionable, and aligned to organisational objectives---not merely theoretical alternatives.
Question 48
Which of the following are elements of price negotiations? Select the TWO that apply.
Answer : A, C
Price negotiations extend beyond headline unit price and include elements that influence total commercial value. Pricing arrangements (such as fixed, variable, indexed, or cost-plus pricing) directly affect financial risk and cost certainty. Terms of payment influence cash flow, working capital, and overall cost of ownership, making them core price-related negotiation variables. Sales tax is typically regulated and not negotiable, while cash flow management and administration costs are internal organisational concerns rather than negotiated price elements. CIPS emphasises a holistic approach to price negotiations that considers structure and payment terms, not just price level.
Question 49
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Hypothetical questions are used to explore options or scenarios without making commitments. This technique allows negotiators to understand the other party's preferences and limitations by presenting hypothetical situations, as recommended in CIPS guidelines for negotiation questioning techniques.
Question 50
A negotiation process ends once the negotiating meeting has finished. Is this statement true?
Answer : C
Question 51
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
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Question 52
Which of the following is a source of information on microeconomic factors?
Answer : B
Question 53
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?
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.
Question 54
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 55
For effective commercial negotiation, an organisation must analyse and apply approaches to negotiate agreements successfully. Which one of the following would provide a successful outcome?
Answer : A
Understanding the key approaches to commercial negotiation---such as adversarial, integrative, collaborative, or accommodative---is fundamental to achieving successful outcomes. CIPS emphasises that negotiators must be able to select and apply the correct approach based on factors such as power balance, relationship importance, risk, and objectives. While understanding conflict, stakeholder power, and sourcing stages all support negotiation effectiveness, they are secondary to choosing the right negotiation approach itself. Without this core understanding, negotiators risk misalignment between strategy and context, leading to suboptimal or failed outcomes.
Question 56
In what circumstances is the bargaining power of suppliers likely to be high, in relation to buyer power? Select THREE that apply.
Answer : A, D, E
Supplier bargaining power is stronger when there arefew suppliers,low volume requirementsfrom buyers, and when suppliers possessunique capabilities or technology(like specialized machinery). These conditions reduce buyer leverage and increase supplier influence.
Question 57
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 58
Which of the following is important during the proposing stage of a negotiation?
Answer : B
During the proposing stage, parties move toward agreement by narrowing down a wide range of potential options. This helps focus the negotiation and aligns both parties toward practical, mutual outcomes. It's an essential step to keep the process structured and productive.
Question 59
Which type of question is most effective for checking facts in negotiation?
Answer : D
Closed questions (requiring yes/no or factual answers) are best for verifying facts, ensuring clarity and accuracy. Open questions are useful for exploration, while hypothetical test possibilities, and leading steer responses. In negotiation, closed questions confirm details such as prices, quantities, or deadlines, preventing ambiguity in agreements. CIPS stresses using the full range of question types strategically, with closed questions essential in finalising commitments.
Question 60
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should ...
Answer : A
Sally's objective is to achieve a 5% saving. If the supplier offers this saving in a different form (aftercare package), and the total value meets her goal, then accepting this alternative shows flexibility and supports a collaborative,win-winoutcome.
Question 61
Buying organisation may increase its leverage with suppliers by concentrating spend. Which of the following are most likely to be forms of supplier spend consolidation? Select THREE that apply.
Answer : A, B, E
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
Volume redistribution: making recommendations following spend analysis to move from one supplier to another
Volume consolidation across categories: certain purchase requirements may be common across a number of categories
Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
Question 62
A wide range of factors may be taken into account by suppliers when setting or negotiating prices. Which of the following are external factors in pricing decisions? Select TWO that apply.
Answer : A, D
External factors in pricing decisions include Competition in the market (A) and Customer perception of value (D). These factors are outside the supplier's direct control but influence pricing strategies to remain competitive and meet customer expectations:
Competition in the market (A): Market competition dictates how much a supplier can charge without losing business to competitors.
Customer perception of value (D): How customers perceive the product's worth affects its acceptable price range.
These factors are considered external as they relate to market dynamics rather than internal cost structures, according to CIPS's guidance on pricing influences.
Question 63
Different types of relationships impact negotiations. Which source of leverage would most support the buyer?
Answer : A
Legitimate power comes from formal authority and organisational backing, making it a credible and sustainable leverage source in negotiations. Personality power or reliance on colleagues and friends lacks long-term weight and may not influence suppliers strategically. Buyers who use legitimate power, backed by governance and authority, negotiate from a position of credibility and professionalism, reinforcing stronger outcomes.
Question 64
A break-even analysis uses which aspects as part of the calculation?
Fixed cost
Buying cost minus variable cost per unit
Variable cost
Selling price minus variable cost per unit
Answer : A
Break-even analysis identifies the sales volume required to cover fixed costs. It relies on:
Fixed costs (constant regardless of output).
Question 65
When a supplier tells a buyer they have a margin of 20%, what does this mean?
Answer : A
Margin is defined as profit expressed as a percentage of the selling price, not the cost. This is a critical distinction from mark-up, which expresses profit as a percentage of cost. For example, a 20% margin means that 20% of the price charged to the buyer represents profit, while 80% represents cost. CIPS emphasises that buyers must clearly understand this difference to avoid being misled during pricing discussions. Confusing margin with mark-up can significantly weaken negotiation effectiveness.
Question 66
Which of the following are types of questions that are useful in opening and testing phases of a negotiation? Select the TWO that apply.
Answer : C, E
In the opening phase, parties should confirm understanding and get the issues on the table.
The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.
Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.
Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening and testing stages.
Question 67
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way ofanalysing costs is to classify them into direct and indirect costs. Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Question 68
A supplier can produce a product for $160 and sells it for $240, making $80 profit. What is the mark-up profit percentage?
Answer : A
Mark-up % = Profit Cost 100. Here, profit is $80, cost is $160. So, (80 160) 100 = 50%. This differs from margin, which is profit selling price. Mark-up analysis helps buyers understand supplier pricing structures, detect hidden margins, and strengthen negotiation. By knowing whether a supplier is working with high or low mark-up levels, buyers can challenge prices more effectively or justify alternative offers. This analytical preparation supports objective negotiation rather than reliance on supplier claims.
Question 69
Which of the following are stages of a win-win approach to negotiations?
Find out where the interests of both parties align
Design new options, where everyone gets more of what they need
Limit the resources to a fixed number
Insist that the agreement includes subjective regulatory standards
Answer : A
A win-win (integrative) negotiation focuses on shared interests and joint value creation. The first step is identifying where both parties' interests align, followed by designing creative options that allow both sides to gain more of what they need. Limiting resources and imposing subjective standards are characteristics of distributive or adversarial approaches and restrict value creation. CIPS clearly distinguishes integrative negotiation as collaborative, interest-based, and solution-focused, particularly suitable for long-term and strategic supplier relationships.
Question 70
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
Question 71
A procurement manager is considering accepting a fixed price agreement for 12 months with an IT supplier. What are the advantages of fixed price agreements? Select TWO that apply.
Answer : B, D
Afixed price agreementprovides stability and predictability. The supplier bears the risk of cost fluctuations, which is especially advantageous in volatile markets. Moreover, it simplifies administrative processes for the buyer over the contract duration.
''Fixed price agreements transfer cost risk to the supplier and enable simplified contract management. This can reduce overhead for buyers and support budgeting accuracy.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Pricing Models in Negotiation)
Question 72
There are many factors which will influence supplier pricing decisions. Which of the following are external factors that may apply? Select THREE that apply:
Answer : C, D, E
Question 73
Win-lose approach is most likely to be associated with which of the following type of relationship?
Answer : A
Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Win-lose approach is useful when the relationship with the other party (TOP) is short-term and once-off.
The question mentions 4 types of relationship:
Adversarial: Both seek to maximize position at the expense of the other. Almost no trust, communication and cooperation. These suppliers will probably provide non-core products or services with the buyer purchasing them on a one-off basis.
Outsourcing relationship: Use competent suppliers to manage non-core businesses previously done in-house. Require high level of trust and collaboration
Partnership: Both work closely on long term development by sharing information, technology and ideas.High level of trust with the aim to benefit both parties (win-win)
Strategic alliance: Both parties identify areas where they could collaborate to create mutual benefits
Among these 4 types of relationship, only adversarial is once-off. Then it is the correct answer.
Question 74
Which of the following is categorised as fixed cost?
Answer : B
An organisation's expense can be categorised into three groups:
Fixed Costs -- costs that do not change with output.
Variable Costs -- costs that vary in direct proportion to output.
Semi-variable costs -- 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.
CIPS study guide page 79-84
Study tips: Fixed variable and semi-variable costs - AAT Comment
Question 75
A procurement professional is dissatisfied with how a recent negotiation was concluded. What could they do to improve their negotiation approach?
Seek feedback from the supplier on their recent performance
Prepare for all negotiations with a WIN/LOSE (distributive) approach
Involve lots of people in future negotiations
Undertake reflective practice after each negotiation
Answer : C
To improve negotiation outcomes, seeking feedback from the supplier (1) and undertaking reflective practice (4) are recommended actions. Feedback from the supplier can provide insights into areas for improvement from the counterparty's perspective, while reflective practice allows the negotiator to evaluate their own approach, outcomes, and areas for growth. This approach aligns with CIPS's emphasis on continuous improvement in negotiation skills.
Question 76
Absorption costing is when the total cost per each unit of output:
Answer : B
Question 77
Which of the following is an advantage of a fixed-price agreement?
Answer : C
Fixed-price agreements give buyers financial certainty, reducing exposure to supplier inefficiencies, cost increases, or inflation. The supplier bears the risk of cost overruns. While it doesn't automatically improve quality or payment terms, it allows buyers to forecast budgets and manage risk effectively. This makes fixed-price contracts especially useful for projects with defined scopes, where costs are predictable. In contrast, cost-plus contracts keep the risk with the buyer and require constant monitoring of supplier costs, making them less attractive in terms of risk management.
Question 78
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?
Answer : C
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.
CIPS study guide page 164-165
What Is a Coalition Anyway?
Question 79
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction.
What is the mark-up profit percentage earned by the supplier on this transaction?
Answer : D
Mark-upis calculated as:
Mark-up%=(ProfitCost)100\text{Mark-up \%} = \left( \frac{\text{Profit}}{\text{Cost}} \right) \times 100Mark-up%=(CostProfit)100
In this case:
Profit = $240 - $160 = $80
Cost = $160
Mark-up = (80 / 160) 100 =50%
''Understanding mark-up percentages helps in assessing supplier pricing behaviour and negotiating realistic margins.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Pricing Models and Profit Margins)
Question 80
Which of the following is considered a strength of a 'logical' style negotiator?
Answer : B
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of logical style are described below:
Question 81
Jessica Taylor, a senior buyer, is reflecting on her most recent negotiation. She has been asked by her manager to create a written record of performance.
Which of the following should Jessica include in this negotiation performance report? Select THREE that apply.
Answer : A, C, F
Post-negotiation analysis should include performance evaluation, learning outcomes, and a comparison of achieved results versus original objectives. These elements contribute to continuous improvement and future strategy development.
Question 82
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
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Question 83
Which of the following are sources of legitimate (personal) power? Select THREE.
Answer : A, B, C
Legitimate power in negotiation can arise from different sources:
Position power (authority from role/position in the organisation).
Referent power (influence from respect, charisma, or relationships).
Question 84
Which negotiation approach is focused on a win--win outcome?
Answer : C
A collaborative negotiation approach is explicitly designed to achieve win--win outcomes, where both parties work together to maximise joint value. This approach is closely associated with integrative negotiation, emphasising trust, information sharing, and joint problem-solving. Distributive and adversarial approaches are win--lose, focusing on dividing value rather than creating it. ''Collective'' is not a recognised CIPS negotiation approach. Collaborative negotiation is particularly suitable where long-term relationships, shared objectives, or strategic partnerships are important.
Question 85
Hammad Alsuwaidi is a procurement professional leading a negotiation for a vehicle rental contract. Hammad has a clear goal to negotiate a two-year contract in exchange for a minimum of a 20% discount. During the negotiation, Hammad presents to the supplier the facts, figures, and justification for a 20% discount. Which of the persuasion methods below has Hammad chosen?
Answer : A
Hammad's approach of presenting facts, figures, and justifications aligns with the Push persuasion method. The Push strategy involves directly presenting information, data, and logical arguments to convince the other party of a certain outcome. In this scenario, Hammad is using objective evidence to influence the supplier towards agreeing to a discount, which is characteristic of the Push method, as per CIPS guidance on negotiation tactics.
Question 86
A buyer has lost trust in a supplier but wishes to repair the relationship. What is the appropriate first step?
Answer : A
Rebuilding trust requires acknowledgement of the issue and supplier commitment to improvement. Cosmetic gestures such as hospitality or price reductions do not address the core problem. Nor should KPIs be artificially lowered, as this masks underperformance. Trust is restored when accountability is accepted and corrective actions are implemented transparently. This aligns with CIPS' emphasis on trust-building behaviours: honesty, responsibility, and consistent performance.
Question 87
For a commercial negotiation to be effective, the organisation has to identify resources required for negotiation. Which one of the following could help?
Answer : B
Involving an appropriate cross-functional team is beneficial for effective commercial negotiation because it brings together diverse perspectives and expertise relevant to the negotiation context. According to CIPS, a cross-functional team ensures that all aspects, such as technical, financial, and operational inputs, are considered, leading to more balanced and informed decision-making. This approach also helps in addressing complex negotiation elements effectively.
Question 88
Lina Rawlins, a senior buyer, asks a supplier: ''Can you tell me exactly what you are doing to ensure quality?'' What type of question is this?
Answer : C
A probing question seeks deeper information, clarifying specifics beyond surface-level responses. Lina's question is factual, detailed, and investigative --- designed to uncover processes and commitments. Hypothetical questions test options (''what if...''), reflective restate or summarise to confirm understanding, and leading steer the respondent toward a desired answer. Probing is essential in negotiations to validate claims, identify risks, and build persuasive arguments.
Question 89
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 90
Which of the following two are recognized strategies to achieve a win-lose outcome?
Making the other party lower its resistance point
Making the other party think this settlement is the best it can achieve
Employ empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
In a win-lose outcome, tactics often involve lowering the other party's resistance point (1) and convincing them that the offer is the best possible (2). These strategies are designed to maximize advantage for one party at the expense of the other, fitting with CIPS's win-lose negotiation techniques.
Question 91
Listening is a key activity in negotiation. Which of the following are characteristics of effective listeners?
Showing empathy
Persuading
Paraphrasing
Offering immediate solutions
Answer : B
Effective listeners demonstrate empathy and use paraphrasing to confirm understanding. These skills help build rapport, validate the speaker, and ensure accurate interpretation. Persuading and immediate solutions are active interventions, not listening behaviours. CIPS emphasises active listening as central to persuasion and relationship building in negotiation, enabling buyers to uncover underlying interests and respond appropriately.
Question 92
Which TWO strategies are recognised for achieving a win--lose outcome?
Making the other party lower its resistance point
Making the other party believe this settlement is the best it can achieve
Employing empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
Win--lose strategies focus on gaining advantage at the other party's expense. Forcing them to lower their resistance point or persuading them the deal is their best option are classic distributive tactics. Empathy, compromise, and creativity belong to integrative approaches aimed at mutual benefit. Recognising these distinctions ensures negotiators adopt the right strategy for the relationship type and context.
Question 93
A procurement manager (PM) is preparing for a negotiation with a supplier. The PM is keen to find a way to reach an agreement with the supplier. The PM is exploring variables that they might be able to trade with the supplier, to encourage them to reduce their price. In particular, the PM is focusing on any variables that are of low value to their own organisation but could be of interest to the supplier. Their preparation focus is on which of the following aspects?
Answer : D
The correct answer is Bargaining mix. The bargaining mix refers to the full range of variables that can be negotiated, such as price, delivery schedules, payment terms, volumes, warranties, contract length, or service levels. According to CIPS guidance, effective negotiators identify elements that are of low value to themselves but high value to the other party, as these can be traded to gain concessions on priority issues like price. This approach supports value creation rather than positional bargaining and is central to both distributive and integrative negotiation preparation. The PM's focus is therefore not on objections, opening statements, or closing techniques, but on structuring tradeables in advance to enable flexible and constructive bargaining.
Question 94
Which characteristics are likely to feature within an integrative negotiation?
Maximising the other party's outcome to enhance relationships
Maximising joint outcomes
Short-term focus
Pursuit of goals held jointly with other party
Answer : C
Integrative negotiationfocuses onmutual gainand long-term collaboration. It seeks tomaximize joint outcomesand encourages parties to align interests andpursue shared goals. This contrasts with distributive tactics that prioritize individual wins and short-term gains.
''Integrative negotiations aim to create outcomes where both parties benefit. Shared problem-solving, information exchange, and joint goal pursuit are central features of this approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Principles of Integrative Negotiation)
Question 95
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
Answer : D
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Question 96
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 97
Which of the following are examples of connected stakeholders in a private organisation? Select TWO that apply.
Answer : A, E
Connected stakeholders are those who, by contractual or commercial relationships, have a significant stake in organisation activity. As a general rule, connected stakeholder (with the exception of suppliers) have a low level of influence on procurement negotiations.
Examples of connected stakeholders are: suppliers, customers, bank where the organisation opens its account, shareholders.
Question 98
Where a negotiator uses numerical reasoning with facts as part of their negotiation approach, which of the following techniques will they be adopting?
Answer : B
Using logic involves applying numerical data and factual evidence to support arguments in a negotiation. Logical reasoning appeals to objective analysis rather than emotional or coercive tactics and is effective in convincing the other party through structured, fact-based arguments, aligning with CIPS's guidance on logical negotiation techniques.
Question 99
A buyer continually states, during a negotiation, that budget constraints are impacting their ability to make concessions. What type of tactic are they using?
Answer : C
Question 100
Which of the following is an attribute of a distributive negotiation approach?
Answer : C
Distributive negotiation is often described as a 'win-lose' approach, where each party aims to maximize their own gain, often at the expense of the other. The focus is onachieving personal success, not collaboration.
Question 101
Leitax is a consumer electronics firm with headquarters in the US and with a global sales presence. The company maintains seven to nine models in its product portfolio, each of which has multiple SKUs. Product life ranges from fifteen to nine months and is getting shorter. The demand planning and master planning processes at the company were ill-defined. Data relevant to forecasting were usually inaccurate, incomplete, or unavailable and the lack of objectives and monitoring mechanisms for the demand planning process meant that process improvement could not be managed. Support for supply management was equally ill-defined, as master production schedules were sporadic and unreliable and suppliers had learned to mistrust them. Leitax's newly appointed Supply chain director, Jessica realises that the ''buy-in'' of different functional groups was critical to the improvement of demand planning. She invites relevant stakeholders to a meeting so that they can express their opinions openly. What tactic is Jessica using?
Answer : A
There are nine commonly used influence tactic:
1. Rational persuasion includes using facts, data, and logical arguments to try to convince others that your point of view is the best alternative. This is the most commonly applied influence tactic.
2. Legitimating
3. Personal appeals
4. Exchange
5. Ingratiation
6. Pressure refers to exerting undue influence on someone to do what you want or else something undesirable will occur.
7. Coalitions refer to a group of individuals working together toward a common goal to influence others.
8. Inspirational appeals
9. Consultation refers to the influence agent's asking others for help in directly influencing or planning to influence another person or group.
In the scenario, there is a problem with demand forecasting and supply chain planning in Leitax. The new Supply chain director invites the stakeholders to a meeting to find the solution. She is using coalition tactics.
- CIPS study guide page 163-168
- Cross-Functional Alignment in Supply Chain Planning: A Case Study of Sales and Operations Planning
- 13.3 The Power to Influence -- Organizational Behavior (umn.edu)
LO 3, AC 3.2
Question 102
''Finding the middle ground between buyer and supplier is a satisfactory way to complete contract negotiations.'' Is this statement correct?
Answer : D
While compromise seems fair, it often erodes credibility and weakens long-term negotiation outcomes. Skilled negotiators avoid ''splitting the difference'' automatically, since it signals weak preparation and can encourage exploitation in future talks. Instead, agreements should be built on objective value, data, and tradeables. Compromise has a place, but reliance on it damages strategic positioning. CIPS stresses integrative or principled negotiation over simplistic middle-ground settlements.
Question 103
Which of the following are most likely to be abilities of a person with high emotional intelligence? Select TWO that apply.
Answer : B, C
Emotional Quotient is the set of skills that enables us to make our way in a complex world - the personal, social and survival aspects of overall intelligence, the elusive common sense and sensitivity that are essential to effective daily functioning. It has to do with the ability to read the political and social environment, and landscape them; to intuitively grasp what others want and need; what strengths and weaknesses are; to remain unruffled by stress; and to be engaging. The kind of person others want to be around and follow.
EQ seeks to measure emotional intelligence and is centred on abilities such as the following:
- Identifying emotions
- Evaluating how others feel
- Controlling one's own emotions
- Perceiving how others feel
- Using emotions to facilitate social communication
- Relating to others
On the other hand, cognitive ability is defined as a general mental capability involving reasoning, problem solving, planning, abstract thinking, complex idea comprehension, and learning from experience (Gottfredson, 1997).
LO 3, AC 3.3
Question 104
Which type of question style is a negotiator using if they ask the other party
''Can you deliver our items by Friday 17th?''
Answer : B
This is a closed question because it requires a definite, factual response such as ''yes'' or ''no''. Closed questions are particularly useful in negotiations for confirming specific commitments, including delivery dates, prices, quantities, or contractual terms. They reduce ambiguity and are commonly used during the later stages of negotiation to confirm agreement and progress toward closure. Probing questions seek deeper explanation, leading questions influence the answer, and multiple questions combine several issues at once. CIPS highlights the importance of choosing question styles appropriately depending on the negotiation objective and stage.
Question 105
A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?
Answer : B
To answer this question, you should know The seller's perspective as in 'How to Negotiate Professionally':
In the scenario, the buyer's spend is low, while they seem unattractive to seller (as they tend to pay late). So the buyer is classified as Nuisance in seller's perspective.
Question 106
Community Meal Partners (CMP) is a not-for-profit company that delivers cooked meals to older residents in their homes. CMP uses a fleet of bespoke vans with onboard ovens. In planning the future procurement of the fleet, CMP has conducted a review of the microeconomics of the van supply market and found that the vans are supplied by a monopoly supplier due to patented technology. Which of the following strategies could CMP utilise to optimise its bargaining position with the van supplier?
Answer : A
When facing a monopoly supplier, buyers must find creative ways to introduce leverage. Publicly exploring alternative solutions can create the perception of competition or a fallback plan, thus shifting bargaining power slightly toward the buyer.
Question 107
What letter R in the acronym SMART stands for?
Answer : C
SMART is an acronym that you can use to guide your goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound
A student met this question in the L4M5 exam. SMART is mentioned primarily in L4M3 Commercial Contracting.
LO: Unknown, AC: Unknown
Question 108
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should:
Answer : D
Question 109
In a negotiation for a new contract, the supplier suggests the buyer to shorten payment period from 45 days to 15 days because they are investing in new facilities to expand the supply capacity. The buyer replies that she can only sign off the deal if the payment period is 30 days ormore since it often takes at least 30 days for her company to collect the payment from customers. A permission from senior management is required for this suggestion. In order to ensure that supplier understands the matter, she reiterates it throughout the meeting. Which tactics is she using?
1. Outrageous initial demand
2. Salami slicing
3. Lack of authority
4. Broken record
Answer : C
In the scenario, the buyer states that permission from senior management is required to shorten payment period and she only has authority to sign off a deal in which the payment period lasts at least 30 days. The buyer is using lack of authority. The buyer also repeats the matter again throughout the negotiation. This is a common tactic known as broken record.
Question 110
A supplier's mark-up on all products is 25%. Supplier's profit margin is...?
Answer : A
LO 2, AC 2.1
Question 111
Absorption costing is when the total cost per each unit of output:
Answer : B
Question 112
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 113
How contribution is calculated in break-even analysis?
Answer : B
Contribution = Price - Variable cost
Break-even point (volume) = Fixed cost/Contribution
Question 114
Which of the following would help build trust in a relationship?
Mediation attendance
Regular meetings
Keep promises
Coercion
Answer : B
Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.
Question 115
Which of the following would cause a demand curve for a good to be price inelastic?
Answer : D
Essential goods and services such as electricity, fuel, basic food stuffs, commuter transport and habitual products such as tobacco, alcohol and sugar-based drinks are often sited as facing a relatively inelastic demand curve. This means when the price goes up, the quantity demanded does not decrease very much and so they are often the target of government taxation.
LO2, AC 2.2
Question 116
Which of the following is a source of information on microeconomic factors?
Answer : D
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Question 117
In general, which of the following is the consequence of a flatter demand curve?
Answer : B
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor.
In microeconomic graphs, elasticity and inelasticity can be shown by the slope of the demand curve. If a demand curve is almost horizontal, then the product pricing can be described as very elastic. If a demand curve is almost vertical, then the product pricing can be described as very inelastic.
The formulae of elasticity:
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LO 2, AC 2.2
Question 118
A buying organisation with a low spend but the reputation for paying on-time. In order to increase buyer's leverage in negotiation with suppliers, which of the following should be a priority of this buyer?
Answer : C
According to Paul Steele's 'The Seller's Perspective', customer can be classified into 4 categories as below:
To increase the leverage in negotiation, buyer may increase its attractiveness and/or increase spend value. In this scenario, the buyer is already attractive to supplier as it always pays on-time, but the spend is still low. So to have greater leverage, the buyer has to increase its spend volume by spend concentration. Spend concentration may take many forms as following:
- Vendor base reduction
- Volume pooling
- Volume redistribution
- Volume consolidation across categories
- Standardisation and harmonisation of specifications
- Forming purchasing consortia
LO 1, AC 1.3
Question 119
Which of the following are characteristics of the pull approach?
Aimed at securing compliance, often against resistance
Influencers are fully aware of the process, which is overt
Persuasion or interpersonal influence
Can secure commitment if influencers accept the viewpoint as fitting their goals
Answer : B
The pull approach relies on persuasion, interpersonal influence, and aligning proposals with others' goals to secure commitment. It is not about forcing compliance (that is push). By engaging influencers and presenting a vision they can adopt, pull fosters buy-in and voluntary agreement. This method is particularly effective in collaborative negotiations where relationships and long-term trust are important.
Question 120
Which of the following are the most typical characteristics of integrative approach to negotiation? Select TWO that apply.
Answer : C, E
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 the pie' 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.
LO 1, AC 1.2
Question 121
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 122
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier takes steps to make their closing statements, they are most likely to be doing which of the following?
Answer : A
As a negotiation nears theclosure stage, experienced negotiators look forbuying signals--- both verbal (e.g., positive affirmations) and non-verbal (e.g., nodding, leaning in). These cues indicate readiness to agree and allow the negotiator to move confidently into closing the deal.
''At the closing stage, negotiators should observe both verbal and non-verbal buying signals. These cues can indicate readiness to commit, helping to time the final proposal or acceptance effectively.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Closing the Negotiation)
Question 123
'What specific tests do you carry out to ensure quality is achieved?' This is an example of which type of negotiation question?
Answer : B
The question requires more detailed answer, it is an example of probing question.
Probing questions are typically follow-up questions, and aim to elicit more detailed information on the back of the answer elicited from the open questions. Probing question are also useful to check that the supplier fully understand their offering, as well as your needs, can also be used to communicate to the suppliers that you know this category well.
LO 3, AC 3.3
Question 124
Which of the following is the first step in the development of negotiation strategies?
Answer : D
Developing specific negotiation strategies in areas where risk or spend is high involves analysing a wide range of objectives and variables within the context of the organisation's business requirements. The first stage in any negotiation preparation is to define your overall objectives which may be related to a single variable such as price in the case of a standardised requirement, or many variables in the case of capital equipment. Your negotiating strategies and tactics will all be focused on achieving overall objectives.
Question 125
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction. What is the mark-up profit percentage earned by the supplier on this transaction?
Answer : C
The mark-up percentage is calculated as the profit divided by the cost of production, then multiplied by 100 to convert it into a percentage.
Calculation:
(
80
/
160
)
100
=
50
%
(80/160)100=50%
Thus, the supplier's mark-up percentage is 50%, as per standard pricing calculations used in procurement.
Question 126
Listening is a key activity in any negotiation. Which of the following are characteristics of effective listeners?
Answer : C
Question 127
Jessica Taylor, a senior buyer, is asked to create a written performance report after her latest negotiation. Which of the following should she include? Select THREE.
Answer : B, C, F
A negotiation performance review should focus on measuring outcomes against objectives, lessons learned, and evaluation of negotiator effectiveness. This ensures continual improvement and supports organisational learning. Pricing structures and alternative suppliers may have been reviewed earlier, but are not part of post-performance reflection. Travel expenses are irrelevant to negotiation learning. By focusing on objectives, learning, and performance, organisations embed best practice and prepare stronger strategies for future negotiations.
Question 128
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost 24%. Which of the following represents the mark-up of that company?
Answer : B
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up (%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
Question 129
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 130
Which of the following are signs indicating that TOP is using coercive power in commercial negotiation? Select TWO that apply.
Answer : B, C
Coercive power comes from the belief that a person can punish other for non-compliance, and can be considered as the flip side of reward power. Coercive power rests in the individual's ability to change other people's behaviour through threat, intimidation, use of guilt, ability to embarrass or shame, or withdrawal of benefits,...
Question 131
Which of the following are most likely to turn buying organisation into an unattractive customer in supplier's perspective? Select TWO that apply.
Answer : A, D
Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation. Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:
Simple procurement processes: Using SRM technology may help to simplify the process
Simple contracting processes
Clear and concise documentation: Reduced paperwork helps both supplier and buyer save their time and resources.
Absence of onerous supplier terms and conditions
On-time payment
Transparent processes: Unclear tender award criteria can be seen as opaque. Suppliers who attended the tendering processes cannot know the reasons why their bids are rejected and hesitate to attend other tendering.
Ethical behaviour: Suppliers may prefer a buyer who adopts CSR policy because they can predict potential customer's behaviour. Demands for kickback are unethical behaviours.
Question 132
Where a market consists of a large producer with high power, it is known as ...
Answer : B
A monopoly occurs when a single supplier dominates a market, giving them high bargaining power over buyers. By contrast, monopsony is where a single buyer dominates, oligopoly involves a few large suppliers, and monopolistic competition refers to many suppliers with differentiated products. Monopoly power in negotiations means buyers have reduced leverage and may need to rely on regulatory frameworks or collaborative strategies to balance outcomes.
Question 133
Effective listening is important in integrative negotiations. Is this statement correct?
Answer : A
Effective listening is crucial in integrative negotiations as it fosters mutual understanding and helps identify shared interests, leading to collaborative solutions. It enables negotiators to comprehend the other party's needs and concerns fully.
Question 134
Which of the following is potentially a major source of conflict?
Answer : A
Question 135
Which of the following are factors that might shift the demand curve for a consumer good to the right?
1. Prices of complementary goods decrease
2. Price of the consumer good decreases
3. Customers' expectation of higher prices in the future
4. Consumer tastes shift toward substitute products
Answer : C
A shift in demand occurs when an influencing factor other than price changes. Those factors are:
- The income of buyers
- The tastes and preferences of buyers
- The prices of other goods and services, especially substitutes and complements
- Expectations of buyer about the future
In this question:
- 'Prices of complementary goods decrease' will lead to quantity demanded for that complements rising, then demand for consumer good will increase accordingly.
- 'Price of the consumer good decreases' will increase the quantity demanded for that good, but it will not shift the demand curve
- 'Customers' expectation of higher prices in the future': in this scenario, customers tend to buy more to store in present, which leads to demand curve shifting to the right
- 'Consumer tastes shift toward substitute products': Demand for substitutes will rise, so demand for that consumer good will decrease and the demand curve shifts to the left.
LO 2, AC 2.2
Question 136
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Answer : A
Question 137
Which type of negotiation strategy should be adopted when the relationship is important and both parties want to help each other achieve their goals?
Answer : A
The collaborative strategy (win-win, integrative) focuses on joint problem-solving, transparency, and trust. It is best when long-term relationships are critical, and both parties see value in mutual success. By contrast, competitive (win-lose) is adversarial, accommodative sacrifices one party's interests, and avoidance seeks disengagement. Collaborative strategies are common in partnerships, innovation projects, and sustainable procurement. They require sharing information, identifying tradeables, and aligning objectives beyond price to long-term outcomes.
Question 138
Which of the following should be adopted to minimise the conflict between parties in commercial negotiation?
Answer : D
Ground rules are the basic rules for doing something (Cambridge Dictionary). A negotiation goes more smoothly if ground rules are adopted. Then if something goes awry at a later time, you can point out the ground rule that has been violated. Procurement professional should seek to minimise conflict over process through agreeing 'ground rules' and approach as far as possible with the other party in advance of any negotiation meetings.
There should be two sets of ground rules: 1) ground rules for the negotiations between the two parties and 2) ground rules for the negotiating team itself. This article is about the negotiating team ground rules.
The rule of law is the condition in which all members of society, including its political leaders, accept the authority of the law.
Ground zero describes the point on the Earth's surface closest to a nuclear detonation. In the case of an explosion above the ground, ground zero refers to the point on the ground directly below the nuclear detonation.
The Ground Beam is the beam which is provided usually at the foundation level to support building walls, joists, etc.
Question 139
Which of the following are stages within the negotiation process?
Planning and preparation
Arguing and persuasion
Accepting hospitality
Testing and proposing
Answer : C
The formal negotiation process includes planning and preparation (objectives, BATNA, MIL) and testing/proposing (exchanging offers). Hospitality is not a stage---it may support relationships but is not part of structured negotiation. Arguing/persuasion occurs within bargaining but is not defined as a stage in itself. Understanding the stages ensures structured progress and prevents disorganised discussions, which often result in suboptimal agreements.
Question 140
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Consolidate the expenditure from across the organisation to increase the size and value of the requirement
Understand the supplier's costs and margins prior to the negotiation to demonstrate that you know what it costs to produce the product
Take a distributive approach to the negotiation and refuse to make concessions
Limit communication and information sharing with the supplier so as not to give anything away
Answer : A
When buyer power is low, leverage must be created rather than assumed. Consolidating organisational spend increases volume and commercial importance to the supplier, directly strengthening buyer power. Understanding supplier costs and margins reduces information asymmetry and demonstrates commercial competence, which improves credibility and influence during negotiations. Refusing concessions and limiting communication are typical of adversarial tactics and often weaken relationships when power is already limited. CIPS clearly advises buyers to use aggregation of demand and market intelligence as ethical and effective methods to rebalance power without damaging long-term supplier relationships.
Question 141
It may be more difficult to buy on a credit from supplier who locates in a country with a hyperinflation? Is this assumption true?
Answer : B
If the inflation rate is running high, then obtaining credit as a buyer is normally more difficult or expensive as money in the future will be worth less than money today.
Question 142
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?
Answer : A
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 and any 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 143
At which stage in a negotiation would questions be asked to obtain missing information?
Answer : D
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 144
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
Answer : D
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Question 145
A senior buyer analyses the supply market and he realises that his organisation is treated as Exploit according to supplier's perspective model. What does he need to do?
Answer : D
The supplier's perspective model has two axes: Spend value and Attractiveness:
Exploit is the quadrant where the buyer has high spend but low attractiveness. Overarching supplier objective would be: 'Milk this customer and charge a high price to compensate for all the pain they put us through'.
The buyer should increase its attractiveness to raise the position to Core customer. To do this, a buyer may:
- Simplify procurement processes
- Simplify contracting processes
- Use clear and concise documentation
- Eliminate onerous supplier terms and conditions
- Make the payment on time
- Use transparent processes
- Promote ethical behaviours
LO 1, AC 1.4
Question 146
Which type of question is most effective for checking facts in negotiation?
Answer : D
Closed questions (requiring yes/no or factual answers) are best for verifying facts, ensuring clarity and accuracy. Open questions are useful for exploration, while hypothetical test possibilities, and leading steer responses. In negotiation, closed questions confirm details such as prices, quantities, or deadlines, preventing ambiguity in agreements. CIPS stresses using the full range of question types strategically, with closed questions essential in finalising commitments.
Question 147
Economic growth can be measured by...?
Answer : B
Gross Domestic Product (GDP) is the monetary value of the goods and services manufactured or supplied in a financial period. In general terms, when the GDP rate falls or slows down, there will be a fall in demand for goods and services demanded in the economy, with a fall in firms' revenue and profit margins. When GDP is rising, there will be an increase in demand.
Consumer Price Index (CPI) is weighted measurement that evaluates the average cost of a basket of goods bought by a consumer.
Producer Price Index (PPI) is average changes in prices that a producer receives in return for its goods or services.
Small Business Lending Index (SBLI) is an indicator of small business lending trends.
Question 148
Which of the following is a source of information on microeconomic factors?
Answer : A
Microeconomic factors concern the conditions specific to suppliers, buyers, and markets --- such as supplier communications, annual reports, and industry-specific data. These provide insight into cost structures, capacity, and competitive positioning. Macroeconomic factors, by contrast, include inflation indices (RPI), financial market trends, or global commodity prices. Distinguishing between micro and macro sources allows negotiators to build more precise intelligence for supplier discussions.
Question 149
There are many factors which will influence supplier pricing decisions. Which of the following are external factors that may apply? Select THREE that apply:
Answer : C, D, E
Question 150
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as:
Answer : C
Question 151
Two firms negotiating a contract have an adversarial relationship. What type of negotiation would you expect?
Answer : B
Adversarial relationships typically lead to distributive (win--lose) negotiations, where each party seeks maximum gain at the other's expense. Trust is low, information is withheld, and concessions are hard-fought. While it can deliver short-term wins, it risks damaging long-term relationships and may reduce overall value. Collaborative, integrative approaches are more sustainable, but adversarial conditions often prevent them. CIPS highlights the importance of recognising relationship dynamics before selecting negotiation style, as forcing integrative approaches in adversarial contexts may be unrealistic.
Question 152
Hammad Alsuwaidi is a procurement professional leading a negotiation for a vehicle rental contract. Hammad has a clear goal to negotiate a two-year contract in exchange for a minimum of a 20% discount. During the negotiation, Hammad presents to the supplier the facts, figures, and justification for a 20% discount. Which of the persuasion methods below has Hammad chosen?
Answer : A
Hammad's approach of presenting facts, figures, and justifications aligns with the Push persuasion method. The Push strategy involves directly presenting information, data, and logical arguments to convince the other party of a certain outcome. In this scenario, Hammad is using objective evidence to influence the supplier towards agreeing to a discount, which is characteristic of the Push method, as per CIPS guidance on negotiation tactics.
Question 153
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 154
Which of the following statements about oligopoly is incorrect?
Answer : D
An oligopoly exists when there are small number of producers that exert a significant influence in the market. Oligopoly's main characteristics are discussed as follows:
- Interdependence
The most important feature of oligopoly is the interdependence in decision-making of the few firms which comprise the industry. This is because when the number of competitors is few, any change in price, output, product etc. by a firm will have a direct effect on the fortune of its rivals, which will then retaliate in changing their own prices, output or products as the case may be.
- Importance of advertising and selling costs
A direct effect of interdependence of oligopolists is that the various firms have to employ various aggressive and defensive marketing weapons to gain a greater share in the market or to prevent a fall in their market share. For this various firms have to incur a good deal of costs on advertising and on other measures of sales promotion. Therefore, there is a great importance of advertising and selling costs under conditions of market situation characterised by oligopoly
- Group behaviour
Another important feature of oligopoly is that for the proper solution to the problem of determination of price and output under, it analysis of group behaviour is impor-tant.
- Indeterminateness of demand curve facing an oligopolist
In this question, 'Prices in oligopoly are predicted to fluctuate widely and frequently' is an incorrect statement as producers in oligopoly often try to set up price. Prices fluctuate more frequently in perfect competition.
LO 2, AC 2.2
Question 155
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
Question 156
Commercial negotiation ends at the award of a contract. Is this statement true?
Answer : C
Negotiation doesn't end after the contract is awarded. The needs for negotiation can arise in any post-award stages. For example, at supplier development and relationship management stage,improvement in supplier capability, capacity, and product/service range can be negotiated. Negotiations with long-term strategic critical suppliers should be carried out in a partnering style, with a win-win starting point assumed.
In some sectors such as transport, utilities and infrastructure, tenderers may 'bid low' or even make a loss to win major contracts with a view to negotiating lucrative changes, variations and 'add-ons' over the life of the contract when the supplier is bedded in and the buyer is in the weaker position to push back or challenge. Even in less complex contract, it is very likely that there will be a need to negotiate with that supplier again after the awarding of the contract.
LO 1, AC 1.1
Question 157
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 158
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?
Answer : A
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 159
An organization should develop different relationships which are appropriate to each supplier situation. Which ONE of the following analysis methods could help to identify these?
Answer : B
The relationship spectrum categorizes supplier relationships based on factors like strategic importance, allowing organizations to tailor their approach to each supplier relationship. CIPS emphasizes the relationship spectrum as a valuable tool for assessing and managing supplier interactions based on strategic relevance.
Question 160
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Tradeables---alternative offers or concessions---are typically introduced during thebargainingstage of the negotiation. This is when both parties discuss and exchange proposals to reach a mutually acceptable agreement.
Question 161
Lina Rawlins is a senior buyer working for a medical equipment company. Lina is in charge of the company's largest supplier account, Great Barrington Gas (GBG), a medical equipment supplier. Recently, GBG's performance has declined, leading to an increasing number of rejected items. Lina is aware of the seriousness of this and has asked GBG to attend an urgent meeting. In the meeting, Lina asked the GBG representative, ''Can you tell me exactly what you are doing to ensure quality?" What type of question is Lina asking?
Answer : A
Lina is asking a probing question to gather more detailed information on the actions GBG is taking to address quality issues. Probing questions are intended to delve deeper into a topic and elicit specific details, making them suitable for understanding underlying issues, as per CIPS's negotiation question types.
Question 162
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
A junior team member can effectively contribute as a note taker (1) and observer (3), allowing them to support the meeting without taking on roles that require more experience, like chairing or serving as an expert. This aligns with CIPS's recommendations for assigning junior roles in negotiations.
Question 163
Which of the following are most likely to be macro factors that may influence the balance of power in commercial negotiation? Select THREE that apply.
Answer : A, B, D
All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forces which both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
LO 1, AC 1.3
Question 164
Which of the following can be prepared before a negotiation with a supplier to achieve an agreement to benefit both parties?
Zone of potential agreement
Attendee list for the negotiation talks
Walk-away point
Venue for the negotiation talks
Answer : B
Zone of Potential Agreement (1) and Walk-away point (3) are key elements in negotiation planning. Establishing a Zone of Potential Agreement helps identify where interests align, whilethe Walk-away point sets the limit of acceptable terms. Both are essential to preparing a negotiation framework that benefits both parties, as per CIPS best practices.
Question 165
Which of the following occur within the planning and preparation stage in a negotiation process? Select THREE that apply.
Answer : A, B, F
In the planning and preparation stage of negotiation, it is essential to build a strong foundation by understanding various factors that influence the negotiation outcome. According to CIPS resources, critical aspects of preparation include:
Understanding the other party (A): This helps in anticipating their needs, objectives, and potential negotiation styles, leading to more strategic discussions.
Defining the constituents (B): This involves identifying all stakeholders or parties impacted by the negotiation, ensuring their interests are considered when planning the negotiation strategy.
Analyzing the bargaining power (F): Understanding the relative power each party brings to the negotiation helps in setting realistic goals and predicting possible negotiation dynamics.
These elements are foundational in ensuring a well-rounded approach and enabling both parties to enter negotiations with clarity and strategy, enhancing the potential for a positive outcome.
Question 166
The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : C
For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.
Question 167
Where a market consists of a large producer of a product with high market power, it is known as:
Answer : C
Question 168
What are the potential sources of conflict between buyer and supplier? Select TWO.
Answer : B, C
Conflicts arise in procurement when risks, costs, or gains are not fairly shared, creating perceptions of exploitation. Another frequent source is late payment of supplier invoices, which damages trust and supplier cash flow. Scheduling or early involvement, by contrast, usually supports collaboration unless poorly managed. Conflict is natural in negotiations due to divergent interests, but recognising sources allows proactive management. Skilled negotiators use integrative approaches to turn potential conflict into opportunity, aligning incentives and ensuring fairness.
Question 169
Which of the following is considered a strength of a 'logical' style negotiator?
Answer : B
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of logical style are described below:
Question 170
Where there are high levels of commitment to relationships between both the buyer and supplier, this is seen as collaborative and beneficial to negotiations. Is this statement correct?
Answer : A
Question 171
Which of the following are microeconomic factors? Select THREE that apply.
Answer : B, D, F
Microeconomic factors refer to elements that affect individual businesses or sectors rather than the economy as a whole. In this case:
Availability of investors (B): Access to investors impacts capital availability for businesses.
Distribution channels (D): Distribution methods directly influence a business's ability to get products to market.
Levels of competition (F): Competition affects pricing and strategic decisions within specific industries.
Taxation rates, unemployment levels, and inflation rates are considered macroeconomic factors, affecting the economy on a broader scale, as per CIPS's definitions of microeconomic vs. macroeconomic influences.
Question 172
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 173
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Question 174
A procurement manager is about to lead an important negotiation with a new IT supplier and has insisted the first meeting takes place at the buying organisation's office. Will this give one party an advantage?
Answer : A
Contextual (environmental) power includes home-ground advantage, control of the venue, access to colleagues and data, and comfort with logistics---all of which can tilt confidence and leverage toward the host (the buyer).
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Question 175
Fast & Easy Limited, a global fast food retailer, is in a negotiation with its major meat supplier. The supplier is asking for a 2% price increase, which Fast & Easy is strongly resisting. The supplier justifies this increase by stating that currency fluctuations, an unstable economic climate, and rising transport costs have necessitated this increase. Which influencing tactic is the supplier using?
Answer : A
The supplier is using Rational persuasion by providing logical reasons, such as economic conditions and increased costs, to justify the price increase. This approach uses factual information to influence the buyer's decision, aiming to present the price hike as a reasonable adjustment, which aligns with CIPS strategies on influencing tactics in negotiations.
Question 176
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 177
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost 24%. Which of the following represents the mark-up of that company?
Answer : B
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up (%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
Question 178
Which of the following is the definition of safety margin?
Answer : A
As a financial metric, the margin of safety (safety margin) is equal to the difference between current or forecasted sales and sales at the break-even point. The margin of safety is sometimes reported as a ratio, in which the aforementioned formula is divided by current or forecasted sales to yield a percentage value. The figure is used in both break-even analysis and forecasting to inform a firm's management of the existing cushion in actual sales or budgeted sales before the firm would incur a loss.
This is a question that a student met in her actual exam. The margin of safety is not even mentioned in the CIPS study guide.
Question 179
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
Answer : B, C
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
Question 180
Which characteristics are likely to feature in a partnership relationship in purchasing?
Close collaboration between supplier and buyer
Focus is on price and delivery only
Sharing of information
One-off commercial transactions
Answer : D
Partnership relationshipsare strategic and long-term. They emphasizetrust, collaboration, and information sharing. Unlike transactional relationships, they go beyond price and delivery to focus on joint value creation.
''Collaborative partnerships involve open information sharing and mutual support. These relationships are built on joint objectives, trust, and commitment to long-term success.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.2 - Types of Supplier Relationships)
Question 181
''A negotiation ends once the meeting finishes.'' Is this statement true?
Answer : D
Negotiations do not end at the meeting; they continue through reflection, documentation, and post-negotiation review. Best practice involves assessing whether objectives were met, capturing lessons learned, and ensuring written confirmation of terms. Without this, misunderstandings or missed improvements can occur. Reflection allows organisations to continuously strengthen negotiation strategies and build learning cycles.
Question 182
After studying Thomas-Kilmann conflict resolution model and considering different approaches carefully, the procurement team of XYZ Ltd. decides to adopt an avoiding approach to the upcoming negotiation with one of their suppliers. Which of the following will be the objective of XYZ procurement team in this negotiation?
Answer : B
Avoiding is unassertive and uncooperative. When avoiding, an individual does not immediately pursue his or her own concerns or those of the other person. He or she does not address the conflict. Avoiding might take the form of diplomatically sidestepping an issue, postponing an issue until a better time, or simply withdrawing from a threatening situation.
LO 1, AC 1.1
Question 183
Open questions can be a useful communication tool in negotiations. Is this statement correct?
Answer : C
Open questions (''how/why/what...'') encourage the other party to share information, interests, and constraints, supporting rapport, listening, and exploration---key to persuasive dialogue and integrative outcomes. Closed questions check facts; open ones surface interests.
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Question 184
A building firm has been awarded a contract to construct an office block. Which is a direct cost?
Answer : A
Direct costs are attributable to a specific project --- in construction, this includes materials and on-site labour. Legal fees, insurance, and office space are indirect costs, as they support the business overall but are not tied to one project. For buyers, distinguishing direct from indirect costs ensures pricing transparency and helps challenge excessive overhead allocations. This knowledge strengthens cost breakdown negotiations in project contracts.
Question 185
What is a benefit to the buyer of having a BATNA (best alternative to a negotiated agreement) in a negotiation?
Answer : C
A BATNA provides the buyer with the confidence to walk away if terms are not favorable, ensuring they don't settle for a suboptimal agreement. Knowing the best alternative enables buyers to negotiate from a position of strength, as per CIPS's guidance on negotiation strategies.
Question 186
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
Question 187
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : D
An adversarial style is appropriate when issues are non-negotiable, such as health and safety commitments (D). In these scenarios, compliance is required without compromise, and a firm stance may be necessary. This aligns with CIPS guidance, where adversarial tactics are used in non-negotiable contexts to enforce strict standards.
Question 188
When is the best time for buyer to propose the negotiation agenda to potential supplier?
Answer : D
A business negotiation agenda is a formal agreed upon list of goals to be achieved or items to be discussed in a particular order during a meeting or negotiation. Agendas can be formal and obvious, or informal and subtle in negotiations.
The agenda is one of the main structural elements of negotiation, in addition to such questions as site, identification of participants, and elements of timing. Together, they answer the who, what, when, and where questions. As with other aspects of negotiation, the agenda can be used either manipulatively to enhance leverage or to improve the prospects for agreement and the possibilities for mutual gain. In most cases, it will be used both ways, reflecting the nature of negotiation as a ''mixed-motive'' situation.
Although it can be instrumental to [research] volunteer as a sole source to write the agenda, in most cases it becomes a joint activity to construct a consensual basis for subsequent negotiation. In these situations, agenda-building becomes one of the pre-negotiation activities that set the tone for the relationship (Saunders, 1985). In other situations, the parties may engage in actual negotiation without a formal or written agenda. When this occurs, the risks and uncertainties may be high but the party who appreciates the importance of the informal agenda has a tremendous advantage.
Whether one plans it or not, during the course of negotiation the parties will discuss a finite set of issues in some sequence and from a particular perceptual framework. Consciousness of the universality and centrality of the agenda is prerequisite to guiding negotiation to a successful conclusion.
CIPS study guide page 146-150
Managing the negotiation agenda | SpringerLink
What is Negotiations Agenda - Negotiation Coaching (brightfocusconsult.com)
Question 189
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 190
When is an adversarial style of negotiation appropriate?
Answer : A
An adversarial negotiation style is appropriate when one party has high bargaining power and is focused on maximizing its benefit rather than maintaining a long-term relationship. This approach often involves competitive tactics that leverage power disparities, aligning with CIPS guidance on when adversarial tactics may be strategically used in negotiations.
Question 191
What is the most likely outcome when two organisations with adversarial relationship negotiate with each other?
Answer : C
An adversarial relationship in purchasing and supply arises when identical or equivalent good or services are available from competing suppliers and buyers/sellers are trying to gain an advantage over each other. Low levels of trust are characteristic of adversarial relationships. The outcome when two organisations with adversarial negotiate is most likely to be win-lose.
Adversarial purchasing - Wikipedia
CIPS study guide page 32-35
Question 192
Any commercial negotiation process has only three stakeholders: procurement, budget holders, and users. Is this TRUE?
Answer : D
Commercial negotiations involve a wider set of stakeholders than procurement, budget holders, and users. Depending on context, directors, IT specialists, legal teams, regulators, or external partners may all be impacted. Ignoring them risks resistance or missed requirements. CIPS stresses stakeholder mapping tools (such as Mendelow's Matrix) to identify influence and interest levels, ensuring all relevant parties are managed appropriately in negotiation preparation and execution. Narrow stakeholder identification can undermine outcomes.
Question 193
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
A junior team member can effectively contribute as a note taker (1) and observer (3), allowing them to support the meeting without taking on roles that require more experience, like chairing or serving as an expert. This aligns with CIPS's recommendations for assigning junior roles in negotiations.
Question 194
Why is the use of power important for integrative commercial negotiations?
Moving negotiations forward when they get stuck on certain issues
Maximising the share of value gains for the negotiator's side
Coercion of the other party into a submissive agreement
Breaking through negotiation barriers related to attitude
Answer : C
In integrative (win--win) negotiations, power is not used to dominate or coerce but to enable progress and overcome barriers. Power can help move negotiations forward when discussions stall on specific issues and can help address behavioural or attitudinal barriers that prevent collaboration. Maximising one side's share of gains and coercion are characteristics of distributive or adversarial negotiations, not integrative ones. CIPS clearly differentiates the constructive use of power in integrative negotiations as a means to facilitate dialogue, encourage engagement, and unlock joint value, rather than to force submission or extract disproportionate gains.
Question 195
Lina Rawlins is a senior buyer working for a medical equipment company. Lina is in charge of the company's largest supplier account, Great Barrington Gas (GBG), a medical equipment supplier. Recently, GBG's performance has declined, leading to an increasing number of rejected items. Lina is aware of the seriousness of this and has asked GBG to attend an urgent meeting. In the meeting, Lina asked the GBG representative, ''Can you tell me exactly what you are doing to ensure quality?" What type of question is Lina asking?
Answer : A
Lina is asking a probing question to gather more detailed information on the actions GBG is taking to address quality issues. Probing questions are intended to delve deeper into a topic and elicit specific details, making them suitable for understanding underlying issues, as per CIPS's negotiation question types.
Question 196
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 197
Which of the following are typical characteristics of activity-based costing (ABC) method? Select TWO that apply.
Answer : A, E
Activity-based costing is an alternative approach to traditional absorption costing. The characteristics of these two methods are illustrated in the graph below:
Question 198
When is the best time to adopt accommodating style according to Thomas-Kilmann conflict mode instrument?
Answer : C
According to Thomas-Kilmann conflict model instrument, there are 5 conflict management styles:
Accommodating is an unassertive and cooperative approach to resolving the conflict. Accommodating means conceding to the other party with little debate or fight, not challenging or strongly putting forward your own point of view and generally giving and yielding to the other party's point of view. Accommodating is best used when:
1. When others can resolve the conflict more effectively
2. When the issue is much more important to the other person than to yourself - to satisfy the needs of others and to show you are reasonable
3. To build up social credit for later issues which are important to you
4. When continued competition would only damage your cause
5. When preserving harmony and avoiding disruption are especially important
6. To aid in the managerial development of subordinates by allowing them to experiment and learn from their own mistakes
LO 1, AC 1.1
Question 199
Maria is a professional services category buyer within the National Health Service. Due to severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
Question 200
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latest meeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : C
Question 201
Which of the following are most likely to be direct costs of a steel manufacturer? Select THREE that apply.
Answer : B, E, F
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
Question 202
A good negotiator invests time in understanding the needs of the individuals in a negotiation. Is this statement true?
Answer : D
Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing tounderstand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:
The organisation - What the organisation wants to achieve. This is generally well stated and understood
The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual
Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.
Question 203
Which of the following roles would support negotiations with an external supplier when planning a negotiation for a low-value, routine purchase? Select TWO that apply.
Answer : C, E
For low-value, routine purchases, the involvement of The procurement manager (C) and An internal business user (E) is appropriate. The procurement manager brings expertise in supplier engagement, while the internal business user provides insights on specific needs for the productor service. Involving high-level roles, like the CEO or a legal advisor, is unnecessary for routine purchases, as per CIPS guidance on resource alignment in procurement.
Question 204
During which stage in the negotiation process would negotiators use tactics and exchange concessions?
Answer : A
Thebargaining stageis where both parties begin tomake concessionsand test options. This phase involves the use of strategic tactics, including the presentation of tradeables and adjustments in position to reach mutual agreement.
''The bargaining stage is characterised by movement, trade-offs, and deal-shaping. Tactics such as anchoring, making concessions, and introducing tradeables are employed to bridge the gap between opening offers.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Stages of the Negotiation Process)
Question 205
For effective commercial negotiation, an organisation must analyse and apply approaches to negotiate agreements successfully. Which one of the following would provide a successful outcome?
Answer : A
Understanding the key approaches to commercial negotiation---such as adversarial, integrative, collaborative, or accommodative---is fundamental to achieving successful outcomes. CIPS emphasises that negotiators must be able to select and apply the correct approach based on factors such as power balance, relationship importance, risk, and objectives. While understanding conflict, stakeholder power, and sourcing stages all support negotiation effectiveness, they are secondary to choosing the right negotiation approach itself. Without this core understanding, negotiators risk misalignment between strategy and context, leading to suboptimal or failed outcomes.
Question 206
Which type of question style is a negotiator using if they ask the other party
''Can you deliver our items by Friday 17th?''
Answer : B
This is a closed question because it requires a definite, factual response such as ''yes'' or ''no''. Closed questions are particularly useful in negotiations for confirming specific commitments, including delivery dates, prices, quantities, or contractual terms. They reduce ambiguity and are commonly used during the later stages of negotiation to confirm agreement and progress toward closure. Probing questions seek deeper explanation, leading questions influence the answer, and multiple questions combine several issues at once. CIPS highlights the importance of choosing question styles appropriately depending on the negotiation objective and stage.
Question 207
In what circumstances is the bargaining power of suppliers likely to be high, in relation to buyer power? Select THREE that apply.
Answer : A, D, E
Supplier bargaining power is stronger when there arefew suppliers,low volume requirementsfrom buyers, and when suppliers possessunique capabilities or technology(like specialized machinery). These conditions reduce buyer leverage and increase supplier influence.
Question 208
When considering a new supply source for a product, a procurement professional reviews supplier quotations before negotiation. Which of the following is a direct cost in the supplier's quotation?
Answer : C
Direct costs are those directly attributable to the production of a unit --- such as raw materials, components, and direct labour. Here, the metal used is a clear direct cost, as it varies with production output. Rent, insurance, and sales wages are indirect (overhead) costs, which must be allocated across products. Understanding this distinction is vital in negotiations, since direct costs are easier to challenge for efficiency gains, while indirect allocations may be arbitrary. Buyers with clear knowledge of cost breakdowns can negotiate more effectively, avoiding inflated pricing.
Question 209
Which of the following occur in the planning and preparation stage of negotiation? Select THREE.
Answer : B, C, D
Planning and preparation involve analysing bargaining power, understanding the counterpart's needs, and defining the constituents (parties involved). Questioning and concessions come later during bargaining. Narrowing solutions occurs during closure. Proper planning ensures negotiators enter with clear objectives, strategies, and knowledge, reducing surprises. CIPS highlights preparation as the most critical determinant of negotiation success, aligning with the saying: ''Failing to prepare is preparing to fail.''
Question 210
Which of the following are most likely to turn buying organisation into an unattractive customer in supplier's perspective? Select TWO that apply.
Answer : A, D
Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation. Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:
Simple procurement processes: Using SRM technology may help to simplify the process
Simple contracting processes
Clear and concise documentation: Reduced paperwork helps both supplier and buyer save their time and resources.
Absence of onerous supplier terms and conditions
On-time payment
Transparent processes: Unclear tender award criteria can be seen as opaque. Suppliers who attended the tendering processes cannot know the reasons why their bids are rejected and hesitate to attend other tendering.
Ethical behaviour: Suppliers may prefer a buyer who adopts CSR policy because they can predict potential customer's behaviour. Demands for kickback are unethical behaviours.
Question 211
Buying organisation may increase its leverage with suppliers by concentrating spend. Which of the following are most likely to be forms of supplier spend consolidation? Select THREE that apply.
Answer : A, B, E
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
Volume redistribution: making recommendations following spend analysis to move from one supplier to another
Volume consolidation across categories: certain purchase requirements may be common across a number of categories
Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
Question 212
Which of the following types of questions are likely to be the most effective to check facts in negotiations?
Answer : D
Closed questions are useful for verifying facts, as they prompt specific, concise responses. These questions allow the negotiator to confirm details without ambiguity, which is crucial for clarity in negotiation settings, as highlighted in CIPS's guidelines on questioning techniques.
Question 213
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : A
Question 214
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?
Answer : A
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 and any 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 215
A procurement manager is about to lead an important negotiation with a new IT supplier and has insisted the first meeting takes place at the buying organisation's office. Will this give one party an advantage?
Answer : A
Contextual (environmental) power includes home-ground advantage, control of the venue, access to colleagues and data, and comfort with logistics---all of which can tilt confidence and leverage toward the host (the buyer).
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Question 216
A competitive win-lose distributive approach to a negotiation is seeking to:
Answer : B
Question 217
Which of the following roles would support negotiations with an external supplier when planning a negotiation for a low-value, routine purchase? Select TWO that apply.
Answer : C, E
For low-value, routine purchases, the involvement of The procurement manager (C) and An internal business user (E) is appropriate. The procurement manager brings expertise in supplier engagement, while the internal business user provides insights on specific needs for the productor service. Involving high-level roles, like the CEO or a legal advisor, is unnecessary for routine purchases, as per CIPS guidance on resource alignment in procurement.
Question 218
Which of the following is potentially a major source of conflict?
Answer : A
Question 219
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 220
A garden furniture supplier currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating in the supplier's environment (their site) can unintentionally shift the power dynamic. The supplier may gain apsychological edgedue to the comfort and control of their surroundings. Best practice recommends holding negotiations in aneutral settingto ensure balance and reduce any influence based on physical context. While site visits are beneficial for supplier evaluation, they should beseparate from the negotiationto maintain objectivity.
Question 221
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost 24%. Which of the following represents the mark-up of that company?
Answer : B
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up (%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
Question 222
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
Junior team members can play supportive roles in negotiations, such as taking notes and observing the proceedings. These roles allow them to learn and contribute without leading the negotiation. Serving as an expert or chair would typically require more experience and authority.
Question 223
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should:
Answer : D
Question 224
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction. What is the mark-up profit percentage earned by the supplier on this transaction?
Answer : C
The mark-up percentage is calculated as the profit divided by the cost of production, then multiplied by 100 to convert it into a percentage.
Calculation:
(
80
/
160
)
100
=
50
%
(80/160)100=50%
Thus, the supplier's mark-up percentage is 50%, as per standard pricing calculations used in procurement.
Question 225
Two firms negotiating a contract have an adversarial relationship. What type of negotiation would you expect?
Answer : B
Adversarial relationships typically lead to distributive (win--lose) negotiations, where each party seeks maximum gain at the other's expense. Trust is low, information is withheld, and concessions are hard-fought. While it can deliver short-term wins, it risks damaging long-term relationships and may reduce overall value. Collaborative, integrative approaches are more sustainable, but adversarial conditions often prevent them. CIPS highlights the importance of recognising relationship dynamics before selecting negotiation style, as forcing integrative approaches in adversarial contexts may be unrealistic.
Question 226
Commercial negotiations on price cover various aspects, including pricing arrangements. A buyer may negotiate a fixed-price agreement. Why is a fixed-price agreement advantageous to the buyer?
Answer : B
In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier's internal cost build-up (unlike cost-plus).
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Question 227
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?
Answer : A
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.
CIPS study guide page 29-31
Integrative Negotiation: Definition, Tips and Examples | Indeed.com
Question 228
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?
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.
Question 229
Ben Dunne is a procurement manager and is responsible for a contract that supplies translation services to his organisation. Ben has the authorisation to extend the contract for a further two years, but has aimed for a further 2% discount. Ben is aware that the supplier's previous performance has been inconsistent, but during the negotiation Ben asks the supplier to present their performance to date on this contract. Which stage of the negotiation cycle is this?
Answer : D
The testing stage of the negotiation cycle is where each party explores and validates information provided by the other side. By asking the supplier to present their performance to date, Ben is testing claims, checking credibility, and assessing whether the supplier's performance supports or undermines their position in the negotiation. This is distinct from preparation (which happens before the meeting), bargaining (where concessions and tradeables are exchanged), and agreement (where final terms are confirmed). CIPS highlights that testing allows negotiators to challenge assumptions, clarify evidence, and strengthen their position before moving into bargaining or closure.
Question 230
Langham Industries is seeking to expand its operations globally. The CEO has asked the procurement department to engage in a macroeconomic analysis for its potential new supply chain to meet organisational objectives and outcomes. Which of the following would be a source of macroeconomic data?
Answer : C
Published market indices are a source of macroeconomic data, as they reflect broader economic trends and provide insights into the overall market environment, which is essential for globalexpansion planning. Macroeconomic analysis focuses on high-level economic indicators, as recommended in CIPS's guidelines on sourcing macroeconomic data.
Question 231
Which of the following is the true statement?
Answer : B
Internal stakeholder support will be important not just at the initial negotiation of the contract, but potentially throughout the life of the contract right through to exit.
As a general rule, connected stakeholders (with the exception of suppliers) have a low level of influence on procurement negotiations.
Suppliers are connected stakeholders who have contractual relationships with the organisation.
Commercial negotiation objective should be driven by the business needs of the organisation, and not just the instinct of procurement.
Question 232
At which stage in a negotiation would questions be asked to obtain missing information?
Answer : D
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 233
Which of the following are stages of a win-win approach to negotiations?
Find out where the interests of both parties align
Design new options, where everyone gets more of what they need
Limit the resources to a fixed number
Insist that the agreement includes subjective regulatory standards
Answer : A
A win-win (integrative) negotiation focuses on shared interests and joint value creation. The first step is identifying where both parties' interests align, followed by designing creative options that allow both sides to gain more of what they need. Limiting resources and imposing subjective standards are characteristics of distributive or adversarial approaches and restrict value creation. CIPS clearly distinguishes integrative negotiation as collaborative, interest-based, and solution-focused, particularly suitable for long-term and strategic supplier relationships.
Question 234
Sally is negotiating with an oversea supplier on the price and payment period. Her company and the supplying organisation are equal in bargaining power. The supplier says that they are investing in new facilities and machinery so the payment period should not be longer than 30 days. Sally knows that her company often pays the suppliers after 45 days from the delivery, but at the moment the company has positive cash flow and it is able to pay immediately. Which of the following should be Sally's concession plan?
Answer : B
In the scenario, the length of payment period is particularly important to the supplier as they are investing new facilities. Otherwise, the buyer's company has a positive cash flow position and budget is available for a shorter payment terms. So this tradeable (payment period) is important to supplier but it is not a significant problem with the buyer. This tradeable will fall within 'Easy concession to trade' quadrant in the following matrix:
Table Description automatically generated
If the tradeable fall within this quadrant, Sally should shorten the payment period in supplier's favour and try to win as many concessions as possible in return. Asking for a discount may be a reasonable trade-off.
LO 2, AC 2.3
Question 235
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?
Answer : C
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 236
A procurement manager is considering accepting a fixed price agreement for 12 months with an IT supplier. What are the advantages of fixed price agreements? Select TWO that apply.
Answer : B, D
Afixed price agreementprovides stability and predictability. The supplier bears the risk of cost fluctuations, which is especially advantageous in volatile markets. Moreover, it simplifies administrative processes for the buyer over the contract duration.
''Fixed price agreements transfer cost risk to the supplier and enable simplified contract management. This can reduce overhead for buyers and support budgeting accuracy.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Pricing Models in Negotiation)
Question 237
Which of the following is the internal factor that is taken into price of a product?
Answer : A
In order to answer this question, you should better consider each option:
'Exchange rate' is the value of one nation's currency versus the currency of another nation or economic zone. This is a macroeconomic factor.
'Elasticity' refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. This is a microeconomic factor
Consumer tastes refer to the products and services that consumers consciously choose over others. Consumer tastes are so powerful that they can change how businesses conduct their activity. Like elasticity, this is also a microeconomic factor.
Among 4 options, only risk management is the internal factor. Risk pricing is a strategy applied by many companies in the world. To learn how to price the risk, you can read an article from McKinsey: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-to-price-risk-to-win-and-profit
This is a question that a student met in her actual exam. The knowledge section is unknown.
LO: Unknown, AC: Unknown
Question 238
Which of the following is potentially a major source of conflict?
Answer : A
Question 239
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Answer : C
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Question 240
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
''Expanding the pie'' is a strategy used in integrative negotiations where both parties collaborate to increase the total value available before dividing it. This leads to mutual gains and supports long-term, strategic relationships.
Question 241
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Answer : A
Question 242
A buyer continually states, during a negotiation, that budget constraints are impacting their ability to make concessions. What type of tactic are they using?
Answer : C
Question 243
''BATNA is a concept that should be considered at the start of negotiations.'' Is this statement correct?
Answer : A
BATNA (Best Alternative to a Negotiated Agreement) is a core preparation concept and should always be considered before negotiations begin. It gives the buyer clarity on the minimum acceptable outcome and provides leverage by ensuring they do not accept a deal worse than their alternative. BATNA is not a legal requirement, nor should it be developed only when negotiations fail, as this weakens negotiating confidence and decision-making. CIPS emphasises BATNA as a fundamental planning tool that underpins effective and disciplined negotiation behaviour.
Question 244
John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?
Answer : C
While stakeholder feedback is crucial, meetings are not always the most effective review method. Reviews may be better conducted through reports, surveys, or individual debriefs, depending on context. The key is to capture lessons learned, successes, and areas for improvement, and to record them for future negotiations. Forcing all stakeholders into one meeting risks inefficiency or unproductive blame games. CIPS stresses structured reflection and documentation as best practice, ensuring organisational learning and preparation improvements.
Question 245
A competitive win-lose distributive approach to a negotiation is seeking to:
Answer : B
Question 246
Which of the following are most likely to be macro factors that may influence the balance of power in commercial negotiation? Select THREE that apply.
Answer : A, B, D
All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forces which both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
LO 1, AC 1.3
Question 247
Fast & Easy Limited, a global fast food retailer, is in a negotiation with its major meat supplier. The supplier is asking for a 2% price increase, which Fast & Easy is strongly resisting. The supplier justifies this increase by stating that currency fluctuations, an unstable economic climate, and rising transport costs have necessitated this increase. Which influencing tactic is the supplier using?
Answer : A
The supplier is using Rational persuasion by providing logical reasons, such as economic conditions and increased costs, to justify the price increase. This approach uses factual information to influence the buyer's decision, aiming to present the price hike as a reasonable adjustment, which aligns with CIPS strategies on influencing tactics in negotiations.
Question 248
A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?
Answer : B
To answer this question, you should know The seller's perspective as in 'How to Negotiate Professionally':
In the scenario, the buyer's spend is low, while they seem unattractive to seller (as they tend to pay late). So the buyer is classified as Nuisance in seller's perspective.
Question 249
Which of the following are features of a single-sourced type of relationship on the relationship spectrum?
Exclusivity granted in relation to a particular product
The supplier is an oligopoly market structure
The supplier is trusted and collaborative
Framework contracts are used to identify the supplier
Answer : B
Single-sourced relationships often involve exclusivity for a specific product (1) and a high level of trust and collaboration (3) between buyer and supplier. This type of relationship is selected forstrategic procurement purposes, often involving long-term partnerships, which align with CIPS's relationship spectrum guidelines.
Question 250
Which of the following is a source of information on microeconomic factors?
Answer : D
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Question 251
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier makes their closing statements, they are most likely to be doing which of the following?
Answer : B
As negotiations near closure, skilled negotiators carefully observe for buying signals---verbal cues (''That sounds reasonable...'') and non-verbal cues (nodding, smiling, leaning forward). These indicate readiness to agree and confirm whether it is the right time to close. At this stage, both sides usually stop gathering data or building rapport, as the focus is on confirming alignment and avoiding last-minute derailments. Closing too early may risk missing concessions, but delaying risks cooling momentum. Recognising buying signals ensures closure occurs at the optimal point, aligning with preparation and tactical awareness.
Question 252
If the value of the British Pound in other currencies is strong, which of the following is most likely to occur?
Answer : D
Currency exchange rates are determined by macroeconomic factors and demand and supply. In general, countries with stable political and economic systems, a growing economy and a strong rule of law will have stronger and more stable currency than those without these characteristics. In this question, the British Pound is stronger than other currency, which means that buyers who import goods from the UK have to pay higher in their own currencies.
LO 2, AC 2.2
Question 253
A buyer is preparing for an upcoming negotiation with a large supplier on a contract renewal price. The buyer has undertaken some analysis and is concerned that changes in the organisation's macro-environment over the last year will result in a price increase. The buyer's analysis has identified changes in which of the following?
Answer : A
Question 254
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 255
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost 24%. Which of the following represents the mark-up of that company?
Answer : B
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up (%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
Question 256
''BATNA is a concept that should be considered at the start of negotiations.'' Is this statement correct?
Answer : A
BATNA (Best Alternative to a Negotiated Agreement) is a core preparation concept and should always be considered before negotiations begin. It gives the buyer clarity on the minimum acceptable outcome and provides leverage by ensuring they do not accept a deal worse than their alternative. BATNA is not a legal requirement, nor should it be developed only when negotiations fail, as this weakens negotiating confidence and decision-making. CIPS emphasises BATNA as a fundamental planning tool that underpins effective and disciplined negotiation behaviour.
Question 257
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : D
An adversarial style is appropriate when issues are non-negotiable, such as health and safety commitments (D). In these scenarios, compliance is required without compromise, and a firm stance may be necessary. This aligns with CIPS guidance, where adversarial tactics are used in non-negotiable contexts to enforce strict standards.
Question 258
Hammad Alsuwaidi is a procurement professional leading a negotiation for a vehicle rental contract. Hammad has a clear goal to negotiate a two-year contract in exchange for a minimum of a 20% discount. During the negotiation, Hammad presents to the supplier the facts, figures, and justification for a 20% discount. Which of the persuasion methods below has Hammad chosen?
Answer : A
Hammad's approach of presenting facts, figures, and justifications aligns with the Push persuasion method. The Push strategy involves directly presenting information, data, and logical arguments to convince the other party of a certain outcome. In this scenario, Hammad is using objective evidence to influence the supplier towards agreeing to a discount, which is characteristic of the Push method, as per CIPS guidance on negotiation tactics.
Question 259
It may be more difficult to buy on a credit from supplier who locates in a country with a hyperinflation? Is this assumption true?
Answer : B
If the inflation rate is running high, then obtaining credit as a buyer is normally more difficult or expensive as money in the future will be worth less than money today.
Question 260
Which of the following stages of the CIPS Procurement Cycle are typically where commercial negotiations take place?
Contract management and improvement
Develop tender documentation
Market sector analysis
Contract award and implementation
Answer : A
Commercial negotiations commonly take place during Contract Management and Improvement (1) and Contract Award and Implementation (4) stages. During these stages:
Contract Management and Improvement (1): Ongoing negotiations may be required to adjust terms and conditions as part of managing the contract lifecycle.
Contract Award and Implementation (4): Initial negotiations finalize terms, setting the foundation for successful contract execution.
These stages are pivotal in ensuring both initial and ongoing alignment, as outlined in the CIPS Procurement Cycle.
Question 261
Lina Rawlins is a senior buyer working for a medical equipment company. Lina is in charge of the company's largest supplier account, Great Barrington Gas (GBG), a medical equipment supplier. Recently GBG's performance has declined, which has led to an increasing number of rejected items. Lina is aware of the seriousness of this, given the nature of the item, and has asked GBG to attend an urgent meeting. In the meeting, Lina asked the GBG representative ''Can you tell me exactly what you are doing to ensure quality?'' What type of question is Lina asking?
Answer : D
Question 262
Can a party gain huge advantages in negotiation from setting room layout?
Answer : B
Essentially, for trained negotiators under most circumstances, the physical locations of negotiations and the room layout should not make much difference to the outcomes of the meeting. It is reasonable to assume that most commercial negotiations are based at least initially on a principled- or pragmatic-type approach. It is arguable also that any advantage gained through intentionally creating an uncomfortable environment to put short-term pressure on TOP is likely to be short-lived as TOP will likely reflect on this later and seek means to get even.
Question 263
In a commercial negotiation, a procurement professional negotiates on his company's behalf. The power of buying organisation is the only factor that influences the behaviours of the other party. Is this assumption true?
Answer : B
The assumption is false, because when a procurement professional negotiates on behalf of his employer, he brings the power of his organisation (its brand, reputation and purchasing spend) as well his own personal power (that which is embedded within him) to the negotiation.
From a negotiation perspective, both organisational and personal power have the ability to influence the behaviours of other or the cause of event. This power is clearly core to negotiation, and of enormous important in seeking to achieve the objectives.
Question 264
The procurement manager of a private healthcare provider is running an IT project. Who would be the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : D
In the context of aninternal IT project, the relevant stakeholders would be thosedirectly involved in decision-making and implementation.Senior managementoversees funding and strategic fit, whilesoftware developersensure technical support. The general public and pharmaceutical suppliers are external and not primary stakeholders in this scenario.
''Stakeholder identification must focus on individuals or groups directly involved or affected by the procurement. This includes internal sponsors, end-users, and technical staff responsible for delivery.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Internal and External Stakeholders)
Question 265
Which of the following is the purpose of using stakeholder support level scale?
Answer : C
In order to estimate the gap and the progress towards desired level of support, a stakeholder support scale can be used by the procurement internally. The support level scale measures stakeholder commitment. Current support level for the procurement/negotiation objectives should be gained from engagement with key stakeholders. The following is an example of stakeholder support level scale:
LO 1, AC 1.1
Question 266
Logibox Ltd is releasing a new range of stackable storage boxes. It has adopted a pricing strategy that aims to sell at a price the consumer is prepared to pay.
Which of the following is it using?
Answer : C
Question 267
A good negotiator invests time in understanding the needs of the individuals in a negotiation. Is this statement true?
Answer : D
Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing tounderstand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:
The organisation - What the organisation wants to achieve. This is generally well stated and understood
The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual
Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.
Question 268
A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier over a contract for critical new services. They have decided they want to find a Win/Win (integrative) solution. Which TWO of the following would be appropriate in this scenario?
Answer : A, B
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.
Question 269
When considering a new supply source for a product, a procurement professional will review the suppliers' quotations before a supplier negotiation. Which of the following is a direct cost associated with the product within a potential supplier's quotation?
Answer : A
Direct costs are those costs that can be directly attributed to the production of specific goods or services. They typically include raw materials and labor directly involved in production. Metal used in the product is a raw material that becomes part of the final product, making it a direct cost.
Question 270
Citywide Developments Ltd (CDL) is a construction programme management company that delivers high-value property development schemes. CDL uses named consultant design services in contracts. Recently, consultancy day rates have increased. Which of the following tradeable concessions could CDL offer when negotiating with suppliers to achieve lower rates, without lowering service quality?
Answer : D
By removing the requirement for named personnel, CDL could allow the supplier flexibility in allocating equally competent but possibly less expensive staff. This tradeable does not compromise on quality but helps control costs.
Question 271
A procurement professional is preparing for a negotiation of purchasing non-critical commodity products. He knows that the product can be easily replaced by other substitutes in the market. The negotiation for these products is typified by which of the following?
Answer : C
With non-critical commodity products, the relationship will be transactional. Buyer should not spend too much time and effort into the negotiation.
LO 1, AC 1.4
Question 272
Which of the following are variable costs?
Answer : D
Packaging is considered a variable cost because it fluctuates with the level of production or sales activity. Variable costs change directly in relation to the volume of output or service. In contrast:
Rent (A), Loan repayments (B), and Insurance (C) are fixed costs, as they generally do not vary with production levels within a certain range. These are recurring costs that remain constant over time, aligning with CIPS's cost classification in procurement.
Question 273
Sunita's supplier states: ''Meeting your needs is meeting my needs because we are in this together.'' What type of negotiation is being undertaken?
Answer : D
This statement reflects shared goals and mutual benefit, hallmarks of integrative negotiation. Unlike adversarial or distributive (win-lose) strategies, integrative approaches seek joint value and collaboration. The language of partnership (''we are in this together'') signals alignment and cooperative intent. Lose-lose outcomes, by contrast, occur when both sides compromise excessively or fail to reach creative solutions. Integrative strategies foster long-term partnerships where value is maximised for both.
Question 274
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?
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
Question 275
Which of the following can help both parties to break the vicious cycle of blame when a relationship needs repairing? Select TWO that apply.
Answer : A, C
In order to break vicious cycle of blame, procurement will need to use their negotiation and conflict management skills, adopting a collaborative and integrative approach. Your first action should be to establish the facts that led to the situation where the relationship broke down. Most day-to-day relationship between buying organisations and suppliers do not of course involve procurement staff, so you will need to consult with your business partners internally to establish their point of view of where the issue and sources of conflict are. You should also contact the supplier and get their side of the story - this is particularly to when you have previously identified the supplier as critical or otherwise important to your operations. Ideally you will be able to apply principled negotiation here, separating the people from the issue, focusing on interests and not positions, and then looking for options of mutual benefits.
Question 276
Which of the following are examples of connected stakeholders in a private organisation? Select TWO that apply.
Answer : A, E
Connected stakeholders are those who, by contractual or commercial relationships, have a significant stake in organisation activity. As a general rule, connected stakeholder (with the exception of suppliers) have a low level of influence on procurement negotiations.
Examples of connected stakeholders are: suppliers, customers, bank where the organisation opens its account, shareholders.
Question 277
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 278
Which of the following would help build trust in a relationship?
Mediation attendance
Regular meetings
Keep promises
Coercion
Answer : B
Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.
Question 279
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?
Answer : B
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.
A picture containing graphical user interface Description automatically generated
Question 280
A break-even analysis uses which aspects as part of the calculation?
Fixed cost
Buying cost minus variable cost per unit
Variable cost
Selling price minus variable cost per unit
Answer : A
Break-even analysis identifies the sales volume required to cover fixed costs. It relies on:
Fixed costs (constant regardless of output).
Question 281
Which characteristics are likely to feature in a partnership relationship in purchasing?
Close collaboration between supplier and buyer
Focus is on price and delivery only
Sharing of information
One-off commercial transactions
Answer : D
Partnership relationshipsare strategic and long-term. They emphasizetrust, collaboration, and information sharing. Unlike transactional relationships, they go beyond price and delivery to focus on joint value creation.
''Collaborative partnerships involve open information sharing and mutual support. These relationships are built on joint objectives, trust, and commitment to long-term success.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.2 - Types of Supplier Relationships)
Question 282
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
===========
Question 283
Telephone is most likely to be used for which of the following negotiations?
Answer : C
Many commercial negotiations could be considered routine or just not worth the investment for buyers, and using the phone can make more sense and can be more immediate.
LO 2, AC 2.4
Question 284
A procurement professional is dissatisfied with how a recent negotiation was concluded. What could they do to improve their negotiation approach?
Seek feedback from the supplier on their recent performance
Prepare for all negotiations with a WIN/LOSE (distributive) approach
Involve lots of people in future negotiations
Undertake reflective practice after each negotiation
Answer : C
To improve negotiation outcomes, seeking feedback from the supplier (1) and undertaking reflective practice (4) are recommended actions. Feedback from the supplier can provide insights into areas for improvement from the counterparty's perspective, while reflective practice allows the negotiator to evaluate their own approach, outcomes, and areas for growth. This approach aligns with CIPS's emphasis on continuous improvement in negotiation skills.
Question 285
Cost and price analysis is very important for buyers when they are preparing for a negotiation with supplier. Which of the following is a benefit of knowing supplier's fixed costs?
Answer : A
Knowing supplier's fixed and variable costs is beneficial for the buyer in a negotiation. With these insights, the buyer would know the volume at which the supplier reaches break-even points and then offers significant discount due to economies of scale.
LO 2, AC 2.1
Question 286
Which of the following are recognised techniques in contract negotiation? Select THREE that apply.
Answer : A, C, F
The question asks about negotiation techniques which are not present in the book. In this question, there are only 3 recognised techniques:
- Framing and reframing: A frame is an assumption, or set of assumptions, that guides our attention and behavior. Reframing is the ability to identify and significantly change assumptions or perspectives. Framing has a significant impact on the effectiveness of negotiation outcomes and negotiator working relationships. You can read more on framing and reframing here.
- Anchoring: Anchoring bias is well-known cognitive bias in negotiation and in other contexts. The anchoring bias describes the common tendency to give too much weight to the first number put forth in a discussion and then inadequately adjust from that starting point, or the ''anchor.'' We even fixate on anchors when we know they are irrelevant to the discussion at hand. You can read more on anchoring here.
- Pacing and leading: Pacing and leading is a two-step lever of persuasion. First -- You ''match your pace'' to the person you want to influence in as many ways as possible. You can do this by mimicking the way the person talks, stands, their appearance, etc. You can also mimic less tangible aspects like the way they act, or their emotional state. Second -- Once you've set your pace with someone, lead them to whatever decision or behavior you want them to take! You can read more on pacing and leading here.
LO 3, AC 3.2
Question 287
When developing a negotiation approach, according to recognised theory (for example Mendelow), how should stakeholders with high interest but low power be managed?
Answer : C
According toMendelow's Matrix, stakeholders withhigh interest but low powershould be keptinformed. Their interest means they care about the negotiation's outcome, but their low power means they can't significantly influence it. Keeping them informed avoids alienation and ensures smoother implementation of negotiated agreements.
''Stakeholders with high interest but low power should be managed by keeping them informed. They may become powerful advocates or opponents in the future, so engaging them is a strategic approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Stakeholder Management in Commercial Negotiations)
Question 288
Neville is a senior procurement specialist in a automaker. He has good relationship with his team mates and other departments because of his amazing purchasing skills and kindness. Which of the following sources of power is Neville likely to possess?
Answer : B
In 1959, French and Raven described five bases of power:
1. Legitimate -- This comes from the belief that a person has the formal right to make demands, and to expect others to be compliant and obedient.
2. Reward -- This results from one person's ability to compensate another for compliance.
3. Expert -- This is based on a person's high levels of skill and knowledge.
4. Referent -- This is the result of a person's perceived attractiveness, worthiness and right to others' respect.
5. Coercive -- This comes from the belief that a person can punish others for noncompliance.
Six years later, Raven added an extra power base:
6. Informational -- This results from a person's ability to control the information that others need to accomplish something.
In the scenario, Neville attracts and keeps good relationship with his colleagues not because of neither position nor reward nor coercion. He has good skills and kindness, which increase his charisma. His source of power is referent power.
CIPS study guide page 47-50
French and Raven's Five Forms of Power
Question 289
Which characteristics are likely to feature within an integrative negotiation?
Maximising the other party's outcome to enhance relationships
Maximising joint outcomes
Short-term focus
Pursuit of goals held jointly with other party
Answer : C
Integrative negotiationfocuses onmutual gainand long-term collaboration. It seeks tomaximize joint outcomesand encourages parties to align interests andpursue shared goals. This contrasts with distributive tactics that prioritize individual wins and short-term gains.
''Integrative negotiations aim to create outcomes where both parties benefit. Shared problem-solving, information exchange, and joint goal pursuit are central features of this approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Principles of Integrative Negotiation)
Question 290
According French and Raven's base model, which of the following are sources of personal power that can be used in commercial negotiation? Select THREE that apply.
Answer : B, E, F
A useful model of personal power that has survived the test of time and provide a simple way to analyse negotiation in French and Raven's Power Base Model, which describes six bases of power:
Question 291
For a commercial negotiation to be effective, the organisation has to identify resources required for negotiation. Which one of the following could help?
Answer : B
Involving an appropriate cross-functional team is beneficial for effective commercial negotiation because it brings together diverse perspectives and expertise relevant to the negotiation context. According to CIPS, a cross-functional team ensures that all aspects, such as technical, financial, and operational inputs, are considered, leading to more balanced and informed decision-making. This approach also helps in addressing complex negotiation elements effectively.
Question 292
Are tactical ploys only used in distributive approach?
Answer : D
There are many tactics and ploys that can be used to persuade others, particularly those not trained in negotiation. But in general these tactics should be used with care, as they can backfire; and in situations where a long-term relationship is desired, they can be, if detected, become an irritant to TOP.
Tactics are particularly effective if and when you are dealing with untrained negotiators, in consumer's buying situation and in once-off encounter.
Question 293
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
Answer : A, D
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
Question 294
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should:
Answer : D
Question 295
A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier over a contract for critical new services. They have decided they want to find a Win/Win (integrative) solution. Which TWO of the following would be appropriate in this scenario?
Answer : A, B
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.
Question 296
In which of the following persuasion methods, the influencer uses logics and objective reasons to persuade the others to buy into influencer's ideas?
Answer : A
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 multiple variables to consider when choosing between 'push' and 'pull'. Professor Fiona Dent of Ashridge Business School proposes situations when each style might be most appropriate, breaking down push into 'directive' and 'reasoning' and 'pull' into 'collaborative' and 'visionary':
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Using logical and objective reasons is one of the typical characteristics of persuasion reasoning method.
Question 297
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 298
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
Answer : B, C
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
Question 299
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Question 300
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier makes their closing statements, they are most likely to be doing which of the following?
Answer : B
As negotiations near closure, skilled negotiators carefully observe for buying signals---verbal cues (''That sounds reasonable...'') and non-verbal cues (nodding, smiling, leaning forward). These indicate readiness to agree and confirm whether it is the right time to close. At this stage, both sides usually stop gathering data or building rapport, as the focus is on confirming alignment and avoiding last-minute derailments. Closing too early may risk missing concessions, but delaying risks cooling momentum. Recognising buying signals ensures closure occurs at the optimal point, aligning with preparation and tactical awareness.
Question 301
Which of the following occur in the planning and preparation stage of negotiation? Select THREE.
Answer : B, C, D
Planning and preparation involve analysing bargaining power, understanding the counterpart's needs, and defining the constituents (parties involved). Questioning and concessions come later during bargaining. Narrowing solutions occurs during closure. Proper planning ensures negotiators enter with clear objectives, strategies, and knowledge, reducing surprises. CIPS highlights preparation as the most critical determinant of negotiation success, aligning with the saying: ''Failing to prepare is preparing to fail.''
Question 302
Which of the following is potentially a major source of conflict?
Answer : A
Question 303
Which of the following is considered a weakness of a 'dealer' style negotiator?
Answer : A
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of dealer style are described below:
LO 2, AC 2.4
Question 304
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 305
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship style can be characterised by which of the following? Select the TWO that apply.
Answer : A, D
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question 306
Which of the following types of relationship would possibly lead to a distributive negotiation?
Answer : D
Question 307
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Answer : C
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Question 308
''A negotiation ends once the meeting finishes.'' Is this statement true?
Answer : D
Negotiations do not end at the meeting; they continue through reflection, documentation, and post-negotiation review. Best practice involves assessing whether objectives were met, capturing lessons learned, and ensuring written confirmation of terms. Without this, misunderstandings or missed improvements can occur. Reflection allows organisations to continuously strengthen negotiation strategies and build learning cycles.
Question 309
Two firms negotiating a contract have an adversarial relationship. What type of negotiation would you expect?
Answer : B
Adversarial relationships typically lead to distributive (win--lose) negotiations, where each party seeks maximum gain at the other's expense. Trust is low, information is withheld, and concessions are hard-fought. While it can deliver short-term wins, it risks damaging long-term relationships and may reduce overall value. Collaborative, integrative approaches are more sustainable, but adversarial conditions often prevent them. CIPS highlights the importance of recognising relationship dynamics before selecting negotiation style, as forcing integrative approaches in adversarial contexts may be unrealistic.
Question 310
Which of the following are examples of variable costs?
Answer : D
Question 311
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?
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.
Question 312
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 313
Which type of question should be used to receive affirmation on statement?
Answer : B
Different questioning styles can be used to elicit desired responses:
Question 314
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as:
Answer : C
Question 315
Colin Smith is preparing to negotiate for a chemical used in fertiliser. His organisation's objective is ethical and sustainable procurement. Using the Must--Intend--Like (MIL) framework, how should Colin categorise this objective?
Answer : D
In MIL planning, ''Musts'' are non-negotiable requirements (policy, law, mandatory standards). Ethical/sustainable procurement is typically a policy/legislative compliance requirement, so it belongs in Must; ''Intend/Like'' cover important and desirable aims respectively.
Question 316
Toby is an international sourcing category buyer within a third sector (not-for-profit) organisation. He has chosen to use a more adversarial style of negotiation as he believes his organisation has greater bargaining power over the supplier.
In what other situation would an adversarial relationship be used by Toby?
Answer : D
An adversarial (win--lose) negotiation approach is most appropriate where the relationship is short-term and transactional, and where long-term collaboration is not required. In such situations, the buyer may focus on maximising immediate value rather than building trust or joint efficiencies. A monopoly market places power with the supplier, making adversarial tactics ineffective. Where there are mutual objectives for efficiencies, an integrative (win--win) approach is more suitable. CIPS makes clear that adversarial negotiation is not appropriate in all negotiations, only where conditions such as short-term focus, low relationship dependency, and buyer power exist.
Question 317
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 318
During a negotiation, a procurement manager suggests that the two companies should split the difference which would benefit both the supplier and buyer. Which persuasion method is she using?
Answer : A
In the scenario, the manager propose to 'split the difference', which means each party will accept some of their demands and concede some. This is known as 'Compromise'.
Question 319
Which of the following is an attribute of a distributive negotiation approach?
Answer : C
Distributive negotiation is often described as a 'win-lose' approach, where each party aims to maximize their own gain, often at the expense of the other. The focus is onachieving personal success, not collaboration.
Question 320
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 321
Which of the following are hardball tactics in negotiations? Select TWO that apply.
Answer : B, C
In difficult negotiations and disputes, hardball tactics like punishment and threats often seem like the only way to win concessions. Some negotiators seem to believe that hardball tactics are the key to success in any negotiation. They resort to extreme demands and even unethical behaviour to try to get the upper hand in a negotiation.
The following are 8 typical hardball tactics:
1. Good cop / Bad cop
2. Low ball / High ball
3. Bogey
4. The Nibble
5. Chicken
6. Intimidation
7. Aggressive Behaviour
8. Snow Job
You can read the details of each tactic here.
In the contrary to hardball tactics, negotiators can adopt integrative approach to the negotiation. Some of integrative tactics are:
1. Expand the Pie
2. Bridging
3. Post Settlement --Settlement
Et cetera
Question 322
Which of the following is a disadvantage of absorption costing method?
Answer : D
Absorption costing is an approach to allocating overheads in which indirect costs are loaded or absorbed into direct costs related to specific jobs, processes or outputs, using an estimated basis of allocation.
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Question 323
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
Question 324
Colin Smith is preparing to negotiate for a chemical used in fertiliser. His organisation's objective is ethical and sustainable procurement. Using the Must--Intend--Like (MIL) framework, how should Colin categorise this objective?
Answer : D
In MIL planning, ''Musts'' are non-negotiable requirements (policy, law, mandatory standards). Ethical/sustainable procurement is typically a policy/legislative compliance requirement, so it belongs in Must; ''Intend/Like'' cover important and desirable aims respectively.
Question 325
Freefields Housing Authority (FHA) is a housing provider that has outsourced a range of management services using fixed-price long-term contracts. FHA's regular supplier credit reviews have identified that some key outsourced service suppliers are at risk of insolvency due to high inflation rates observed in the macroeconomic climate. Which of the following actions would enable FHA to reduce this risk for the lifetime of the affected contracts?
Answer : B
Question 326
Effective listening is important in integrative negotiations. Is this statement correct?
Answer : A
Effective listening is crucial in integrative negotiations as it fosters mutual understanding and helps identify shared interests, leading to collaborative solutions. It enables negotiators to comprehend the other party's needs and concerns fully.
Question 327
Which characteristics are likely to feature within an integrative negotiation?
Maximising the other party's outcome to enhance relationships
Maximising joint outcomes
Short-term focus
Pursuit of goals held jointly with other party
Answer : C
Integrative negotiationfocuses onmutual gainand long-term collaboration. It seeks tomaximize joint outcomesand encourages parties to align interests andpursue shared goals. This contrasts with distributive tactics that prioritize individual wins and short-term gains.
''Integrative negotiations aim to create outcomes where both parties benefit. Shared problem-solving, information exchange, and joint goal pursuit are central features of this approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Principles of Integrative Negotiation)
Question 328
Upper Woodborough Council is a government organisation that is seeking to reduce regular expenditure on facilities management services. Which of the following charges is an example of a fixed cost, that the council could renegotiate with the facilities management contractor to achieve savings?
Answer : D
Fixed costs are regular, predictable charges that do not vary directly with usage or demand. Monthly cleaning services are typically charged at a fixed, recurring rate, making them a clear example of a fixed cost that can be renegotiated to achieve savings. Fuel costs and reactive maintenance vary with activity levels, while inflation indexation is a pricing mechanism rather than a cost itself. CIPS advises buyers to focus on fixed-cost elements when seeking sustainable cost reductions, as changes deliver predictable and ongoing savings.
Question 329
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 330
Lina Rawlins is a senior buyer working for a medical equipment company. Lina is in charge of the company's largest supplier account, Great Barrington Gas (GBG), a medical equipment supplier. Recently, GBG's performance has declined, leading to an increasing number of rejected items. Lina is aware of the seriousness of this and has asked GBG to attend an urgent meeting. In the meeting, Lina asked the GBG representative, ''Can you tell me exactly what you are doing to ensure quality?" What type of question is Lina asking?
Answer : A
Lina is asking a probing question to gather more detailed information on the actions GBG is taking to address quality issues. Probing questions are intended to delve deeper into a topic and elicit specific details, making them suitable for understanding underlying issues, as per CIPS's negotiation question types.
Question 331
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Hypothetical questions are used to explore options or scenarios without making commitments. This technique allows negotiators to understand the other party's preferences and limitations by presenting hypothetical situations, as recommended in CIPS guidelines for negotiation questioning techniques.
Question 332
Which of the following are types of non-verbal communication that could be used during a negotiation meeting? Select THREE that apply.
Answer : C, E, F
Non-verbal communicationsignificantly affects the dynamics of negotiation.Hand gestures,eye contact, andfacial expressionscan reinforce spoken words or contradict them. These elements can influence perception, trust, and the tone of the negotiation.
''Non-verbal communication includes gestures, posture, eye contact, and facial expressions. These play a critical role in how messages are received and interpreted.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Verbal and Non-Verbal Communication Techniques)
Question 333
A garden furniture supplier currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating in the supplier's environment (their site) can unintentionally shift the power dynamic. The supplier may gain apsychological edgedue to the comfort and control of their surroundings. Best practice recommends holding negotiations in aneutral settingto ensure balance and reduce any influence based on physical context. While site visits are beneficial for supplier evaluation, they should beseparate from the negotiationto maintain objectivity.
Question 334
An adversarial style of negotiation is appropriate when the buyer has greater bargaining power. In what other situation may the buyer adopt this style?
Answer : A
Adversarial (win--lose) negotiation is viable when buyers can leverage abundant alternatives and substitutes, reducing supplier power. In such cases, buyers can adopt tough tactics, knowing they can switch suppliers if necessary. By contrast, limited supply, single sourcing, or monopolist suppliers constrain buyer power, making adversarial strategies risky and often ineffective. CIPS stresses that negotiation style must be matched to market conditions and the power balance.
Question 335
Which of the following is considered a strength of a 'logical' style negotiator?
Answer : B
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of logical style are described below:
Question 336
Which of the following are sources of power in organisational relationships?
Coercive power
Intruded power
Referent power
Tactical power
Answer : C
Coercive powerstems from the ability to apply pressure or sanctions, whilereferent powercomes from reputation, charisma, or respect. These are both recognised power sources in negotiations. ''Intruded'' and ''tactical'' power are not classified within the standard power framework used in CIPS materials.
''Sources of power include coercive (based on threats or penalties), referent (based on personal appeal or influence), and others such as reward, expert, and legitimate power.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Power in Negotiation)
Question 337
Which TWO strategies are recognised for achieving a win--lose outcome?
Making the other party lower its resistance point
Making the other party believe this settlement is the best it can achieve
Employing empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
Win--lose strategies focus on gaining advantage at the other party's expense. Forcing them to lower their resistance point or persuading them the deal is their best option are classic distributive tactics. Empathy, compromise, and creativity belong to integrative approaches aimed at mutual benefit. Recognising these distinctions ensures negotiators adopt the right strategy for the relationship type and context.
Question 338
Sunita's supplier states: ''Meeting your needs is meeting my needs because we are in this together.'' What type of negotiation is being undertaken?
Answer : D
This statement reflects shared goals and mutual benefit, hallmarks of integrative negotiation. Unlike adversarial or distributive (win-lose) strategies, integrative approaches seek joint value and collaboration. The language of partnership (''we are in this together'') signals alignment and cooperative intent. Lose-lose outcomes, by contrast, occur when both sides compromise excessively or fail to reach creative solutions. Integrative strategies foster long-term partnerships where value is maximised for both.
Question 339
If the price of a good is above the equilibrium price, which of the following will happen?
Answer : D
In microeconomics, equilibrium price is determined when the quantity demanded is equal to the quantity supplied at equilibrium price in a market, there will be no shortages and no surpluses. If we combine our supply and demand curves on one graph, the point at which they converge determines the equilibrium price. If the price is set above this price and you read across the graph you will see the supply excess demand and there will be a surplus. In order to reduce this surplus, the price will need to fall. The scenario is illustrated in the graph below:
Question 340
When is an adversarial style of negotiation appropriate?
Answer : A
An adversarial negotiation style is appropriate when one party has high bargaining power and is focused on maximizing its benefit rather than maintaining a long-term relationship. This approach often involves competitive tactics that leverage power disparities, aligning with CIPS guidance on when adversarial tactics may be strategically used in negotiations.
Question 341
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latestmeeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : A
Jayden's use ofeye contact to demonstrate understandingis a core element ofactive and effective listening. This technique includes not only listening to spoken words but also using non-verbal cues (e.g., nodding, eye contact) to confirm comprehension and engagement. Effective listening is essential to ensure that both parties feel heard and respected, which can de-escalate tension and improve outcomes.
''Effective listening involves verbal and non-verbal behaviours that show attentiveness. Maintaining eye contact, nodding, and reflecting key points show engagement and help in building rapport and trust.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Communication Techniques in Negotiation)
Question 342
When considering a new supply source for a product, a procurement professional reviews supplier quotations before negotiation. Which of the following is a direct cost in the supplier's quotation?
Answer : C
Direct costs are those directly attributable to the production of a unit --- such as raw materials, components, and direct labour. Here, the metal used is a clear direct cost, as it varies with production output. Rent, insurance, and sales wages are indirect (overhead) costs, which must be allocated across products. Understanding this distinction is vital in negotiations, since direct costs are easier to challenge for efficiency gains, while indirect allocations may be arbitrary. Buyers with clear knowledge of cost breakdowns can negotiate more effectively, avoiding inflated pricing.
Question 343
Which of the following types of question are likely to be the most effective to check facts in negotiations?
Answer : A
Closed questions are designed to elicit specific, factual responses --- typically ''yes'' or ''no'' or a brief piece of information. These are particularly useful when verifying details during negotiation. For example, asking ''Did you receive the revised schedule on Monday?'' ensures clarity and reduces ambiguity.
Question 344
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 345
A buying organisation with a low spend but the reputation for paying on-time. In order to increase buyer's leverage in negotiation with suppliers, which of the following should be a priority of this buyer?
Answer : C
According to Paul Steele's 'The Seller's Perspective', customer can be classified into 4 categories as below:
To increase the leverage in negotiation, buyer may increase its attractiveness and/or increase spend value. In this scenario, the buyer is already attractive to supplier as it always pays on-time, but the spend is still low. So to have greater leverage, the buyer has to increase its spend volume by spend concentration. Spend concentration may take many forms as following:
- Vendor base reduction
- Volume pooling
- Volume redistribution
- Volume consolidation across categories
- Standardisation and harmonisation of specifications
- Forming purchasing consortia
LO 1, AC 1.3
Question 346
Open questions can be a useful communication tool in negotiations. Is this statement correct?
Answer : C
Open questions (''how/why/what...'') encourage the other party to share information, interests, and constraints, supporting rapport, listening, and exploration---key to persuasive dialogue and integrative outcomes. Closed questions check facts; open ones surface interests.
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Question 347
A break-even analysis uses which aspects as part of the calculation?
Fixed cost
Buying cost minus variable cost per unit
Variable cost
Selling price minus variable cost per unit
Answer : A
Break-even analysis identifies the sales volume required to cover fixed costs. It relies on:
Fixed costs (constant regardless of output).
Question 348
A supplier's mark-up on all products is 25%. Supplier's profit margin is...?
Answer : A
LO 2, AC 2.1
Question 349
Hammad Alsuwaidi is a procurement professional leading a negotiation for a vehicle rental contract. Hammad has a clear goal to negotiate a two-year contract in exchange for a minimum of a 20% discount. During the negotiation, Hammad presents to the supplier the facts, figures, and justification for a 20% discount. Which of the persuasion methods below has Hammad chosen?
Answer : A
Hammad's approach of presenting facts, figures, and justifications aligns with the Push persuasion method. The Push strategy involves directly presenting information, data, and logical arguments to convince the other party of a certain outcome. In this scenario, Hammad is using objective evidence to influence the supplier towards agreeing to a discount, which is characteristic of the Push method, as per CIPS guidance on negotiation tactics.
Question 350
Different types of relationships impact on commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate poweris derived from theposition or authorityheld within the organisation. It supports the buyer's ability to influence negotiation outcomes based on formal responsibility, legal rights, or contractual mandates.
''Legitimate power stems from formal roles, authority or responsibility. It enables negotiators to assert terms backed by organisational policy or legal mandate.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Organisational Power Structures in Negotiation)
Question 351
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as:
Answer : C
Question 352
Which of the following is a source of information on microeconomic factors?
Answer : B
Question 353
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
Answer : B, C
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
Question 354
Which of the following are microeconomic factors? Select THREE that apply.
Answer : B, D, F
Microeconomic factors refer to elements that affect individual businesses or sectors rather than the economy as a whole. In this case:
Availability of investors (B): Access to investors impacts capital availability for businesses.
Distribution channels (D): Distribution methods directly influence a business's ability to get products to market.
Levels of competition (F): Competition affects pricing and strategic decisions within specific industries.
Taxation rates, unemployment levels, and inflation rates are considered macroeconomic factors, affecting the economy on a broader scale, as per CIPS's definitions of microeconomic vs. macroeconomic influences.
Question 355
Which of the following roles would support negotiations with an external supplier when planning a negotiation for a low-value, routine purchase? Select TWO that apply.
Answer : C, E
For low-value, routine purchases, the involvement of The procurement manager (C) and An internal business user (E) is appropriate. The procurement manager brings expertise in supplier engagement, while the internal business user provides insights on specific needs for the productor service. Involving high-level roles, like the CEO or a legal advisor, is unnecessary for routine purchases, as per CIPS guidance on resource alignment in procurement.
Question 356
Which of the following is considered a strength of a 'logical' style negotiator?
Answer : B
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of logical style are described below:
Question 357
Jasmine and the IHL sales team have a negotiation scheduled with one of AB's lead buyers, Samuel, at AB's premises. This is one of the biggest negotiations that Jasmine has been involved in and is eager not to make any mistakes. Jasmine has heard from a colleague that Samuel tends to adopt an integrative negotiation style. IHL senior management decides to send a team of three members to the negotiation. Jasmine is among the team and she is assigned to check body language, reactions, feeds insight to her leader and to record important comments and information from the meeting for minutes. Which of the following are roles of Jasmine in the forthcoming negotiation? Select TWO that apply.
Answer : A, E
A negotiating team can be as few as two people, and one person can play one or more of these roles:
As from the scenario, Jasmine will act as an observer and a scribe (or secretary).
Question 358
A good negotiator invests time in understanding the needs of the individuals in a negotiation. Is this statement true?
Answer : D
Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing tounderstand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:
The organisation - What the organisation wants to achieve. This is generally well stated and understood
The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual
Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.
Question 359
Which TWO strategies are recognised for achieving a win--lose outcome?
Making the other party lower its resistance point
Making the other party believe this settlement is the best it can achieve
Employing empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
Win--lose strategies focus on gaining advantage at the other party's expense. Forcing them to lower their resistance point or persuading them the deal is their best option are classic distributive tactics. Empathy, compromise, and creativity belong to integrative approaches aimed at mutual benefit. Recognising these distinctions ensures negotiators adopt the right strategy for the relationship type and context.
Question 360
Professional buyer is planning for the next negotiation of a simple one-off contract. This negotiation is typified by which of the following? Select TWO that apply.
Answer : D, E
Professional buyers, when planning or engaging in negotiation with suppliers, should always be aware of where the intended and actual relationship with this supplier is positioned on the 'spectrum' or 'continuum' of commercial relationships. The relationship spectrum describes the range of commercial relationships between a buyer and supplier based on richness of communication, longevity and mutual dependence.
In the question, the contract is simple one-off (or spot buy), which means the relationship will likely to be more transactional. In such relationship, price is the most important criteria and buyer may adopt arm's-length approach.
Question 361
Logibox Ltd is releasing a new range of stackable storage boxes. It has adopted a pricing strategy that aims to sell at a price the consumer is prepared to pay.
Which of the following is it using?
Answer : C
Question 362
Which of the following are types of questions that are useful in opening and testing phases of a negotiation? Select the TWO that apply.
Answer : C, E
In the opening phase, parties should confirm understanding and get the issues on the table.
The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.
Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.
Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening and testing stages.
Question 363
According French and Raven's base model, which of the following are sources of personal power that can be used in commercial negotiation? Select THREE that apply.
Answer : B, E, F
A useful model of personal power that has survived the test of time and provide a simple way to analyse negotiation in French and Raven's Power Base Model, which describes six bases of power:
Question 364
Different types of relationships impact on commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate poweris derived from theposition or authorityheld within the organisation. It supports the buyer's ability to influence negotiation outcomes based on formal responsibility, legal rights, or contractual mandates.
''Legitimate power stems from formal roles, authority or responsibility. It enables negotiators to assert terms backed by organisational policy or legal mandate.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Organisational Power Structures in Negotiation)
Question 365
In which of the following scenarios could you adopt a distributive-based negotiation approach?
Answer : D
Question 366
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 367
Which of the following would help build trust in a relationship?
Mediation attendance
Regular meetings
Keep promises
Coercion
Answer : B
Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.
Question 368
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 369
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?
Answer : A
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.
CIPS study guide page 29-31
Integrative Negotiation: Definition, Tips and Examples | Indeed.com
Question 370
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
Answer : A, C, E
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 conditionthat would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
Question 371
Which of the following are features of a single-sourced type of relationship on the relationship spectrum?
Exclusivity granted in relation to a particular product
The supplier is an oligopoly market structure
The supplier is trusted and collaborative
Framework contracts are used to identify the supplier
Answer : B
Single-sourced relationships often involve exclusivity for a specific product (1) and a high level of trust and collaboration (3) between buyer and supplier. This type of relationship is selected forstrategic procurement purposes, often involving long-term partnerships, which align with CIPS's relationship spectrum guidelines.
Question 372
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?
Answer : D
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 right strategy.
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 373
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost 24%. Which of the following represents the mark-up of that company?
Answer : B
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up (%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
Question 374
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
Answer : D
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Question 375
Which of the following are hardball tactics in negotiations? Select TWO that apply.
Answer : B, C
In difficult negotiations and disputes, hardball tactics like punishment and threats often seem like the only way to win concessions. Some negotiators seem to believe that hardball tactics are the key to success in any negotiation. They resort to extreme demands and even unethical behaviour to try to get the upper hand in a negotiation.
The following are 8 typical hardball tactics:
1. Good cop / Bad cop
2. Low ball / High ball
3. Bogey
4. The Nibble
5. Chicken
6. Intimidation
7. Aggressive Behaviour
8. Snow Job
You can read the details of each tactic here.
In the contrary to hardball tactics, negotiators can adopt integrative approach to the negotiation. Some of integrative tactics are:
1. Expand the Pie
2. Bridging
3. Post Settlement --Settlement
Et cetera
Question 376
Which of the following is considered a strength of a 'logical' style negotiator?
Answer : B
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of logical style are described below:
Question 377
When considering a new supply source for a product, a procurement professional will review the suppliers' quotations before a supplier negotiation. Which of the following is a direct cost associated with the product within a potential supplier's quotation?
Answer : A
Direct costs are those costs that can be directly attributed to the production of specific goods or services. They typically include raw materials and labor directly involved in production. Metal used in the product is a raw material that becomes part of the final product, making it a direct cost.
Question 378
Which of the following is important during the proposing stage of a negotiation?
Answer : B
During the proposing stage, parties move toward agreement by narrowing down a wide range of potential options. This helps focus the negotiation and aligns both parties toward practical, mutual outcomes. It's an essential step to keep the process structured and productive.
Question 379
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Question 380
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
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Question 381
A procurement manager considers using an integrative negotiation approach with shortlisted suppliers. Which factor favours such an approach?
Answer : C
Integrative negotiation requires shared motivation to collaborate and focus on joint benefits. When parties are motivated to work together, they can share data, explore tradeables, and align on long-term value creation. Conversely, lack of trust, unwillingness to share, or absence of joint goals make integrative approaches unworkable, forcing adversarial or distributive methods instead. CIPS highlights that motivation and willingness to cooperate are preconditions for collaboration.
Question 382
Different types of relationships impact commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate power derives from formal authority or position, giving the buyer leverage in negotiations. This power type is more effective in establishing credibility and enforcing terms, as highlighted in CIPS's framework for negotiation power sources, unlike informal sources like personality or friendship.
Question 383
Which factors give rise to conflict within the procurement negotiation context? Select THREE that apply.
Answer : A, C, F
Conflict can arise in procurement negotiations due to a power imbalance, which occurs when one party has more influence than the other, leading to potential exploitation or dissatisfaction. Differences in goals between parties---such as cost minimization for buyers and profit maximization for suppliers---also contribute to tension. Surprisingly, similar motives can lead to conflict as well, particularly when both parties are competing for limited benefits or market share.
Question 384
A negotiation process ends once the negotiating meeting has finished. Is this statement true?
Answer : C
Question 385
A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier over a contract for critical new services. They have decided they want to find a Win/Win (integrative) solution. Which TWO of the following would be appropriate in this scenario?
Answer : A, B
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.
Question 386
Jessica Taylor, a senior buyer, is asked to create a written performance report after her latest negotiation. Which of the following should she include? Select THREE.
Answer : B, C, F
A negotiation performance review should focus on measuring outcomes against objectives, lessons learned, and evaluation of negotiator effectiveness. This ensures continual improvement and supports organisational learning. Pricing structures and alternative suppliers may have been reviewed earlier, but are not part of post-performance reflection. Travel expenses are irrelevant to negotiation learning. By focusing on objectives, learning, and performance, organisations embed best practice and prepare stronger strategies for future negotiations.
Question 387
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 388
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 389
If the price of a good is above the equilibrium price, which of the following will happen?
Answer : D
In microeconomics, equilibrium price is determined when the quantity demanded is equal to the quantity supplied at equilibrium price in a market, there will be no shortages and no surpluses. If we combine our supply and demand curves on one graph, the point at which they converge determines the equilibrium price. If the price is set above this price and you read across the graph you will see the supply excess demand and there will be a surplus. In order to reduce this surplus, the price will need to fall. The scenario is illustrated in the graph below:
Question 390
A competitive win-lose distributive approach to a negotiation is seeking to:
Answer : B
Question 391
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Question 392
Jane is planning for a forthcoming negotiation with a key supplier. She has learned what are important to the supplier and what are important to her company from previous contracts between them. In order to avoid negotiation deadlocks, she has set up several concession plans. But Jane has little experience in dealing with suppliers and doesn't know when to trade these concessions. When is the best time in a negotiation to trade concessions?
Answer : C
The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.
LO 3, AC 3.1
Question 393
A break-even analysis uses which aspects as part of the calculation?
Fixed cost
Buying cost minus variable cost per unit
Variable cost
Selling price minus variable cost per unit
Answer : A
Break-even analysis identifies the sales volume required to cover fixed costs. It relies on:
Fixed costs (constant regardless of output).
Question 394
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 395
According French and Raven's base model, which of the following are sources of personal power that can be used in commercial negotiation? Select THREE that apply.
Answer : B, E, F
A useful model of personal power that has survived the test of time and provide a simple way to analyse negotiation in French and Raven's Power Base Model, which describes six bases of power:
Question 396
During which stage in the negotiation process would negotiators use tactics and exchange concessions?
Answer : A
Thebargaining stageis where both parties begin tomake concessionsand test options. This phase involves the use of strategic tactics, including the presentation of tradeables and adjustments in position to reach mutual agreement.
''The bargaining stage is characterised by movement, trade-offs, and deal-shaping. Tactics such as anchoring, making concessions, and introducing tradeables are employed to bridge the gap between opening offers.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Stages of the Negotiation Process)
Question 397
Jessica Taylor, a senior buyer, is reflecting on her most recent negotiation. She has been asked by her manager to create a written record of performance.
Which of the following should Jessica include in this negotiation performance report? Select THREE that apply.
Answer : A, C, F
Post-negotiation analysis should include performance evaluation, learning outcomes, and a comparison of achieved results versus original objectives. These elements contribute to continuous improvement and future strategy development.
Question 398
Which of the following are examples of non-verbal negotiation? Select THREE that apply.
Answer : B, D, F
Nonverbal communication is important because it gives us valuable information about a situation including how a person might be feeling, how someone receives information and how to approach a person or group of people.
There are several types of nonverbal communications you should be aware of, including:
1. Body language
Body language is the way someone situates their body naturally depending on the situation, the environment and how they are feeling.
Example: Someone might cross their arms if they are feeling angry or nervous.
2. Movement
The way you move your arms and legs such as walking quickly or slowly, standing, sitting or fidgeting, can all convey different messages to onlookers.
Example: Sitting still and paying attention in a meeting conveys respect and attention.
3. Posture
The way you sit or stand can also communicate your comfort level, professionalism and general disposition towards a person or conversation.
Example: Someone might slouch their shoulders if they feel tired, frustrated or disappointed.
4. Gestures
While gestures vary widely across communities, they are generally used both intentionally and unintentionally to convey information to others.
Example: Someone in the United States might display a ''thumbs up'' to communicate confirmation or that they feel positively about something.
5. Space
Creating or closing distance between yourself and the people around you can also convey messages about your comfort level, the importance of the conversation, your desire to support or connect with others and more.
Example: You might stand two to three feet away from a new contact to respect their boundaries.
6. Paralanguage:
Paralanguage includes the non-language elements of speech, such as your talking speed, pitch, intonation, volume and more.
Example: You might speak quickly if you are excited about something.
7. Facial expressions
One of the most common forms of nonverbal communication is facial expressions. Using the eyebrows, mouth, eyes and facial muscles to convey can be very effective when communicating both emotion and information.
Example: Someone might raise their eyebrows and open their eyes widely if they feel surprised.
8. Eye contact
Strategically using eye content (or lack of eye contact) is an extremely effective way to communicate your attention and interest.
Example: Looking away from someone and at the ground or your phone may convey disinterest or disrespect.
9. Touch
Some people also use touch as a form of communication. Most commonly, it is used to communicate support or comfort. This form of communication should be used sparingly and only when you know the receiving party is okay with it. It should never be used to convey anger, frustration or any other negative emotions.
Example: Placing your hand on a friend's shoulder may convey support or empathy.
- CIPS study guide page 174-175
- Nonverbal Communication Skills: Definition and Examples
LO 3, AC 3.3
Question 399
In a commercial negotiation, a procurement professional negotiates on his company's behalf. The power of buying organisation is the only factor that influences the behaviours of the other party. Is this assumption true?
Answer : B
The assumption is false, because when a procurement professional negotiates on behalf of his employer, he brings the power of his organisation (its brand, reputation and purchasing spend) as well his own personal power (that which is embedded within him) to the negotiation.
From a negotiation perspective, both organisational and personal power have the ability to influence the behaviours of other or the cause of event. This power is clearly core to negotiation, and of enormous important in seeking to achieve the objectives.
Question 400
Commercial negotiations on prices cover a range of aspects including pricing arrangements. A buyer may negotiate for a 'fixed price agreement'. Why is a fixed price agreement advantageous to the buyer?
Answer : B
Afixed price agreementprovides the buyer withcost predictability. Once the price is agreed upon, the buyer is insulated from any cost increases on the supplier's side. The supplier bears the risk of fluctuating input prices, which simplifies cost control and contract administration for the buyer.
''With a fixed price arrangement, the buyer is protected from future price increases and does not need to monitor the supplier's ongoing costs. This is particularly useful for budgeting and forecasting.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Fixed Price Agreements)
Question 401
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 402
Which of the following is important during the proposing stage of a negotiation?
Answer : D
Question 403
A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier over a contract for critical new services. They have decided they want to find a Win/Win (integrative) solution. Which TWO of the following would be appropriate in this scenario?
Answer : A, B
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.
Question 404
There are many factors which will influence supplier pricing decisions. Which of the following are external factors that may apply? Select THREE that apply:
Answer : C, D, E
Question 405
Which of the following are internal factors when a supplier is making its pricing decision?
Answer : D
Question 406
Which of the following is a source of power in organisational relationships?
Answer : A
Question 407
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 408
Which of the following are most likely to be abilities of a person with high emotional intelligence? Select TWO that apply.
Answer : B, C
Emotional Quotient is the set of skills that enables us to make our way in a complex world - the personal, social and survival aspects of overall intelligence, the elusive common sense and sensitivity that are essential to effective daily functioning. It has to do with the ability to read the political and social environment, and landscape them; to intuitively grasp what others want and need; what strengths and weaknesses are; to remain unruffled by stress; and to be engaging. The kind of person others want to be around and follow.
EQ seeks to measure emotional intelligence and is centred on abilities such as the following:
- Identifying emotions
- Evaluating how others feel
- Controlling one's own emotions
- Perceiving how others feel
- Using emotions to facilitate social communication
- Relating to others
On the other hand, cognitive ability is defined as a general mental capability involving reasoning, problem solving, planning, abstract thinking, complex idea comprehension, and learning from experience (Gottfredson, 1997).
LO 3, AC 3.3
Question 409
Which of the following stages of the CIPS Procurement Cycle are typically where commercial negotiations take place?
Contract management and improvement
Develop tender documentation
Market sector analysis
Contract award and implementation
Answer : A
Commercial negotiations commonly take place during Contract Management and Improvement (1) and Contract Award and Implementation (4) stages. During these stages:
Contract Management and Improvement (1): Ongoing negotiations may be required to adjust terms and conditions as part of managing the contract lifecycle.
Contract Award and Implementation (4): Initial negotiations finalize terms, setting the foundation for successful contract execution.
These stages are pivotal in ensuring both initial and ongoing alignment, as outlined in the CIPS Procurement Cycle.
Question 410
Upper Woodborough Council is a government organisation that is seeking to reduce regular expenditure on facilities management services. Which of the following charges is an example of a fixed cost, that the council could renegotiate with the facilities management contractor to achieve savings?
Answer : D
Fixed costs are regular, predictable charges that do not vary directly with usage or demand. Monthly cleaning services are typically charged at a fixed, recurring rate, making them a clear example of a fixed cost that can be renegotiated to achieve savings. Fuel costs and reactive maintenance vary with activity levels, while inflation indexation is a pricing mechanism rather than a cost itself. CIPS advises buyers to focus on fixed-cost elements when seeking sustainable cost reductions, as changes deliver predictable and ongoing savings.
Question 411
A procurement manager considers using an integrative negotiation approach with shortlisted suppliers. Which factor favours such an approach?
Answer : C
Integrative negotiation requires shared motivation to collaborate and focus on joint benefits. When parties are motivated to work together, they can share data, explore tradeables, and align on long-term value creation. Conversely, lack of trust, unwillingness to share, or absence of joint goals make integrative approaches unworkable, forcing adversarial or distributive methods instead. CIPS highlights that motivation and willingness to cooperate are preconditions for collaboration.
Question 412
Which of the following are examples of non-verbal negotiation? Select THREE that apply.
Answer : B, D, F
Nonverbal communication is important because it gives us valuable information about a situation including how a person might be feeling, how someone receives information and how to approach a person or group of people.
There are several types of nonverbal communications you should be aware of, including:
1. Body language
Body language is the way someone situates their body naturally depending on the situation, the environment and how they are feeling.
Example: Someone might cross their arms if they are feeling angry or nervous.
2. Movement
The way you move your arms and legs such as walking quickly or slowly, standing, sitting or fidgeting, can all convey different messages to onlookers.
Example: Sitting still and paying attention in a meeting conveys respect and attention.
3. Posture
The way you sit or stand can also communicate your comfort level, professionalism and general disposition towards a person or conversation.
Example: Someone might slouch their shoulders if they feel tired, frustrated or disappointed.
4. Gestures
While gestures vary widely across communities, they are generally used both intentionally and unintentionally to convey information to others.
Example: Someone in the United States might display a ''thumbs up'' to communicate confirmation or that they feel positively about something.
5. Space
Creating or closing distance between yourself and the people around you can also convey messages about your comfort level, the importance of the conversation, your desire to support or connect with others and more.
Example: You might stand two to three feet away from a new contact to respect their boundaries.
6. Paralanguage:
Paralanguage includes the non-language elements of speech, such as your talking speed, pitch, intonation, volume and more.
Example: You might speak quickly if you are excited about something.
7. Facial expressions
One of the most common forms of nonverbal communication is facial expressions. Using the eyebrows, mouth, eyes and facial muscles to convey can be very effective when communicating both emotion and information.
Example: Someone might raise their eyebrows and open their eyes widely if they feel surprised.
8. Eye contact
Strategically using eye content (or lack of eye contact) is an extremely effective way to communicate your attention and interest.
Example: Looking away from someone and at the ground or your phone may convey disinterest or disrespect.
9. Touch
Some people also use touch as a form of communication. Most commonly, it is used to communicate support or comfort. This form of communication should be used sparingly and only when you know the receiving party is okay with it. It should never be used to convey anger, frustration or any other negative emotions.
Example: Placing your hand on a friend's shoulder may convey support or empathy.
- CIPS study guide page 174-175
- Nonverbal Communication Skills: Definition and Examples
LO 3, AC 3.3
Question 413
Any commercial negotiation process has only three stakeholders: procurement, budget holders, and users. Is this TRUE?
Answer : D
Commercial negotiations involve a wider set of stakeholders than procurement, budget holders, and users. Depending on context, directors, IT specialists, legal teams, regulators, or external partners may all be impacted. Ignoring them risks resistance or missed requirements. CIPS stresses stakeholder mapping tools (such as Mendelow's Matrix) to identify influence and interest levels, ensuring all relevant parties are managed appropriately in negotiation preparation and execution. Narrow stakeholder identification can undermine outcomes.
Question 414
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
Answer : A, C, E
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 conditionthat would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
Question 415
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
Answer : B, C
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
Question 416
Which of the following is a description of mark-up?
Answer : B
Mark-up is defined as profit expressed as a percentage of the cost. It calculates the profit margin based on the cost price rather than the selling price, which allows companies to determine how much they are earning over their production or purchase costs. This aligns with standard accounting and CIPS definitions of mark-up in procurement contexts.
Question 417
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Answer : A
Question 418
A buyer is preparing for an upcoming negotiation with a large supplier on a contract renewal price. The buyer has undertaken some analysis and is concerned that changes in the organisation's macro-environment over the last year will result in a price increase. The buyer's analysis has identified changes in which of the following?
Answer : A
Question 419
Which of the following would help build trust in a relationship?
Mediation attendance
Regular meetings
Keep promises
Coercion
Answer : B
Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.
Question 420
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as ...
Answer : C
In the MIL framework, ''Must have'' refers to non-negotiable elements. For Colin's organisation,ethical and sustainable procurementis a core, uncompromisable value, making it a ''Must have'' in negotiations.
Question 421
'What specific tests do you carry out to ensure quality is achieved?' This is an example of which type of negotiation question?
Answer : B
The question requires more detailed answer, it is an example of probing question.
Probing questions are typically follow-up questions, and aim to elicit more detailed information on the back of the answer elicited from the open questions. Probing question are also useful to check that the supplier fully understand their offering, as well as your needs, can also be used to communicate to the suppliers that you know this category well.
LO 3, AC 3.3
Question 422
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Tradeables---alternative offers or concessions---are typically introduced during thebargainingstage of the negotiation. This is when both parties discuss and exchange proposals to reach a mutually acceptable agreement.
Question 423
In a commercial negotiation, a procurement professional negotiates on his company's behalf. The power of buying organisation is the only factor that influences the behaviours of the other party. Is this assumption true?
Answer : B
The assumption is false, because when a procurement professional negotiates on behalf of his employer, he brings the power of his organisation (its brand, reputation and purchasing spend) as well his own personal power (that which is embedded within him) to the negotiation.
From a negotiation perspective, both organisational and personal power have the ability to influence the behaviours of other or the cause of event. This power is clearly core to negotiation, and of enormous important in seeking to achieve the objectives.
Question 424
Which of the following are stages of a win-win approach to negotiations?
Find out where the interests of both parties align
Design new options, where everyone gets more of what they need
Limit the resources to a fixed number
Insist that the agreement includes subjective regulatory standards
Answer : A
A win-win (integrative) negotiation focuses on shared interests and joint value creation. The first step is identifying where both parties' interests align, followed by designing creative options that allow both sides to gain more of what they need. Limiting resources and imposing subjective standards are characteristics of distributive or adversarial approaches and restrict value creation. CIPS clearly distinguishes integrative negotiation as collaborative, interest-based, and solution-focused, particularly suitable for long-term and strategic supplier relationships.
Question 425
To buying organisation, savings can be achieved from different saving levers or tactics. Which of the following are means that deliver savings through optimising specifications?
Answer : A, B
If driving greater value and efficiency from your supply base is your end, you should remember that there are many ways to do this without seeking to negotiate lower prices. Below are 7 types of saving levers:
Question 426
Which of the following are sources of power in organisational relationships?
Coercive power
Intruded power
Referent power
Tactical power
Answer : C
Coercive powerstems from the ability to apply pressure or sanctions, whilereferent powercomes from reputation, charisma, or respect. These are both recognised power sources in negotiations. ''Intruded'' and ''tactical'' power are not classified within the standard power framework used in CIPS materials.
''Sources of power include coercive (based on threats or penalties), referent (based on personal appeal or influence), and others such as reward, expert, and legitimate power.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Power in Negotiation)
Question 427
If the value of the British Pound in other currencies is strong, which of the following is most likely to occur?
Answer : D
Currency exchange rates are determined by macroeconomic factors and demand and supply. In general, countries with stable political and economic systems, a growing economy and a strong rule of law will have stronger and more stable currency than those without these characteristics. In this question, the British Pound is stronger than other currency, which means that buyers who import goods from the UK have to pay higher in their own currencies.
LO 2, AC 2.2
Question 428
In general, which of the following is the consequence of a flatter demand curve?
Answer : B
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor.
In microeconomic graphs, elasticity and inelasticity can be shown by the slope of the demand curve. If a demand curve is almost horizontal, then the product pricing can be described as very elastic. If a demand curve is almost vertical, then the product pricing can be described as very inelastic.
The formulae of elasticity:
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Table Description automatically generated with medium confidence
LO 2, AC 2.2
Question 429
Logibox Ltd is releasing a new range of stackable storage boxes. It has adopted a pricing strategy that aims to sell at a price the consumer is prepared to pay.
Which of the following is it using?
Answer : C
Question 430
A procurement officer for a manufacturing organisation is negotiating with a supplier over the provision of components. The supplier has indicated that they have to raise their prices due to their fixed costs increasing. Which TWO of the following are types of fixed costs?
Answer : A, B
Fixed costs are costs that do not vary directly with production volume. Staff salaries and building rents remain largely constant regardless of output levels and therefore meet the definition of fixed costs. Raw materials and temporary labour vary with production levels and are therefore variable costs. Warehouse logistics often fluctuate with throughput and activity, making them variable or semi-variable rather than fixed. Understanding fixed versus variable costs is essential for buyers when assessing supplier justifications for price increases, enabling more informed and credible cost-based negotiations.
Question 431
How contribution is calculated in break-even analysis?
Answer : B
Contribution = Price - Variable cost
Break-even point (volume) = Fixed cost/Contribution
Question 432
A supplier has offered international football tickets to the procurement manager while they are in the middle of a contract negotiation. What should the procurement manager do?
Answer : C
Accepting gifts during a negotiation can createconflict of interestconcerns and may violate ethical standards. Best practice requires rejecting such offers to maintain transparency and objectivity in decision-making.
Question 433
For effective commercial negotiation, an organisation must analyse and apply approaches to negotiate agreements successfully. Which one of the following would provide a successful outcome?
Answer : A
Understanding the key approaches to commercial negotiation---such as adversarial, integrative, collaborative, or accommodative---is fundamental to achieving successful outcomes. CIPS emphasises that negotiators must be able to select and apply the correct approach based on factors such as power balance, relationship importance, risk, and objectives. While understanding conflict, stakeholder power, and sourcing stages all support negotiation effectiveness, they are secondary to choosing the right negotiation approach itself. Without this core understanding, negotiators risk misalignment between strategy and context, leading to suboptimal or failed outcomes.
Question 434
John and a supplier agree on a long-term relationship based on trust, respect, and shared risk/reward. What type of relationship is this?
Answer : A
A partnership is characterised by trust, mutual respect, and joint sharing of risks and rewards. Both sides collaborate on innovation and improvement. In contrast, transactional or arm's-length relationships are short-term and price-driven, while outsourcing simply transfers responsibility without guaranteeing collaboration. CIPS emphasises partnerships as enablers of integrative negotiations, where joint value and long-term benefits can be achieved.
Question 435
Leitax is a consumer electronics firm with headquarters in the US and with a global sales presence. The company maintains seven to nine models in its product portfolio, each of which has multiple SKUs. Product life ranges from fifteen to nine months and is getting shorter. The demand planning and master planning processes at the company were ill-defined. Data relevant to forecasting were usually inaccurate, incomplete, or unavailable and the lack of objectives and monitoring mechanisms for the demand planning process meant that process improvement could not be managed. Support for supply management was equally ill-defined, as master production schedules were sporadic and unreliable and suppliers had learned to mistrust them. Leitax's newly appointed Supply chain director, Jessica realises that the ''buy-in'' of different functional groups was critical to the improvement of demand planning. She invites relevant stakeholders to a meeting so that they can express their opinions openly. What tactic is Jessica using?
Answer : A
There are nine commonly used influence tactic:
1. Rational persuasion includes using facts, data, and logical arguments to try to convince others that your point of view is the best alternative. This is the most commonly applied influence tactic.
2. Legitimating
3. Personal appeals
4. Exchange
5. Ingratiation
6. Pressure refers to exerting undue influence on someone to do what you want or else something undesirable will occur.
7. Coalitions refer to a group of individuals working together toward a common goal to influence others.
8. Inspirational appeals
9. Consultation refers to the influence agent's asking others for help in directly influencing or planning to influence another person or group.
In the scenario, there is a problem with demand forecasting and supply chain planning in Leitax. The new Supply chain director invites the stakeholders to a meeting to find the solution. She is using coalition tactics.
- CIPS study guide page 163-168
- Cross-Functional Alignment in Supply Chain Planning: A Case Study of Sales and Operations Planning
- 13.3 The Power to Influence -- Organizational Behavior (umn.edu)
LO 3, AC 3.2
Question 436
Commercial negotiation ends at the award of a contract. Is this statement true?
Answer : C
Negotiation doesn't end after the contract is awarded. The needs for negotiation can arise in any post-award stages. For example, at supplier development and relationship management stage,improvement in supplier capability, capacity, and product/service range can be negotiated. Negotiations with long-term strategic critical suppliers should be carried out in a partnering style, with a win-win starting point assumed.
In some sectors such as transport, utilities and infrastructure, tenderers may 'bid low' or even make a loss to win major contracts with a view to negotiating lucrative changes, variations and 'add-ons' over the life of the contract when the supplier is bedded in and the buyer is in the weaker position to push back or challenge. Even in less complex contract, it is very likely that there will be a need to negotiate with that supplier again after the awarding of the contract.
LO 1, AC 1.1
Question 437
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latestmeeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : A
Jayden's use ofeye contact to demonstrate understandingis a core element ofactive and effective listening. This technique includes not only listening to spoken words but also using non-verbal cues (e.g., nodding, eye contact) to confirm comprehension and engagement. Effective listening is essential to ensure that both parties feel heard and respected, which can de-escalate tension and improve outcomes.
''Effective listening involves verbal and non-verbal behaviours that show attentiveness. Maintaining eye contact, nodding, and reflecting key points show engagement and help in building rapport and trust.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Communication Techniques in Negotiation)
Question 438
An experienced procurement professional is developing strategies for forthcoming negotiations with her key supplier. To avoid negotiation deadlocks, she identifies the reasons why negotiations could fail. Which of the following are most likely to be reasons for negotiation failures? Select TWO that apply.
Answer : A, E
It has been said that most negotiations are won (or lost) at the preparation stage. Success in a negotiation cannot be claimed unless you can refer back to your objectives and show how you have achieve them. In broad terms, negotiation plans/strategies involve 4 key activities:
1. Developing and prioritising your objectives and limits
2. Seeking to understand TOP's objectives
3. Developing concession plans
4. Planning the resources and logistics required and agreeing team roles.
Questions to gain an understanding of why a negotiation failed
Did we collect and make effective use of all information available when preparing for the negotiation?
Did we set objectives for the negotiation that were stretching and achievable and established MIL objectives?
Did we determine a strategy for the negotiation?
Did the other party understand our needs correctly?
Were we aware of the underlying interests of the other party?
Were our proposals convincing enough for acceptance by the other party?
Did we explore different variables in the negotiation?
Did we fully understand all proposals?
Did we give any unplanned concessions and did we check the importance of these?
Did we focus on common interests?
Did we ask a range of questions?
Did we get answers to all our questions?
Could we answer all the questions addressed to us in a proper and positive way?
Did we summarise effectively?
Did we use different methods of persuasion in the negotiations?
Which tactics did we use and what effect did they have?
Did our negotiating team work well as a team?
Did we help to create a co-operative atmosphere
Question 439
Absorption costing is when the total cost per each unit of output:
Answer : B
Question 440
In which of the following persuasion methods, the influencer uses logics and objective reasons to persuade the others to buy into influencer's ideas?
Answer : A
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 multiple variables to consider when choosing between 'push' and 'pull'. Professor Fiona Dent of Ashridge Business School proposes situations when each style might be most appropriate, breaking down push into 'directive' and 'reasoning' and 'pull' into 'collaborative' and 'visionary':
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Using logical and objective reasons is one of the typical characteristics of persuasion reasoning method.
Question 441
Which of the following is a source of information on microeconomic factors?
Answer : B
Question 442
Which of the following are most likely to harm trust between buyer and supplier in a commercial relationship? Select TWO that apply.
Answer : A, D
Trust-destroying behaviours:
- Rumours of partnership or relationship breaking down
- Emotion-based assessment of performance
- Avoiding accountability, passing the blame to others
- General mood -- resentment, distrust, frustration, etc
LO 1, AC 1.4
Question 443
Macroeconomics can have an impact on commercial negotiations. Is this statement correct?
Answer : A
Macroeconomic factors like inflation, interest rates, and currency fluctuations can significantly affect pricing and contractual terms. Buyers and suppliers must account for these factors during negotiations, particularly in long-term or high-value contracts.
Question 444
Which of the following are most likely to turn buying organisation into an unattractive customer in supplier's perspective? Select TWO that apply.
Answer : A, D
Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation. Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:
Simple procurement processes: Using SRM technology may help to simplify the process
Simple contracting processes
Clear and concise documentation: Reduced paperwork helps both supplier and buyer save their time and resources.
Absence of onerous supplier terms and conditions
On-time payment
Transparent processes: Unclear tender award criteria can be seen as opaque. Suppliers who attended the tendering processes cannot know the reasons why their bids are rejected and hesitate to attend other tendering.
Ethical behaviour: Suppliers may prefer a buyer who adopts CSR policy because they can predict potential customer's behaviour. Demands for kickback are unethical behaviours.
Question 445
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 446
In preparation for holding negotiation meetings with existing suppliers, category manager Stephen would like to appraise the bargaining strength of his organisation. Which of the following are examples of buyer power? Select TWO that apply:
Answer : A, D
Question 447
John and a supplier agree on a long-term relationship based on trust, respect, and shared risk/reward. What type of relationship is this?
Answer : A
A partnership is characterised by trust, mutual respect, and joint sharing of risks and rewards. Both sides collaborate on innovation and improvement. In contrast, transactional or arm's-length relationships are short-term and price-driven, while outsourcing simply transfers responsibility without guaranteeing collaboration. CIPS emphasises partnerships as enablers of integrative negotiations, where joint value and long-term benefits can be achieved.
Question 448
Which of the following is the true statement?
Answer : B
Internal stakeholder support will be important not just at the initial negotiation of the contract, but potentially throughout the life of the contract right through to exit.
As a general rule, connected stakeholders (with the exception of suppliers) have a low level of influence on procurement negotiations.
Suppliers are connected stakeholders who have contractual relationships with the organisation.
Commercial negotiation objective should be driven by the business needs of the organisation, and not just the instinct of procurement.
Question 449
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship style can be characterised by which of the following? Select the TWO that apply.
Answer : A, D
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question 450
The stages of commercial negotiation involve which of the following characteristics?
Answer : C
The typical stages of commercial negotiation are Preparing, opening, bargaining, agreement, and closure. This sequence facilitates a structured approach where negotiators prepare strategies, initiate discussions, engage in bargaining, reach agreements, and formally close the negotiation. This structure is emphasized in CIPS materials as essential for achieving a balanced negotiation process.
Question 451
Sunita's supplier states: ''Meeting your needs is meeting my needs because we are in this together.'' What type of negotiation is being undertaken?
Answer : D
This statement reflects shared goals and mutual benefit, hallmarks of integrative negotiation. Unlike adversarial or distributive (win-lose) strategies, integrative approaches seek joint value and collaboration. The language of partnership (''we are in this together'') signals alignment and cooperative intent. Lose-lose outcomes, by contrast, occur when both sides compromise excessively or fail to reach creative solutions. Integrative strategies foster long-term partnerships where value is maximised for both.
Question 452
Which negotiation approach is focused on a win--win outcome?
Answer : C
A collaborative negotiation approach is explicitly designed to achieve win--win outcomes, where both parties work together to maximise joint value. This approach is closely associated with integrative negotiation, emphasising trust, information sharing, and joint problem-solving. Distributive and adversarial approaches are win--lose, focusing on dividing value rather than creating it. ''Collective'' is not a recognised CIPS negotiation approach. Collaborative negotiation is particularly suitable where long-term relationships, shared objectives, or strategic partnerships are important.
Question 453
The only procurement risk inherent in a distributive negotiation approach is the potential loss in the outcome. Is this statement TRUE?
Answer : D
Distributive negotiation carries several risks beyond justlosing out on value. These includedamaging supplier relationships,eroding trust, andreaching an impasse, where neither party can agree. This could result in delayed projects, increased costs, or supplier withdrawal.
''Distributive negotiation can lead to a breakdown in communication, impasses, and long-term relationship damage. The win-lose mindset can prevent collaborative problem-solving.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.5 - Risks of Distributive Approaches)
Question 454
Telephone is most likely to be used for which of the following negotiations?
Answer : C
Many commercial negotiations could be considered routine or just not worth the investment for buyers, and using the phone can make more sense and can be more immediate.
LO 2, AC 2.4
Question 455
Two firms negotiating a contract have an adversarial relationship. What type of negotiation would you expect?
Answer : B
Adversarial relationships typically lead to distributive (win--lose) negotiations, where each party seeks maximum gain at the other's expense. Trust is low, information is withheld, and concessions are hard-fought. While it can deliver short-term wins, it risks damaging long-term relationships and may reduce overall value. Collaborative, integrative approaches are more sustainable, but adversarial conditions often prevent them. CIPS highlights the importance of recognising relationship dynamics before selecting negotiation style, as forcing integrative approaches in adversarial contexts may be unrealistic.
Question 456
Which of the following is a variable cost?
Answer : D
Variable costs change in proportion to production volume, such as packaging, raw materials, and delivery. Fixed costs (rent, insurance, loan repayments) remain constant regardless of output. Recognising the difference is crucial when negotiating supplier pricing, as variable costs are often more open to tradeable adjustments (e.g., bulk discounts). Buyers who understand cost structures can challenge inflated fixed allocations or negotiate on genuine variable elements. This knowledge is vital in price breakdown discussions and in cost-modelling negotiations.
Question 457
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 458
When might a buyer decide to use a distributive approach to a negotiation with a supplier?
Answer : B
A distributive approach is appropriate when multiple suppliers offer similar products, as this competitive environment allows the buyer to focus on maximizing their position rather than building long-term partnerships. CIPS suggests that a distributive or competitive approach is best used in non-critical purchases or when supplier dependency is low, as is the case here.
Question 459
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost 24%. Which of the following represents the mark-up of that company?
Answer : B
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up (%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
Question 460
Logibox Ltd sets prices based on what consumers are prepared to pay. Which pricing strategy is this?
Answer : C
Market pricing sets prices according to consumer demand and willingness to pay, ensuring competitiveness. Skimming sets high prices at launch to maximise early profit, penetration uses low prices to enter markets, and premium pricing positions products as luxury with high margins. Market pricing balances supplier costs with customer value perception, making it a common approach in competitive industries.
Question 461
Where a market consists of a large producer of a product with high market power, it is known as:
Answer : C
Question 462
When planning an international negotiation, which divergent positions may create potential conflict? Select TWO.
Answer : C, D
International negotiations often face conflicts due to cultural differences (language, communication style, decision-making norms) and timing/location (time zones, travel, scheduling). These factors can cause misunderstandings or perceived power imbalances. Team size and make-up matter but are manageable internally, while closure processes can be aligned. Recognising cultural and logistical divergences allows buyers to prepare strategies that reduce conflict and promote smoother negotiations.
Question 463
Which of the following types of questions should be used most often in the proposing phase?
Answer : A
At the proposing phase either side may start making tentative proposals regarding their offering. In the case of negotiation where TOP has already submitted a tender or proposal, this stage may provide an opportunity for them to make proposals to improve on their initial offers in general or in areas highlighted by the buying side in advance.
The word 'if' is very useful at this stage and allows you to test tentative proposals without committing yourself. Skilled negotiators use language very carefully. The questions with 'if' are hypothetical ones.
LO 3, AC 3.1
Question 464
A wide range of factors may be taken into account by suppliers when setting or negotiating prices. Which of the following are external factors in pricing decisions? Select TWO that apply.
Answer : A, D
External factors in pricing decisions include Competition in the market (A) and Customer perception of value (D). These factors are outside the supplier's direct control but influence pricing strategies to remain competitive and meet customer expectations:
Competition in the market (A): Market competition dictates how much a supplier can charge without losing business to competitors.
Customer perception of value (D): How customers perceive the product's worth affects its acceptable price range.
These factors are considered external as they relate to market dynamics rather than internal cost structures, according to CIPS's guidance on pricing influences.
Question 465
Which characteristics are likely to feature within an integrative negotiation?
Maximising the other party's outcome to enhance relationships
Maximising joint outcomes
Short-term focus
Pursuit of goals held jointly with the other party
Answer : D
Integrative negotiation emphasises maximising joint outcomes and pursuing shared goals, moving beyond narrow self-interest. Unlike distributive negotiations, it does not focus on short-term wins or zero-sum positions. Instead, integrative strategies build sustainable value and strengthen partnerships. Maximising the other party's outcome alone is more accommodative than integrative. Therefore, true integrative practice balances both parties' interests for long-term gain.
Question 466
Collaborative approach in negotiation not only can fully satisfies the concerns of both, but also ensure that neither party will seek to be opportunistic in later time during the life of the contract. Is this statement true?
Answer : B
Integrative, interest-based negotiation can facilitate constructive, positive relationship and establish contracts between parties on a foundation of goodwill. It is important to note it can only facilitate these positive outcomes, it does not guarantee that the other party will not seek to be opportunistic at a later time during the life of the contract. Previous knowledge of the behaviours of the other party regarding honouring contractual and other commitments will be useful here in predicting long-term outcomes, not ensuring that they will not leverage their advantages.
Question 467
One of the most important steps in preparing for negotiations is to appraise the relative power of the parties. The buying organisation must assess its bargaining power against that of the supplier it intends to negotiate with. This information is necessary in facilitating the preparation, the negotiation team and the negotiation strategy.
In what situation is the bargaining power of buyers likely to be high relative to suppliers?
Answer : B
Whenmany supplierscompete forfew buyers, buyers gain leverage. This competition can drive prices down and increase the buyer's ability to negotiate favorable terms. Conversely, if the buyer is dependent on a supplier (as in A), the buyer's power diminishes.
''Buyer power increases when there are many suppliers and few buyers. The buyer has multiple options and can negotiate from a position of strength.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Relative Bargaining Power and Market Dynamics)
Question 468
Which of the following is the purpose of using stakeholder support level scale?
Answer : C
In order to estimate the gap and the progress towards desired level of support, a stakeholder support scale can be used by the procurement internally. The support level scale measures stakeholder commitment. Current support level for the procurement/negotiation objectives should be gained from engagement with key stakeholders. The following is an example of stakeholder support level scale:
LO 1, AC 1.1
Question 469
Which of the following types of relationship would possibly lead to a distributive negotiation?
Answer : D
Question 470
In a negotiation for a new contract, the supplier suggests the buyer to shorten payment period from 45 days to 15 days because they are investing in new facilities to expand the supply capacity. The buyer replies that she can only sign off the deal if the payment period is 30 days ormore since it often takes at least 30 days for her company to collect the payment from customers. A permission from senior management is required for this suggestion. In order to ensure that supplier understands the matter, she reiterates it throughout the meeting. Which tactics is she using?
1. Outrageous initial demand
2. Salami slicing
3. Lack of authority
4. Broken record
Answer : C
In the scenario, the buyer states that permission from senior management is required to shorten payment period and she only has authority to sign off a deal in which the payment period lasts at least 30 days. The buyer is using lack of authority. The buyer also repeats the matter again throughout the negotiation. This is a common tactic known as broken record.
Question 471
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier, Top Teds. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Bargaining is the negotiation stage where tradeables are typically introduced and discussed. During this phase, both parties exchange offers and concessions, using tradeables such as lead times and order quantities to find a mutually acceptable agreement. This aligns with CIPS's guidance on the stages of negotiation.
Question 472
Which of the following are most likely to be the potential cultural differences that can make transactions with an international supplier more problematic that with local suppliers? Select TWO that apply.
Answer : B, D
The question requires student to detect factors of cultural differences. Problems may occur on the international scene with such things as the importance of extending courtesy between cultures, the importance of timescales, the use of negotiating ploys, the sense of 'fair play', the use and interpretation of body language, the role of women in negotiations (or indeed, in business in general), the importance of status, the role of conflict, standards of dress and deportment and the readiness to ignore or uphold contract terms and conditions.
LO 3, AC 3.3
Question 473
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latestmeeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : A
Jayden's use ofeye contact to demonstrate understandingis a core element ofactive and effective listening. This technique includes not only listening to spoken words but also using non-verbal cues (e.g., nodding, eye contact) to confirm comprehension and engagement. Effective listening is essential to ensure that both parties feel heard and respected, which can de-escalate tension and improve outcomes.
''Effective listening involves verbal and non-verbal behaviours that show attentiveness. Maintaining eye contact, nodding, and reflecting key points show engagement and help in building rapport and trust.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Communication Techniques in Negotiation)
Question 474
A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?
Answer : C
Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values. A smile, a 'yes' and the type of hospitality received, (in the business context), can mean very different things in different international business cultures.
Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide towhat TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.
Question 475
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
Answer : D
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Question 476
Win-lose approach is most likely to be associated with which of the following type of relationship?
Answer : A
Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Win-lose approach is useful when the relationship with the other party (TOP) is short-term and once-off.
The question mentions 4 types of relationship:
Adversarial: Both seek to maximize position at the expense of the other. Almost no trust, communication and cooperation. These suppliers will probably provide non-core products or services with the buyer purchasing them on a one-off basis.
Outsourcing relationship: Use competent suppliers to manage non-core businesses previously done in-house. Require high level of trust and collaboration
Partnership: Both work closely on long term development by sharing information, technology and ideas.High level of trust with the aim to benefit both parties (win-win)
Strategic alliance: Both parties identify areas where they could collaborate to create mutual benefits
Among these 4 types of relationship, only adversarial is once-off. Then it is the correct answer.
Question 477
Which of the following is the first step in the development of negotiation strategies?
Answer : D
Developing specific negotiation strategies in areas where risk or spend is high involves analysing a wide range of objectives and variables within the context of the organisation's business requirements. The first stage in any negotiation preparation is to define your overall objectives which may be related to a single variable such as price in the case of a standardised requirement, or many variables in the case of capital equipment. Your negotiating strategies and tactics will all be focused on achieving overall objectives.
Question 478
What are the potential sources of conflict between buyer and supplier? Select TWO.
Answer : B, C
Conflicts arise in procurement when risks, costs, or gains are not fairly shared, creating perceptions of exploitation. Another frequent source is late payment of supplier invoices, which damages trust and supplier cash flow. Scheduling or early involvement, by contrast, usually supports collaboration unless poorly managed. Conflict is natural in negotiations due to divergent interests, but recognising sources allows proactive management. Skilled negotiators use integrative approaches to turn potential conflict into opportunity, aligning incentives and ensuring fairness.
Question 479
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 480
An integrative negotiation style involves ...
Answer : C
Integrative negotiation focuses on collaboration, transparency, and the pursuit of shared benefits. It emphasizes mutual problem-solving and long-term value creation rather than short-term wins.
Question 481
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : A, B
Persistent late payment of the supplier's invoices (A) and Unequal sharing of gains, risks, and costs with the supplier (B) are potential sources of conflict as they create dissatisfaction and imbalance in the relationship. According to CIPS materials:
Late payments (A) can strain the supplier's cash flow, affecting their operational stability and leading to mistrust in the buyer.
Unequal sharing of gains, risks, and costs (B) can result in one party feeling exploited or unfairly treated, which undermines the collaborative spirit essential for long-term partnerships.
In contrast, requesting early supplier involvement, planning visits, or setting delivery dates are typically part of constructive relationship management practices and do not inherently lead to conflict.
Question 482
Which type of question is most effective for checking facts in negotiation?
Answer : D
Closed questions (requiring yes/no or factual answers) are best for verifying facts, ensuring clarity and accuracy. Open questions are useful for exploration, while hypothetical test possibilities, and leading steer responses. In negotiation, closed questions confirm details such as prices, quantities, or deadlines, preventing ambiguity in agreements. CIPS stresses using the full range of question types strategically, with closed questions essential in finalising commitments.
Question 483
Which of the following are typical characteristics of activity-based costing (ABC) method? Select TWO that apply.
Answer : A, E
Activity-based costing is an alternative approach to traditional absorption costing. The characteristics of these two methods are illustrated in the graph below:
Question 484
Absorption costing is when the total cost per each unit of output:
Answer : B
Question 485
Which of the following is the purpose of using stakeholder support level scale?
Answer : C
In order to estimate the gap and the progress towards desired level of support, a stakeholder support scale can be used by the procurement internally. The support level scale measures stakeholder commitment. Current support level for the procurement/negotiation objectives should be gained from engagement with key stakeholders. The following is an example of stakeholder support level scale:
LO 1, AC 1.1
Question 486
Which best describes features of the recovery phase in a business cycle? Select TWO.
Answer : B, D
In the recovery phase, economies move out of recession: consumer spending rises, demand grows, and prices begin to stabilise or increase. Confidence improves, investment starts picking up, and spare capacity is gradually absorbed. Low confidence and falling investment are features of recession, while full capacity is linked to boom phases. For negotiators, recovery phases may mean suppliers regain confidence to raise prices, requiring careful market analysis.
Question 487
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should ...
Answer : A
Sally's objective is to achieve a 5% saving. If the supplier offers this saving in a different form (aftercare package), and the total value meets her goal, then accepting this alternative shows flexibility and supports a collaborative,win-winoutcome.
Question 488
Which of the following can be prepared before a negotiation with a supplier to achieve an agreement to benefit both parties?
Zone of potential agreement
Attendee list for the negotiation talks
Walk-away point
Venue for the negotiation talks
Answer : B
Zone of Potential Agreement (1) and Walk-away point (3) are key elements in negotiation planning. Establishing a Zone of Potential Agreement helps identify where interests align, whilethe Walk-away point sets the limit of acceptable terms. Both are essential to preparing a negotiation framework that benefits both parties, as per CIPS best practices.
Question 489
It may be more difficult to buy on a credit from supplier who locates in a country with a hyperinflation? Is this assumption true?
Answer : B
If the inflation rate is running high, then obtaining credit as a buyer is normally more difficult or expensive as money in the future will be worth less than money today.
Question 490
Fast & Easy Limited, a global fast food retailer, is in a negotiation with its major meat supplier. The supplier is asking for a 2% price increase, which Fast & Easy is strongly resisting. The supplier justifies this increase by stating that currency fluctuations, an unstable economic climate, and rising transport costs have necessitated this increase. Which influencing tactic is the supplier using?
Answer : A
The supplier is using Rational persuasion by providing logical reasons, such as economic conditions and increased costs, to justify the price increase. This approach uses factual information to influence the buyer's decision, aiming to present the price hike as a reasonable adjustment, which aligns with CIPS strategies on influencing tactics in negotiations.
Question 491
According to Professor Gavin Kennedy, in which of the following forms of dispute resolution, both parties will voluntarily exchange their ideas and beliefs?
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.
Question 492
Different types of relationships impact commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate power derives from formal authority or position, giving the buyer leverage in negotiations. This power type is more effective in establishing credibility and enforcing terms, as highlighted in CIPS's framework for negotiation power sources, unlike informal sources like personality or friendship.
Question 493
''BATNA is a concept that should be considered at the start of negotiations.'' Is this statement correct?
Answer : A
BATNA (Best Alternative to a Negotiated Agreement) is a core preparation concept and should always be considered before negotiations begin. It gives the buyer clarity on the minimum acceptable outcome and provides leverage by ensuring they do not accept a deal worse than their alternative. BATNA is not a legal requirement, nor should it be developed only when negotiations fail, as this weakens negotiating confidence and decision-making. CIPS emphasises BATNA as a fundamental planning tool that underpins effective and disciplined negotiation behaviour.
Question 494
Which of the following is an objective of proposing phase?
Answer : D
In the study guide, CIPS lists 5 stages of an negotiation:
The opening phase: confirm understanding and get the issues on the table. At this stage, both parties should check agenda, authority and create atmosphere conducive to agreement
The testing phase is an information gathering stage where the hypothesis and assumptions you have made in the planning stage can be tested and confirmed or disconfirmed
The proposing phase: Both sides may start making tentative proposals regarding their offering.
The bargaining phase: Both parties trade concessions; the preliminary stages are over and proposals move from being tentative and general to being more definite and specific.
The agreement and closing phase: both parties should seek agreement or if TOP does not have the final authority, some sort of acknowledgement of what key terms are should be sought.
Question 495
Citywide Developments Ltd (CDL) is a construction programme management company that delivers high-value property development schemes. CDL uses named consultant design services in contracts. Recently, consultancy day rates have increased. Which of the following tradeable concessions could CDL offer when negotiating with suppliers to achieve lower rates, without lowering service quality?
Answer : D
By removing the requirement for named personnel, CDL could allow the supplier flexibility in allocating equally competent but possibly less expensive staff. This tradeable does not compromise on quality but helps control costs.
Question 496
Where can we find the data on macroeconomics?
1. From trade journal
2. From supplier's marketing catalogue
3. From stock exchange market
4. From government's statistics
Answer : B
Macroeconomic indicators are statistics or data readings that reflect the economic circumstances of a particular country, region or sector. They are used by analysts and governments to assess the current and future health of the economy and financial markets.
Macroeconomic indicators will vary in their meaning and the impact that they have on the economy, but broadly speaking there are two main types of indicator.
- Leading indicators, which forecast where an economy might be heading. They are often used by governments to implement policies because they represent the first phase of a new economic cycle. These include the yield curve, interest rates and share prices.
- Lagging indicators, which reflect an economy's historical performance and only change after a trend has been established. They are used to confirm a trend is underway. These include gross domestic product (GDP), inflation and employment figures.
There is also the category of coincident indicators, but these are generally grouped in with lagging indicators as they either happen at the same time or after an economic shift.
The best macroeconomic indicator to watch will heavily depend on your personal preferences, what positions you are taking and which country your portfolio is focused on. However, there are some very common indicators that most traders and investors will keep an eye on.
For simplicity's sake, we have split these out into leading and lagging indicators.
Top leading indicators:
1. The stock market
2. House prices
3. Bond yields
4. Production and manufacturing statistics
5. Retail sales
6. Interest rates
Top lagging indicators:
1. GDP growth rates
2. The Consumer Price Index (CPI) and inflation
3. Currency strength and stability
4. Labour market statistics
5. Commodity prices
A procurement professional may find stock market data from the security exchange, while most lagging indicators (such as GDP, CPI, unemployment rate, currency and inflation rate, etc) can be found from government statistics data.
- CIPS study guide page 117-118
- What Are the Key Macroeconomic Indicators?| IG EN
LO 2, AC 2.2
Question 497
A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?
Answer : C
Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values. A smile, a 'yes' and the type of hospitality received, (in the business context), can mean very different things in different international business cultures.
Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide towhat TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.
Question 498
Any commercial negotiation process has only three stakeholders: procurement, budget holders, and users. Is this TRUE?
Answer : D
Commercial negotiations involve a wider set of stakeholders than procurement, budget holders, and users. Depending on context, directors, IT specialists, legal teams, regulators, or external partners may all be impacted. Ignoring them risks resistance or missed requirements. CIPS stresses stakeholder mapping tools (such as Mendelow's Matrix) to identify influence and interest levels, ensuring all relevant parties are managed appropriately in negotiation preparation and execution. Narrow stakeholder identification can undermine outcomes.
Question 499
Effective listening is important in integrative negotiations. Is this statement correct?
Answer : A
Effective listening is crucial in integrative negotiations as it fosters mutual understanding and helps identify shared interests, leading to collaborative solutions. It enables negotiators to comprehend the other party's needs and concerns fully.
Question 500
The bargaining power of buyers is likely to be high in relation to suppliers in which of the following situations?
Answer : D
The bargaining power of buyers increases when the buyer is large relative to the supplier. A large buyer can leverage its size to negotiate more favorable terms due to its significant impact on the supplier's business. CIPS notes that a buyer's size and purchasing volume are key factors that enhance its negotiating power in buyer-supplier relationships.
Question 501
Which of the following are examples of variable costs?
Building and site rent
Annual insurance premium
Raw materials expenditure
Delivery costs for materials
Answer : D
Variable costsare expenses that change in proportion to business activity or production volume.Raw materialsanddelivery costsdirectly increase as more products are produced. In contrast,rentandinsuranceare fixed costs that remain constant regardless of output levels.
''Variable costs are directly linked to production output. Raw materials and logistics (e.g., delivery) scale with order volume, impacting supplier pricing and buyer negotiations.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Direct and Variable Cost Classifications)
Question 502
Which of the following types of relationship would possibly lead to a distributive negotiation?
Answer : D
Question 503
A procurement officer for a manufacturing organisation is negotiating with a supplier over the provision of components. The supplier has indicated that they have to raise their prices due to their fixed costs increasing. Which TWO of the following are types of fixed costs?
Answer : A, B
Fixed costs are costs that do not vary directly with production volume. Staff salaries and building rents remain largely constant regardless of output levels and therefore meet the definition of fixed costs. Raw materials and temporary labour vary with production levels and are therefore variable costs. Warehouse logistics often fluctuate with throughput and activity, making them variable or semi-variable rather than fixed. Understanding fixed versus variable costs is essential for buyers when assessing supplier justifications for price increases, enabling more informed and credible cost-based negotiations.
Question 504
An oil refinery plant imports much of its crude oil from overseas. A procurement manager in the refinery suggests that fixing the crude oil contract price for 36 months would be beneficial for the company. Would this be a right thing to do?
Answer : C
Fixed price contract is the contract in which the price is static throughout the contract period. A fixed-price contract may give certainty to budget and simplify contract management. However, it may lead to other problems since it requires bidders to estimate and bear the financial risks associated with price escalations. If the estimates are too high or events do not materialize, the buyer will pay a steep price that may affect the economy and efficiency of the contract. In the worst case, it may mean that the bid price is then above budget and may lead to a reduction in the requirements or rebidding. If the estimates are too low, it may appear as an abnormally low bid and disrupt contract execution.
On the other hand, price adjustment provisions include formulas designed to address problems, and can protect both the borrower and contractors from price fluctuations. Price adjustment formulas allow contractors to offer more realistic prices at the time of bidding. Despite concerns that they may lead to budget uncertainties, price adjustment formulas will estimate the actual cost implications that will be encountered. They use indexes that can be used for cost projection.
According to Asia Development Bank (ADB), any contract with a delivery or completion period beyond 18 months should contain an appropriate price adjustment clause.
In the scenario, the crude oil contract is planned to last 36 months. This period is pretty long with a fluctuating commodity. Therefore, the company should use price adjustment agreement.
- CIPS study guide page 113-117
- Guidance Note on Procurement: Price Adjustment (adb.org)
LO 2, AC 2.2
Question 505
Distributive approach in negotiation is typified by which of the following?
Answer : C
Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Commercial situations often demand a distributive bargaining approach, if the 'pie' is inherently of a fixed size. In this case, any conflicts must be resolved by sharing it.
In win-lose approach, a negotiator wants to maximise the value obtained in a single deal, the relationship with the other party is not important. Therefore, a strong party may win more than 50% of the metaphorical 'pie'.
It should not be assumed that win-win can be applied to all commercial negotiations, or that win-lose approaches are inherently inferior.
Question 506
Which of the following situations would increase a buyer's bargaining power?
Answer : A
When a buyer's purchase represents asignificant portion of a supplier's revenue, it increases the buyer's leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.
''Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer's ability to influence terms.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)
Question 507
Which of the following is active listening?
Answer : C
Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS's guidelines for effective negotiation communication.
Question 508
Jasmine and the IHL sales team have a negotiation scheduled with one of AB's lead buyers, Samuel, at AB's premises. This is one of the biggest negotiations that Jasmine has been involved in and is eager not to make any mistakes. Jasmine has heard from a colleague that Samuel tends to adopt an integrative negotiation style. IHL senior management decides to send a team of three members to the negotiation. Jasmine is among the team and she is assigned to check body language, reactions, feeds insight to her leader and to record important comments and information from the meeting for minutes. Which of the following are roles of Jasmine in the forthcoming negotiation? Select TWO that apply.
Answer : A, E
A negotiating team can be as few as two people, and one person can play one or more of these roles:
As from the scenario, Jasmine will act as an observer and a scribe (or secretary).
Question 509
Which of the following are stages within the negotiation process?
Planning and preparation
Arguing and persuasion
Accepting hospitality
Testing and proposing
Answer : C
The formal negotiation process includes planning and preparation (objectives, BATNA, MIL) and testing/proposing (exchanging offers). Hospitality is not a stage---it may support relationships but is not part of structured negotiation. Arguing/persuasion occurs within bargaining but is not defined as a stage in itself. Understanding the stages ensures structured progress and prevents disorganised discussions, which often result in suboptimal agreements.
Question 510
Different types of relationships impact negotiations. Which source of leverage would most support the buyer?
Answer : A
Legitimate power comes from formal authority and organisational backing, making it a credible and sustainable leverage source in negotiations. Personality power or reliance on colleagues and friends lacks long-term weight and may not influence suppliers strategically. Buyers who use legitimate power, backed by governance and authority, negotiate from a position of credibility and professionalism, reinforcing stronger outcomes.
Question 511
A buyer has lost trust in a supplier but wishes to repair the relationship. What is the appropriate first step?
Answer : A
Rebuilding trust requires acknowledgement of the issue and supplier commitment to improvement. Cosmetic gestures such as hospitality or price reductions do not address the core problem. Nor should KPIs be artificially lowered, as this masks underperformance. Trust is restored when accountability is accepted and corrective actions are implemented transparently. This aligns with CIPS' emphasis on trust-building behaviours: honesty, responsibility, and consistent performance.
Question 512
Ben Dunne is a procurement manager and is responsible for a contract that supplies translation services to his organisation. Ben has the authorisation to extend the contract for a further two years, but has aimed for a further 2% discount. Ben is aware that the supplier's previous performance has been inconsistent, but during the negotiation Ben asks the supplier to present their performance to date on this contract. Which stage of the negotiation cycle is this?
Answer : D
The testing stage of the negotiation cycle is where each party explores and validates information provided by the other side. By asking the supplier to present their performance to date, Ben is testing claims, checking credibility, and assessing whether the supplier's performance supports or undermines their position in the negotiation. This is distinct from preparation (which happens before the meeting), bargaining (where concessions and tradeables are exchanged), and agreement (where final terms are confirmed). CIPS highlights that testing allows negotiators to challenge assumptions, clarify evidence, and strengthen their position before moving into bargaining or closure.
Question 513
Which characteristics are likely to feature in a partnership relationship in purchasing?
Close collaboration between supplier and buyer
Focus is on price and delivery only
Sharing of information
One-off commercial transactions
Answer : D
Partnership relationshipsare strategic and long-term. They emphasizetrust, collaboration, and information sharing. Unlike transactional relationships, they go beyond price and delivery to focus on joint value creation.
''Collaborative partnerships involve open information sharing and mutual support. These relationships are built on joint objectives, trust, and commitment to long-term success.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.2 - Types of Supplier Relationships)
Question 514
An integrative negotiation style involves ...
Answer : C
Integrative negotiation focuses on collaboration, transparency, and the pursuit of shared benefits. It emphasizes mutual problem-solving and long-term value creation rather than short-term wins.
Question 515
According to Dr. Mari Sako, which of the following is potentially the weakest trust to be built?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Otherwise, trust also has legal meaning. A trust is a legal document that can be created during a person's lifetime and survive the person's death. A trust can also be created by a will and formed after death. Charitable trusts are trusts which benefit a particular charity or the public in general.
Question 516
Rose is a senior buyer from a skiing equipment retailer. Rose is concerned about the current ski boot shortage and the number of invoicing problems from a key supplier. She has decided to have a video conference with Victor, CEO of the supplier. Initially, she intends to threaten Victor with contract termination unless he can improve the situation. However, she is a little wary of doing this as the switching costs are high. Eventually, she decides to seek solutions by encouraging the other party to offer their views and ideas. Rose also prepares some ideas to discuss with Victor. Which of the following is the persuasion method that Rose intends to use in the forthcoming conference?
Answer : C
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 multiple variables to consider when choosing between 'push' and 'pull'. Professor Fiona Dent of Ashridge Business School proposes situations when each style might be most appropriate, breaking down push into 'directive' and 'reasoning' and 'pull' into 'collaborative' and 'visionary':
Table Description automatically generated
In the scenario, Rose intends to let both parties exchange their views and ideas so that solutions to current problems can be found. This is the typical characteristic of collaborative (pull) method.
Question 517
''Finding the middle ground between buyer and supplier is a satisfactory way to complete contract negotiations.'' Is this statement correct?
Answer : D
While compromise seems fair, it often erodes credibility and weakens long-term negotiation outcomes. Skilled negotiators avoid ''splitting the difference'' automatically, since it signals weak preparation and can encourage exploitation in future talks. Instead, agreements should be built on objective value, data, and tradeables. Compromise has a place, but reliance on it damages strategic positioning. CIPS stresses integrative or principled negotiation over simplistic middle-ground settlements.
Question 518
A negotiation process ends once the negotiating meeting has finished. Is this statement true?
Answer : C
Question 519
When is the best time to adopt accommodating style according to Thomas-Kilmann conflict mode instrument?
Answer : C
According to Thomas-Kilmann conflict model instrument, there are 5 conflict management styles:
Accommodating is an unassertive and cooperative approach to resolving the conflict. Accommodating means conceding to the other party with little debate or fight, not challenging or strongly putting forward your own point of view and generally giving and yielding to the other party's point of view. Accommodating is best used when:
1. When others can resolve the conflict more effectively
2. When the issue is much more important to the other person than to yourself - to satisfy the needs of others and to show you are reasonable
3. To build up social credit for later issues which are important to you
4. When continued competition would only damage your cause
5. When preserving harmony and avoiding disruption are especially important
6. To aid in the managerial development of subordinates by allowing them to experiment and learn from their own mistakes
LO 1, AC 1.1
Question 520
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?
Answer : A
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 521
A building firm has been awarded a contract to build a new office block, and the
building firm needs to separate its direct and indirect costs.
Which one of the following is a direct cost to the building of the new office block?
Answer : A
Question 522
Commercial negotiation ends at the award of a contract. Is this statement true?
Answer : C
Negotiation doesn't end after the contract is awarded. The needs for negotiation can arise in any post-award stages. For example, at supplier development and relationship management stage,improvement in supplier capability, capacity, and product/service range can be negotiated. Negotiations with long-term strategic critical suppliers should be carried out in a partnering style, with a win-win starting point assumed.
In some sectors such as transport, utilities and infrastructure, tenderers may 'bid low' or even make a loss to win major contracts with a view to negotiating lucrative changes, variations and 'add-ons' over the life of the contract when the supplier is bedded in and the buyer is in the weaker position to push back or challenge. Even in less complex contract, it is very likely that there will be a need to negotiate with that supplier again after the awarding of the contract.
LO 1, AC 1.1
Question 523
When implementing value analysis or value engineering, which of the following acronyms reminds both buyer and supplier of ideas on removal, substitution and design-out of cost elements?
Answer : B
Ray Carter coined the mnemonic STOPS WASTE to remind buyers of 10 cost-reduction ideas they can ask for themselves and their suppliers in any situation when considering a key purchase input. Stop Waste by:
Standardisation - is there a standard specification?
Transportation - is the inbound transport classification appropriate
Over-engineered - is the specification too tight?
Packaging - can packaging be reduced or eliminated?
Substitutes - is there a cheaper substitute material
Weight - is there opportunity to reduce weight of the product?
Any unnecessary processing - is there any unnecessary design or feature?
Supplier's input - are suppliers able to assist with the cost reduction
To make - is it more economical to make or buy?
Eliminate - if no one uses the feature, can it be eliminated?
SAMOA is a useful acronym for checking and testing the information gathered from the Internet:
Source
Audience
Methodology
Objectivity
Accuracy
OWN-IT is acronym for 5 steps in the process of collecting and analysing the data and information needed in any field:
Outline
Wide search
Narrow search
Increase your stockpile of information
Transform your stockpile into new knowledge
A SMART goal is used to help guide goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Realistic, and Time-bound.
Question 524
Jasmine and the IHL sales team have a negotiation scheduled with one of AB's lead buyers, Samuel, at AB's premises. This is one of the biggest negotiations that Jasmine has been involved in and is eager not to make any mistakes. Jasmine has heard from a colleague that Samuel tends to adopt an integrative negotiation style. IHL senior management decides to send a team of three members to the negotiation. Jasmine is among the team and she is assigned to check body language, reactions, feeds insight to her leader and to record important comments and information from the meeting for minutes. Which of the following are roles of Jasmine in the forthcoming negotiation? Select TWO that apply.
Answer : A, E
A negotiating team can be as few as two people, and one person can play one or more of these roles:
As from the scenario, Jasmine will act as an observer and a scribe (or secretary).
Question 525
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as ...
Answer : C
In the MIL framework, ''Must have'' refers to non-negotiable elements. For Colin's organisation,ethical and sustainable procurementis a core, uncompromisable value, making it a ''Must have'' in negotiations.
Question 526
Maria is a professional services category buyer within the National Health Service. Due to the severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
The Win-Win approach is the most appropriate negotiation strategy in situations where collaboration and ongoing relationships are prioritized. In this case:
Achieving cost savings: The NHS aims to reduce expenses in order to reallocate funds to critical areas, making it essential that both parties work together to find cost-effective solutions.
Collaborative supplier relationship: Since Maria is working with a collaborative supplier, maintaining a positive relationship through mutual benefit is essential for continued cooperation.
Alignment with public service objectives: A Win-Win outcome aligns with the NHS's broader objectives of maximizing resources for patient care, as it ensures that savings are achieved without undermining the supplier's commitment to quality service.
This approach aligns with CIPS guidelines for maintaining productive, ethical partnerships in procurement, especially in critical sectors like healthcare.
Question 527
To buying organisation, savings can be achieved from different saving levers or tactics. Which of the following are means that deliver savings through optimising specifications?
Answer : A, B
If driving greater value and efficiency from your supply base is your end, you should remember that there are many ways to do this without seeking to negotiate lower prices. Below are 7 types of saving levers:
Question 528
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 529
When a supplier tells a buyer they have a margin of 20%, what does this mean?
Answer : A
Margin is defined as profit expressed as a percentage of the selling price, not the cost. This is a critical distinction from mark-up, which expresses profit as a percentage of cost. For example, a 20% margin means that 20% of the price charged to the buyer represents profit, while 80% represents cost. CIPS emphasises that buyers must clearly understand this difference to avoid being misled during pricing discussions. Confusing margin with mark-up can significantly weaken negotiation effectiveness.
Question 530
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : D
An adversarial style is appropriate when issues are non-negotiable, such as health and safety commitments (D). In these scenarios, compliance is required without compromise, and a firm stance may be necessary. This aligns with CIPS guidance, where adversarial tactics are used in non-negotiable contexts to enforce strict standards.
Question 531
Which of the following is considered a weakness of a 'dealer' style negotiator?
Answer : A
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of dealer style are described below:
LO 2, AC 2.4
Question 532
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
===========
Question 533
A supplier can produce a product for $160 and sells it for $240, making $80 profit. What is the mark-up profit percentage?
Answer : A
Mark-up % = Profit Cost 100. Here, profit is $80, cost is $160. So, (80 160) 100 = 50%. This differs from margin, which is profit selling price. Mark-up analysis helps buyers understand supplier pricing structures, detect hidden margins, and strengthen negotiation. By knowing whether a supplier is working with high or low mark-up levels, buyers can challenge prices more effectively or justify alternative offers. This analytical preparation supports objective negotiation rather than reliance on supplier claims.
Question 534
Which of the following occur within the planning and preparation stage in a negotiation process? Select THREE that apply.
Answer : A, B, F
In the planning and preparation stage of negotiation, it is essential to build a strong foundation by understanding various factors that influence the negotiation outcome. According to CIPS resources, critical aspects of preparation include:
Understanding the other party (A): This helps in anticipating their needs, objectives, and potential negotiation styles, leading to more strategic discussions.
Defining the constituents (B): This involves identifying all stakeholders or parties impacted by the negotiation, ensuring their interests are considered when planning the negotiation strategy.
Analyzing the bargaining power (F): Understanding the relative power each party brings to the negotiation helps in setting realistic goals and predicting possible negotiation dynamics.
These elements are foundational in ensuring a well-rounded approach and enabling both parties to enter negotiations with clarity and strategy, enhancing the potential for a positive outcome.
Question 535
Sally is negotiating with an oversea supplier on the price and payment period. Her company and the supplying organisation are equal in bargaining power. The supplier says that they are investing in new facilities and machinery so the payment period should not be longer than 30 days. Sally knows that her company often pays the suppliers after 45 days from the delivery, but at the moment the company has positive cash flow and it is able to pay immediately. Which of the following should be Sally's concession plan?
Answer : B
In the scenario, the length of payment period is particularly important to the supplier as they are investing new facilities. Otherwise, the buyer's company has a positive cash flow position and budget is available for a shorter payment terms. So this tradeable (payment period) is important to supplier but it is not a significant problem with the buyer. This tradeable will fall within 'Easy concession to trade' quadrant in the following matrix:
Table Description automatically generated
If the tradeable fall within this quadrant, Sally should shorten the payment period in supplier's favour and try to win as many concessions as possible in return. Asking for a discount may be a reasonable trade-off.
LO 2, AC 2.3
Question 536
Which of the following is a source of information on microeconomic factors?
Answer : D
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Question 537
When implementing value analysis or value engineering, which of the following acronyms reminds both buyer and supplier of ideas on removal, substitution and design-out of cost elements?
Answer : B
Ray Carter coined the mnemonic STOPS WASTE to remind buyers of 10 cost-reduction ideas they can ask for themselves and their suppliers in any situation when considering a key purchase input. Stop Waste by:
Standardisation - is there a standard specification?
Transportation - is the inbound transport classification appropriate
Over-engineered - is the specification too tight?
Packaging - can packaging be reduced or eliminated?
Substitutes - is there a cheaper substitute material
Weight - is there opportunity to reduce weight of the product?
Any unnecessary processing - is there any unnecessary design or feature?
Supplier's input - are suppliers able to assist with the cost reduction
To make - is it more economical to make or buy?
Eliminate - if no one uses the feature, can it be eliminated?
SAMOA is a useful acronym for checking and testing the information gathered from the Internet:
Source
Audience
Methodology
Objectivity
Accuracy
OWN-IT is acronym for 5 steps in the process of collecting and analysing the data and information needed in any field:
Outline
Wide search
Narrow search
Increase your stockpile of information
Transform your stockpile into new knowledge
A SMART goal is used to help guide goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Realistic, and Time-bound.
Question 538
Where a negotiator uses numerical reasoning with facts as part of their negotiation approach, which of the following techniques will they be adopting?
Answer : B
Using logic involves applying numerical data and factual evidence to support arguments in a negotiation. Logical reasoning appeals to objective analysis rather than emotional or coercive tactics and is effective in convincing the other party through structured, fact-based arguments, aligning with CIPS's guidance on logical negotiation techniques.
Question 539
Different types of relationships impact commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate power derives from formal authority or position, giving the buyer leverage in negotiations. This power type is more effective in establishing credibility and enforcing terms, as highlighted in CIPS's framework for negotiation power sources, unlike informal sources like personality or friendship.
Question 540
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?
Answer : C
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 541
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 542
Which of the following is the internal factor that is taken into price of a product?
Answer : A
In order to answer this question, you should better consider each option:
'Exchange rate' is the value of one nation's currency versus the currency of another nation or economic zone. This is a macroeconomic factor.
'Elasticity' refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. This is a microeconomic factor
Consumer tastes refer to the products and services that consumers consciously choose over others. Consumer tastes are so powerful that they can change how businesses conduct their activity. Like elasticity, this is also a microeconomic factor.
Among 4 options, only risk management is the internal factor. Risk pricing is a strategy applied by many companies in the world. To learn how to price the risk, you can read an article from McKinsey: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-to-price-risk-to-win-and-profit
This is a question that a student met in her actual exam. The knowledge section is unknown.
LO: Unknown, AC: Unknown
Question 543
Which of the following is a challenge when calculating absorption costing?
Answer : A
Absorption costing allocates indirect overheads to units, which is inherently judgemental; selecting allocation bases that ''fairly'' load overhead to products is the well-known difficulty. (By contrast, option B describes activity-based costing concepts---cost pools and drivers.)
===========
Question 544
Which of the following can be prepared before negotiation to achieve an agreement that benefits both parties?
Zone of potential agreement (ZOPA)
Attendee list
Walk-away point
Venue for the talks
Answer : B
The ZOPA defines the range of outcomes acceptable to both parties, while the walk-away point defines the minimum acceptable deal for the buyer. Together, these guide negotiation planning to avoid unfavourable agreements. Attendee lists and venues are logistical details, important but not central to negotiation value creation. Preparation of ZOPA and walk-away ensures structured, strategic decision-making and protects against poor deals.
Question 545
A good negotiator invests time in understanding the needs of the individuals in a negotiation. Is this statement true?
Answer : D
Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing tounderstand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:
The organisation - What the organisation wants to achieve. This is generally well stated and understood
The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual
Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.
Question 546
An adversarial style of negotiation is appropriate when the buyer has greater bargaining power. In what other situation may the buyer adopt this style?
Answer : A
Adversarial (win--lose) negotiation is viable when buyers can leverage abundant alternatives and substitutes, reducing supplier power. In such cases, buyers can adopt tough tactics, knowing they can switch suppliers if necessary. By contrast, limited supply, single sourcing, or monopolist suppliers constrain buyer power, making adversarial strategies risky and often ineffective. CIPS stresses that negotiation style must be matched to market conditions and the power balance.
Question 547
Where a market consists of a large producer with high power, it is known as ...
Answer : B
A monopoly occurs when a single supplier dominates a market, giving them high bargaining power over buyers. By contrast, monopsony is where a single buyer dominates, oligopoly involves a few large suppliers, and monopolistic competition refers to many suppliers with differentiated products. Monopoly power in negotiations means buyers have reduced leverage and may need to rely on regulatory frameworks or collaborative strategies to balance outcomes.
Question 548
Which of the following are stages within the negotiation process?
Planning and preparation
Arguing and persuasion
Accepting hospitality
Testing and proposing
Answer : C
The formal negotiation process includes planning and preparation (objectives, BATNA, MIL) and testing/proposing (exchanging offers). Hospitality is not a stage---it may support relationships but is not part of structured negotiation. Arguing/persuasion occurs within bargaining but is not defined as a stage in itself. Understanding the stages ensures structured progress and prevents disorganised discussions, which often result in suboptimal agreements.
Question 549
Which of the following are internal factors when a supplier is making its pricing decision?
Answer : D
Question 550
Lina Rawlins is a senior buyer working for a medical equipment company. Lina is in charge of the company's largest supplier account, Great Barrington Gas (GBG), a medical equipment supplier. Recently, GBG's performance has declined, leading to an increasing number of rejected items. Lina is aware of the seriousness of this and has asked GBG to attend an urgent meeting. In the meeting, Lina asked the GBG representative, ''Can you tell me exactly what you are doing to ensure quality?" What type of question is Lina asking?
Answer : A
Lina is asking a probing question to gather more detailed information on the actions GBG is taking to address quality issues. Probing questions are intended to delve deeper into a topic and elicit specific details, making them suitable for understanding underlying issues, as per CIPS's negotiation question types.
Question 551
A procurement manager withholds important information to strengthen negotiating power. Is this appropriate when using an integrative negotiation style?
Answer : B
Integrative negotiation relies on openness and trust, aiming to identify underlying interests, not just positions. Withholding information is typical of distributive (win-lose) bargaining, where each side protects its bottom line. In an integrative context, hiding key details prevents mutual understanding, reduces creative option-building, and damages relationship trust. Instead, transparency enables value creation---such as joint cost reduction or innovation. CIPS emphasises that power must be balanced with openness when integrative outcomes are desired.
Question 552
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
Answer : B, C
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
Question 553
Which of the following are most likely to be fundamentals of Fisher & Ury's principled negotiation?
1. Depersonalise the argument
2. Focus on positions
3. Generate creative options
4. Using subjective criteria
Answer : C
Principled negotiation is based on four fundamentals: people, interest, options and criteria:
1st Principle: separate the people from the problem: Negotiator should depersonalise the situation and accepting that the subject matter of the negotiation. This can be difficult for untrained negotiators, but this is a key skill to develop
2nd principle: focus on interests, not positions: It is important in principled negotiations not to focus on their parties' positions (what are expressed during negotiations), but on the interests (underlying needs) behind them
3rd principle: invent options for mutual gains: this principle aims to help the parties find a solution that both would benefit from. The more options - or tradeables - that can be brought to the table the better.
4th principle: insist on using objective criteria: is about making sure that the negotiation stays focused on outcomes based on objective criteria and that it is productive.
LO 1, AC 1.2
Question 554
John is in a negotiation with a supplier. They have decided that their future
relationship will be long term, built on trust and respect, and that gains and risk
will be shared between the parties. The parties will also share ideas and
collaborate on those ideas. Which of the following is this type of relationship?
Answer : A
Question 555
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
A junior team member can effectively contribute as a note taker (1) and observer (3), allowing them to support the meeting without taking on roles that require more experience, like chairing or serving as an expert. This aligns with CIPS's recommendations for assigning junior roles in negotiations.
Question 556
Which of the following two are recognized strategies to achieve a win-lose outcome?
Making the other party lower its resistance point
Making the other party think this settlement is the best it can achieve
Employ empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
In a win-lose outcome, tactics often involve lowering the other party's resistance point (1) and convincing them that the offer is the best possible (2). These strategies are designed to maximize advantage for one party at the expense of the other, fitting with CIPS's win-lose negotiation techniques.
Question 557
At which stage in a negotiation would questions be asked to obtain missing information?
Answer : D
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 558
Which of the following may help the procurement professional increase expert power in commercial negotiation? Select TWO that apply.
Answer : C, E
Expert power is based on a person's high levels of skill and knowledge, formal training, qualifications and experience in a particular procurement category would give someone expert status and mean that in negotiation their voice is listened to as a more objective, informed knowledge leader. Expert power is based on facts, knowledge, research, insight and study.
Legitimate power comes from rules, formal authority, organisation rank, staff rate or official position held.
Reward power comes from one person's ability to compensate or reward another for compliance.
Referent power stems from their personality, way of engaging with others and habit of acting in a way that is in line with a strong set of values and principles.
Question 559
Which of the following are most likely to be abilities of a person with high emotional intelligence? Select TWO that apply.
Answer : B, C
Emotional Quotient is the set of skills that enables us to make our way in a complex world - the personal, social and survival aspects of overall intelligence, the elusive common sense and sensitivity that are essential to effective daily functioning. It has to do with the ability to read the political and social environment, and landscape them; to intuitively grasp what others want and need; what strengths and weaknesses are; to remain unruffled by stress; and to be engaging. The kind of person others want to be around and follow.
EQ seeks to measure emotional intelligence and is centred on abilities such as the following:
- Identifying emotions
- Evaluating how others feel
- Controlling one's own emotions
- Perceiving how others feel
- Using emotions to facilitate social communication
- Relating to others
On the other hand, cognitive ability is defined as a general mental capability involving reasoning, problem solving, planning, abstract thinking, complex idea comprehension, and learning from experience (Gottfredson, 1997).
LO 3, AC 3.3
Question 560
Maria is a professional services category buyer within the National Health Service. Due to the severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
The Win-Win approach is the most appropriate negotiation strategy in situations where collaboration and ongoing relationships are prioritized. In this case:
Achieving cost savings: The NHS aims to reduce expenses in order to reallocate funds to critical areas, making it essential that both parties work together to find cost-effective solutions.
Collaborative supplier relationship: Since Maria is working with a collaborative supplier, maintaining a positive relationship through mutual benefit is essential for continued cooperation.
Alignment with public service objectives: A Win-Win outcome aligns with the NHS's broader objectives of maximizing resources for patient care, as it ensures that savings are achieved without undermining the supplier's commitment to quality service.
This approach aligns with CIPS guidelines for maintaining productive, ethical partnerships in procurement, especially in critical sectors like healthcare.
Question 561
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Hypothetical questionsare used to explore scenarios or options without making a commitment. For example, asking 'What if we were to increase the order volume?' encourages creative thinking and testing potential agreements without binding either party. This technique is valuable in theproposing and bargaining stagesof negotiation to explore trade-offs and build mutual solutions.
Question 562
When developing a negotiation approach, according to recognised theory (for example Mendelow), how should stakeholders with high interest but low power be managed?
Answer : C
According toMendelow's Matrix, stakeholders withhigh interest but low powershould be keptinformed. Their interest means they care about the negotiation's outcome, but their low power means they can't significantly influence it. Keeping them informed avoids alienation and ensures smoother implementation of negotiated agreements.
''Stakeholders with high interest but low power should be managed by keeping them informed. They may become powerful advocates or opponents in the future, so engaging them is a strategic approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Stakeholder Management in Commercial Negotiations)
Question 563
Which negotiation approach is focused on a win--win outcome?
Answer : C
A collaborative negotiation approach is explicitly designed to achieve win--win outcomes, where both parties work together to maximise joint value. This approach is closely associated with integrative negotiation, emphasising trust, information sharing, and joint problem-solving. Distributive and adversarial approaches are win--lose, focusing on dividing value rather than creating it. ''Collective'' is not a recognised CIPS negotiation approach. Collaborative negotiation is particularly suitable where long-term relationships, shared objectives, or strategic partnerships are important.
Question 564
A procurement professional is negotiating with a supplier on cleaning service. She realises that there are huge cost-saving opportunities if the supplier agrees to reduce its mark-up and unnecessary employee benefits. Supplier's mark-up and employee benefits are examples of which of the following?
Answer : D
A key consideration when seeking to negotiate prices is to establish what proportion of the spend is addressable by procurement action such as negotiation. Addressability of spend is influenceable through negotiations or application of other saving effort or leverage with suppliers.
LO 2, AC 2.1
Question 565
A procurement expert has been asked to ensure they consider emotional intelligence in their negotiation strategy. They have agreed to this and have started planning their approach. Which of the following describes emotional intelligence?
Answer : C
Emotional intelligence involves the ability to recognize and manage one's emotions and empathize with others. This skill allows negotiators to respond appropriately to both their own feelings and the emotional cues of the other party, fostering a more constructive and adaptive negotiation environment. CIPS highlights emotional intelligence as a valuable asset in understanding and influencing negotiation dynamics.
Question 566
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
===========
Question 567
Why is rapport building with the supplier important during the opening phase of a negotiation?
Answer : B
Building rapport sets apositive tonefor the negotiation and encourages openness. It is particularly vital during theopening phase, where first impressions are formed, and trust begins to build. Trust facilitates moreconstructive dialogue, enhances collaboration, and helps parties exploremutual interests.
''Developing rapport at the start of negotiations helps to foster trust and cooperation. This enhances the likelihood of reaching agreements that are mutually beneficial.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.4 - The Opening Phase and Relationship Building)
Question 568
Finding the middle ground between buyer and supplier by moving towards each other's position is a satisfactory way to complete contract negotiations and maintain ongoing relations for future negotiations. Is this statement correct?
Answer : A
Finding a middle ground, also known ascompromise or convergence, is a hallmark of collaborative or integrative negotiation. It allows both parties to secure partial wins, supports longer-term relationships, and promotes ongoing goodwill for future dealings.
''Negotiators must balance assertiveness with cooperation. Meeting halfway can lead to agreements that meet minimum needs of both parties while preserving the relationship.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Collaborative Approaches to Negotiation)
Question 569
Upper Woodborough Council is a government organisation that is seeking to reduce regular expenditure on facilities management services. Which of the following charges is an example of a fixed cost, that the council could renegotiate with the facilities management contractor to achieve savings?
Answer : D
Fixed costs are regular, predictable charges that do not vary directly with usage or demand. Monthly cleaning services are typically charged at a fixed, recurring rate, making them a clear example of a fixed cost that can be renegotiated to achieve savings. Fuel costs and reactive maintenance vary with activity levels, while inflation indexation is a pricing mechanism rather than a cost itself. CIPS advises buyers to focus on fixed-cost elements when seeking sustainable cost reductions, as changes deliver predictable and ongoing savings.
Question 570
Which of the following are types of non-verbal communication that could be used during a negotiation meeting? Select THREE that apply.
Answer : C, E, F
Non-verbal communicationsignificantly affects the dynamics of negotiation.Hand gestures,eye contact, andfacial expressionscan reinforce spoken words or contradict them. These elements can influence perception, trust, and the tone of the negotiation.
''Non-verbal communication includes gestures, posture, eye contact, and facial expressions. These play a critical role in how messages are received and interpreted.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Verbal and Non-Verbal Communication Techniques)
Question 571
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 572
Effective listening is important in integrative negotiations. Is this statement correct?
Answer : A
Effective listening is crucial in integrative negotiations as it fosters mutual understanding and helps identify shared interests, leading to collaborative solutions. It enables negotiators to comprehend the other party's needs and concerns fully.
Question 573
Which of the following roles would support negotiations with an external supplier when planning a negotiation for a low-value, routine purchase? Select TWO that apply.
Answer : C, E
For low-value, routine purchases, the involvement of The procurement manager (C) and An internal business user (E) is appropriate. The procurement manager brings expertise in supplier engagement, while the internal business user provides insights on specific needs for the productor service. Involving high-level roles, like the CEO or a legal advisor, is unnecessary for routine purchases, as per CIPS guidance on resource alignment in procurement.
Question 574
An integrative negotiation style involves ...
Answer : C
Integrative negotiation focuses on collaboration, transparency, and the pursuit of shared benefits. It emphasizes mutual problem-solving and long-term value creation rather than short-term wins.
Question 575
Which of the following is most likely a consequence of falling interest rate?
Answer : A
If interest rate are too low and credit is too, cheap rates can fund a spending boom with consumers and businesses buying (investment) more than they can afford to pay back.
Question 576
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?
Answer : D
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 right strategy.
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 577
A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?
Answer : B
To answer this question, you should know The seller's perspective as in 'How to Negotiate Professionally':
In the scenario, the buyer's spend is low, while they seem unattractive to seller (as they tend to pay late). So the buyer is classified as Nuisance in seller's perspective.
Question 578
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should:
Answer : D
Question 579
Which of the following are examples of non-verbal negotiation? Select THREE that apply.
Answer : B, D, F
Nonverbal communication is important because it gives us valuable information about a situation including how a person might be feeling, how someone receives information and how to approach a person or group of people.
There are several types of nonverbal communications you should be aware of, including:
1. Body language
Body language is the way someone situates their body naturally depending on the situation, the environment and how they are feeling.
Example: Someone might cross their arms if they are feeling angry or nervous.
2. Movement
The way you move your arms and legs such as walking quickly or slowly, standing, sitting or fidgeting, can all convey different messages to onlookers.
Example: Sitting still and paying attention in a meeting conveys respect and attention.
3. Posture
The way you sit or stand can also communicate your comfort level, professionalism and general disposition towards a person or conversation.
Example: Someone might slouch their shoulders if they feel tired, frustrated or disappointed.
4. Gestures
While gestures vary widely across communities, they are generally used both intentionally and unintentionally to convey information to others.
Example: Someone in the United States might display a ''thumbs up'' to communicate confirmation or that they feel positively about something.
5. Space
Creating or closing distance between yourself and the people around you can also convey messages about your comfort level, the importance of the conversation, your desire to support or connect with others and more.
Example: You might stand two to three feet away from a new contact to respect their boundaries.
6. Paralanguage:
Paralanguage includes the non-language elements of speech, such as your talking speed, pitch, intonation, volume and more.
Example: You might speak quickly if you are excited about something.
7. Facial expressions
One of the most common forms of nonverbal communication is facial expressions. Using the eyebrows, mouth, eyes and facial muscles to convey can be very effective when communicating both emotion and information.
Example: Someone might raise their eyebrows and open their eyes widely if they feel surprised.
8. Eye contact
Strategically using eye content (or lack of eye contact) is an extremely effective way to communicate your attention and interest.
Example: Looking away from someone and at the ground or your phone may convey disinterest or disrespect.
9. Touch
Some people also use touch as a form of communication. Most commonly, it is used to communicate support or comfort. This form of communication should be used sparingly and only when you know the receiving party is okay with it. It should never be used to convey anger, frustration or any other negative emotions.
Example: Placing your hand on a friend's shoulder may convey support or empathy.
- CIPS study guide page 174-175
- Nonverbal Communication Skills: Definition and Examples
LO 3, AC 3.3
Question 580
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
Junior team members can play supportive roles in negotiations, such as taking notes and observing the proceedings. These roles allow them to learn and contribute without leading the negotiation. Serving as an expert or chair would typically require more experience and authority.
Question 581
Ranjit is a facilities category buyer for a hospital in the UK and is managing an overseas sourcing project for security guard clothing and personal protective equipment. Ranjit is aware that foreign exchange fluctuations can create risk for his organisation and would like to remove this risk. Ranjit has asked the international suppliers to quote in GBP sterling. Will Ranjit's approach remove the fluctuation risk for the hospital?
Answer : C
Question 582
Jessica Taylor, a senior buyer, is asked to create a written performance report after her latest negotiation. Which of the following should she include? Select THREE.
Answer : B, C, F
A negotiation performance review should focus on measuring outcomes against objectives, lessons learned, and evaluation of negotiator effectiveness. This ensures continual improvement and supports organisational learning. Pricing structures and alternative suppliers may have been reviewed earlier, but are not part of post-performance reflection. Travel expenses are irrelevant to negotiation learning. By focusing on objectives, learning, and performance, organisations embed best practice and prepare stronger strategies for future negotiations.
Question 583
A buyer is preparing for an upcoming negotiation with a large supplier on a contract renewal price. The buyer has undertaken some analysis and is concerned that changes in the organisation's macro-environment over the last year will result in a price increase. The buyer's analysis has identified changes in which of the following?
Answer : A
Question 584
To buying organisation, savings can be achieved from different saving levers or tactics. Which of the following are means that deliver savings through optimising specifications?
Answer : A, B
If driving greater value and efficiency from your supply base is your end, you should remember that there are many ways to do this without seeking to negotiate lower prices. Below are 7 types of saving levers:
Question 585
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 586
Fast & Easy Limited, a global fast food retailer, is in a negotiation with its major meat supplier. The supplier is asking for a 2% price increase, which Fast & Easy is strongly resisting. The supplier justifies this increase by stating that currency fluctuations, an unstable economic climate, and rising transport costs have necessitated this increase. Which influencing tactic is the supplier using?
Answer : A
The supplier is using Rational persuasion by providing logical reasons, such as economic conditions and increased costs, to justify the price increase. This approach uses factual information to influence the buyer's decision, aiming to present the price hike as a reasonable adjustment, which aligns with CIPS strategies on influencing tactics in negotiations.
Question 587
An organization should develop different relationships which are appropriate to each supplier situation. Which ONE of the following analysis methods could help to identify these?
Answer : B
The relationship spectrum categorizes supplier relationships based on factors like strategic importance, allowing organizations to tailor their approach to each supplier relationship. CIPS emphasizes the relationship spectrum as a valuable tool for assessing and managing supplier interactions based on strategic relevance.
Question 588
Which of the following is active listening?
Answer : C
Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS's guidelines for effective negotiation communication.
Question 589
John Browne, a junior buyer for a corporation, is analyzing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : C
Foreign exchange rates impact import costs, profit margins, and overall turnover when transactions are conducted in foreign currencies. Understanding these fluctuations allows buyersto anticipate changes in purchasing costs, supporting informed decision-making, as highlighted in CIPS guidance on global procurement considerations.
Question 590
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Hypothetical questions are used to explore options or scenarios without making commitments. This technique allows negotiators to understand the other party's preferences and limitations by presenting hypothetical situations, as recommended in CIPS guidelines for negotiation questioning techniques.
Question 591
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 592
Which of the following is potentially a major source of conflict?
Answer : A
Question 593
Which of the following is a variable cost?
Answer : D
Variable costs change in proportion to production volume, such as packaging, raw materials, and delivery. Fixed costs (rent, insurance, loan repayments) remain constant regardless of output. Recognising the difference is crucial when negotiating supplier pricing, as variable costs are often more open to tradeable adjustments (e.g., bulk discounts). Buyers who understand cost structures can challenge inflated fixed allocations or negotiate on genuine variable elements. This knowledge is vital in price breakdown discussions and in cost-modelling negotiations.
Question 594
Amelia needs to negotiate prices with a potential client that she has not met before. She was due to attend their offices next week, but the meeting has been cancelled. The potentialclient has offered a telephone call as an alternative, but Amelia has declined the offer as she feels negotiations cannot succeed without a face-to-face meeting. Is this the right decision?
Answer : C
While face-to-face meetings are beneficial, declining all other forms of interaction can hinder progress. Telephone calls can be effective in early negotiation stages to build rapport and set expectations. Conditioning the client through initial calls is a common and productive practice.
Question 595
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier makes their closing statements, they are most likely to be doing which of the following?
Answer : B
As negotiations near closure, skilled negotiators carefully observe for buying signals---verbal cues (''That sounds reasonable...'') and non-verbal cues (nodding, smiling, leaning forward). These indicate readiness to agree and confirm whether it is the right time to close. At this stage, both sides usually stop gathering data or building rapport, as the focus is on confirming alignment and avoiding last-minute derailments. Closing too early may risk missing concessions, but delaying risks cooling momentum. Recognising buying signals ensures closure occurs at the optimal point, aligning with preparation and tactical awareness.
Question 596
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 597
The buyer's bargaining power tends to be relatively higher than supplier's bargaining power in which of the following circumstances?
Answer : D
Buyer power gives customers/consumers (buyers) the ability to squeeze industry margins by pressuring firms (the suppliers) to reduce prices or increase the quality of services or products offered.
There are four major factors to consider when determining the bargaining power of buyers:
1. Number of buyers relative to suppliers: If the number of buyers is small relative to that of suppliers, the buyer's power will be stronger.
2. Dependence of a buyer's purchase on a particular supplier: If a buyer is able to get similar products/services from other suppliers, buyers depend less on a particular supplier. Therefore, the power of the buyer would be greater.
3. Switching costs: If there are not many alternative suppliers available, the cost of switching is high. Therefore, buyer power would be low.
4. Backward Integration: If the buyer is able to integrate or merge suppliers, the buyer has greater bargaining power over the existing suppliers.
When is Bargaining Power of Buyers High/Strong?
There are fewer buyers relative to that of suppliers
The switching costs of the buyer are low
If the buyer is able to backward integrate
The buyer purchases product in bulk (high volume)
The buyer is able to get similar product/services from other suppliers
The buyer purchases the majority of the seller's products
Several substitutes are available on the market
Product is not differentiated
CIPS study guide page 54-56
What is the Bargaining Power of Buyers?
Question 598
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 599
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
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.
Question 600
According to Fiona Dent and Mike Brent, which of the following are characteristics of Push approach? Select TWO that apply.
Answer : B, E
According to the book 'Influencing: Skills and techniques for business success' by Fiona Dent and Mike Brent, there are two major influencing styles. Push tends to be directive. It tells, and is clear and resolute, but needs to be employed in situations where firmness is required because of difficulties that exist or weakness is evident. Pull is more participatory and collaborative. It seeks to incorporate everyone's perspective. It can appear wishy-washy if not skilfully employed. Thatapproach should be followed which is most likely to secure commitment and not mere compliance.
The two divisions can be further divided into four style categories: directive; persuasive reasoning; collaborative -- team oriented, people oriented to inspire them with a vision. The directive style relies on your expertise and reputation being respected by others, and where there really does seem to be one answer. It is 'I' driven whereas persuasive reasoning is more 'we' and issue driven. Directive styles can make the user appear as 'a bull in a china shop'; persuasive reasoning can be portrayed as tough guy.
Collaborative influencing takes the 'we' element further and seeks to mobilise everyone's ideas in a journey of discovery. It may have the flavour of 'I'm your best friend', which may not go down too well. Visioning style is concerned to stir people's emotions in support of achieving an objective. This last one has been used by demagogues to stir people's hearts and minds for evil purposes as well as good.
A useful table offers the benefits, problems, words and body language associated with each style along with advice on when to use and when to avoid each. Cases and exercises illustrate these styles.
Empathy comes in for extended treatment with the definition of 'standing in the other's shoes'. This does not necessarily happen just intuitively, and therefore before a specific influencing effort there should be an intense effort to think about the other person or persons and to sense what it might feel like to be them -- their hopes, fears, concerns, what turns them on, what turns them off, where are they coming from.
Influencing by Fiona Elsa Dent and Mike Brent, 2006 (bd-cons.com)
CIPS study guide page 163-165
Question 601
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 602
A procurement professional is preparing for a negotiation with supplier. She is setting targets for price which her company is seeking to achieve. Which of the following acronyms can help her identify limits before engaging in the negotiation?
Answer : A
MIL criteria indicate 3 limits that negotiator should establish:
M - Must achieve: minimum target/maximum you can concede on this point; the mandatory requirement or fall back position
I - Intend to achieve: realistic target you are aiming for on this point
L -- Like to achieve: stretch target to achieve on this point.
PPCA is purchase cost analysis
TIMWOOD indicates 7 types of waste in Lean principles
The RAQSCI model is a mnemonic summary of a business model used to define and structure business requirements
Question 603
A procurement team has discussed, in advance of a negotiation, what they will do if there is no agreement with the current supplier. They have decided that they will perform the services themselves in-house on a trial basis if no deal is made. Which of the following describes what they have prepared here?
Answer : A
Question 604
A break-even analysis uses which aspects as part of the calculation?
Fixed cost
Buying cost minus variable cost per unit
Variable cost
Selling price minus variable cost per unit
Answer : A
Break-even analysis identifies the sales volume required to cover fixed costs. It relies on:
Fixed costs (constant regardless of output).
Question 605
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
A junior team member can effectively contribute as a note taker (1) and observer (3), allowing them to support the meeting without taking on roles that require more experience, like chairing or serving as an expert. This aligns with CIPS's recommendations for assigning junior roles in negotiations.
Question 606
Which of the following is a variable cost?
Answer : D
Variable costs change in proportion to production volume, such as packaging, raw materials, and delivery. Fixed costs (rent, insurance, loan repayments) remain constant regardless of output. Recognising the difference is crucial when negotiating supplier pricing, as variable costs are often more open to tradeable adjustments (e.g., bulk discounts). Buyers who understand cost structures can challenge inflated fixed allocations or negotiate on genuine variable elements. This knowledge is vital in price breakdown discussions and in cost-modelling negotiations.
Question 607
A buyer continually states during negotiation that budget constraints limit their concessions. What tactic is being used?
Answer : C
The broken record tactic involves repeating the same point to reinforce a position, making it difficult for the other party to ignore. Here, the buyer keeps citing budget constraints to avoid moving away from their position, hoping repetition will wear down the supplier's resistance. This tactic is common in distributive bargaining and aims to anchor discussions around a fixed limitation. While effective, overuse risks damaging relationships, so skilled negotiators balance it with genuine reasoning and integrative approaches when appropriate.
Question 608
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship style can be characterised by which of the following? Select the TWO that apply.
Answer : A, D
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question 609
Which type of question is most effective for checking facts in negotiation?
Answer : D
Closed questions (requiring yes/no or factual answers) are best for verifying facts, ensuring clarity and accuracy. Open questions are useful for exploration, while hypothetical test possibilities, and leading steer responses. In negotiation, closed questions confirm details such as prices, quantities, or deadlines, preventing ambiguity in agreements. CIPS stresses using the full range of question types strategically, with closed questions essential in finalising commitments.
Question 610
If the price of a good is above the equilibrium price, which of the following will happen?
Answer : D
In microeconomics, equilibrium price is determined when the quantity demanded is equal to the quantity supplied at equilibrium price in a market, there will be no shortages and no surpluses. If we combine our supply and demand curves on one graph, the point at which they converge determines the equilibrium price. If the price is set above this price and you read across the graph you will see the supply excess demand and there will be a surplus. In order to reduce this surplus, the price will need to fall. The scenario is illustrated in the graph below:
Question 611
Sally is negotiating with an oversea supplier on the price and payment period. Her company and the supplying organisation are equal in bargaining power. The supplier says that they are investing in new facilities and machinery so the payment period should not be longer than 30 days. Sally knows that her company often pays the suppliers after 45 days from the delivery, but at the moment the company has positive cash flow and it is able to pay immediately. Which of the following should be Sally's concession plan?
Answer : B
In the scenario, the length of payment period is particularly important to the supplier as they are investing new facilities. Otherwise, the buyer's company has a positive cash flow position and budget is available for a shorter payment terms. So this tradeable (payment period) is important to supplier but it is not a significant problem with the buyer. This tradeable will fall within 'Easy concession to trade' quadrant in the following matrix:
Table Description automatically generated
If the tradeable fall within this quadrant, Sally should shorten the payment period in supplier's favour and try to win as many concessions as possible in return. Asking for a discount may be a reasonable trade-off.
LO 2, AC 2.3
Question 612
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 613
When prices of input materials increase, supply curve shifts to the left while demand remains stable. The shift of supply will tend to cause which of the following?
Answer : D
The case in the question is illustrated as below:
The equilibrium price initially at P0 with quantity Q0, when supply curve shifts to the left, it will converge with demand curve at new equilibrium point with price P1 and quantity Q1. As you can see from the graph, P1 is greater than P0 and Q1 is smaller than Q0.
Question 614
Which one of these key approaches could be pursued for a successful negotiation of a commercial agreement?
Answer : C
Acollaborative win-win approachfocuses on mutual benefit and long-term value creation. This strategy is especially effective in strategic partnerships where trust, information sharing, and problem-solving are emphasized over competition.
''The collaborative win-win approach aims to create outcomes where both parties gain. This strengthens the relationship and leads to sustainable agreements built on trust and transparency.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Win-Win Negotiation Strategy)
Question 615
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
===========
Question 616
A buyer is leading a negotiation with a supplier for plumbing parts for a large construction project with a five-year term. The buyer knows copper pipe costs will reduce after year two, while plastic component costs are forecast to rise significantly. In the negotiation, the buyer should seek to...
Answer : C
Effective negotiation preparation requires buyers to align pricing mechanisms with cost forecasts and risk exposure. Since copper prices are forecast to fall, fixing them would disadvantage the buyer; a variable price allows the buyer to benefit from market reductions. Conversely, where plastic component costs are expected to rise, fixing prices protects the buyer from inflationary increases. CIPS highlights the importance of selectively applying fixed and variable pricing to manage risk intelligently rather than adopting a single approach across all components. This mixed strategy demonstrates strong commercial awareness and supports value-for-money outcomes over long-term contracts.
Question 617
''BATNA is a concept that should be considered at the start of negotiations.'' Is this statement correct?
Answer : A
BATNA (Best Alternative to a Negotiated Agreement) is a core preparation concept and should always be considered before negotiations begin. It gives the buyer clarity on the minimum acceptable outcome and provides leverage by ensuring they do not accept a deal worse than their alternative. BATNA is not a legal requirement, nor should it be developed only when negotiations fail, as this weakens negotiating confidence and decision-making. CIPS emphasises BATNA as a fundamental planning tool that underpins effective and disciplined negotiation behaviour.
Question 618
Which of the following constitutes a key element to developing high-trust supplier relationships?
Answer : C
Delivering on commitments is fundamental to building high-trust relationships. When an organization reliably fulfills its promises, it reinforces the supplier's confidence in the partnership, fostering long-term collaboration. While contract management and audits are supportive processes, delivering on commitments directly strengthens trust, as emphasized in CIPS best practices for relationship management.
Question 619
Procurement team is required to improve leverage with their suppliers through spend consolidation. To check whether there is any opportunity to consolidate spend, which of the following should be priority of procurement team?
Answer : A
In order to identify opportunities where you can increase your leverage with supplier, you need to understand your spend. Undertaking spend analysis of your accounts payable (AP) data is an essential first step here.
Question 620
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?
Answer : A
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 and any 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 621
Logibox Ltd sets prices based on what consumers are prepared to pay. Which pricing strategy is this?
Answer : C
Market pricing sets prices according to consumer demand and willingness to pay, ensuring competitiveness. Skimming sets high prices at launch to maximise early profit, penetration uses low prices to enter markets, and premium pricing positions products as luxury with high margins. Market pricing balances supplier costs with customer value perception, making it a common approach in competitive industries.
Question 622
Buying organisation may increase its leverage with suppliers by concentrating spend. Which of the following are most likely to be forms of supplier spend consolidation? Select THREE that apply.
Answer : A, B, E
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
Volume redistribution: making recommendations following spend analysis to move from one supplier to another
Volume consolidation across categories: certain purchase requirements may be common across a number of categories
Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
Question 623
For a commercial negotiation to be effective, the organisation has to identify resources required for negotiation. Which one of the following could help?
Answer : B
Involving an appropriate cross-functional team is beneficial for effective commercial negotiation because it brings together diverse perspectives and expertise relevant to the negotiation context. According to CIPS, a cross-functional team ensures that all aspects, such as technical, financial, and operational inputs, are considered, leading to more balanced and informed decision-making. This approach also helps in addressing complex negotiation elements effectively.
Question 624
When developing a negotiation approach, according to recognised theory (for example Mendelow), how should stakeholders with high interest but low power be managed?
Answer : C
According toMendelow's Matrix, stakeholders withhigh interest but low powershould be keptinformed. Their interest means they care about the negotiation's outcome, but their low power means they can't significantly influence it. Keeping them informed avoids alienation and ensures smoother implementation of negotiated agreements.
''Stakeholders with high interest but low power should be managed by keeping them informed. They may become powerful advocates or opponents in the future, so engaging them is a strategic approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Stakeholder Management in Commercial Negotiations)
Question 625
The bargaining power of buyers is likely to be high in relation to suppliers in which of the following situations?
Answer : D
The bargaining power of buyers increases when the buyer is large relative to the supplier. A large buyer can leverage its size to negotiate more favorable terms due to its significant impact on the supplier's business. CIPS notes that a buyer's size and purchasing volume are key factors that enhance its negotiating power in buyer-supplier relationships.
Question 626
The purpose of ongoing supplier relationship management following a negotiation and contract award is that it:
Answer : B
Question 627
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 628
A breakeven analysis uses which of the following aspects as part of the analysis?
Answer : A, D
Question 629
Colin Smith is preparing to negotiate for a chemical used in fertiliser. His organisation's objective is ethical and sustainable procurement. Using the Must--Intend--Like (MIL) framework, how should Colin categorise this objective?
Answer : D
In MIL planning, ''Musts'' are non-negotiable requirements (policy, law, mandatory standards). Ethical/sustainable procurement is typically a policy/legislative compliance requirement, so it belongs in Must; ''Intend/Like'' cover important and desirable aims respectively.
Question 630
Which of the following are examples of variable costs?
Answer : D
Question 631
Which of the following should be adopted to minimise the conflict between parties in commercial negotiation?
Answer : D
Ground rules are the basic rules for doing something (Cambridge Dictionary). A negotiation goes more smoothly if ground rules are adopted. Then if something goes awry at a later time, you can point out the ground rule that has been violated. Procurement professional should seek to minimise conflict over process through agreeing 'ground rules' and approach as far as possible with the other party in advance of any negotiation meetings.
There should be two sets of ground rules: 1) ground rules for the negotiations between the two parties and 2) ground rules for the negotiating team itself. This article is about the negotiating team ground rules.
The rule of law is the condition in which all members of society, including its political leaders, accept the authority of the law.
Ground zero describes the point on the Earth's surface closest to a nuclear detonation. In the case of an explosion above the ground, ground zero refers to the point on the ground directly below the nuclear detonation.
The Ground Beam is the beam which is provided usually at the foundation level to support building walls, joists, etc.
Question 632
Distributive approach in negotiation is typified by which of the following?
Answer : C
Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Commercial situations often demand a distributive bargaining approach, if the 'pie' is inherently of a fixed size. In this case, any conflicts must be resolved by sharing it.
In win-lose approach, a negotiator wants to maximise the value obtained in a single deal, the relationship with the other party is not important. Therefore, a strong party may win more than 50% of the metaphorical 'pie'.
It should not be assumed that win-win can be applied to all commercial negotiations, or that win-lose approaches are inherently inferior.
Question 633
During which stage in the negotiation process would negotiators use tactics and exchange concessions?
Answer : A
Thebargaining stageis where both parties begin tomake concessionsand test options. This phase involves the use of strategic tactics, including the presentation of tradeables and adjustments in position to reach mutual agreement.
''The bargaining stage is characterised by movement, trade-offs, and deal-shaping. Tactics such as anchoring, making concessions, and introducing tradeables are employed to bridge the gap between opening offers.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Stages of the Negotiation Process)
Question 634
According to Professor Gavin Kennedy, in which of the following forms of dispute resolution, both parties will voluntarily exchange their ideas and beliefs?
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.
Question 635
A procurement manager is considering accepting a fixed price agreement for 12 months with an IT supplier. What are the advantages of fixed price agreements? Select TWO that apply.
Answer : B, D
Afixed price agreementprovides stability and predictability. The supplier bears the risk of cost fluctuations, which is especially advantageous in volatile markets. Moreover, it simplifies administrative processes for the buyer over the contract duration.
''Fixed price agreements transfer cost risk to the supplier and enable simplified contract management. This can reduce overhead for buyers and support budgeting accuracy.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Pricing Models in Negotiation)
Question 636
Which of the following are stages of a win-win approach to negotiations?
Find out where the interests of both parties align
Design new options, where everyone gets more of what they need
Limit the resources to a fixed number
Insist that the agreement includes subjective regulatory standards
Answer : A
A win-win (integrative) negotiation focuses on shared interests and joint value creation. The first step is identifying where both parties' interests align, followed by designing creative options that allow both sides to gain more of what they need. Limiting resources and imposing subjective standards are characteristics of distributive or adversarial approaches and restrict value creation. CIPS clearly distinguishes integrative negotiation as collaborative, interest-based, and solution-focused, particularly suitable for long-term and strategic supplier relationships.
Question 637
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 638
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
Answer : A, C, E
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 conditionthat would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
Question 639
Which of the following is a challenge when calculating absorption costing?
Answer : A
Absorption costing allocates indirect overheads to units, which is inherently judgemental; selecting allocation bases that ''fairly'' load overhead to products is the well-known difficulty. (By contrast, option B describes activity-based costing concepts---cost pools and drivers.)
===========
Question 640
Upper Woodborough Council is a government organisation that is seeking to reduce regular expenditure on facilities management services. Which of the following charges is an example of a fixed cost, that the council could renegotiate with the facilities management contractor to achieve savings?
Answer : D
Fixed costs are regular, predictable charges that do not vary directly with usage or demand. Monthly cleaning services are typically charged at a fixed, recurring rate, making them a clear example of a fixed cost that can be renegotiated to achieve savings. Fuel costs and reactive maintenance vary with activity levels, while inflation indexation is a pricing mechanism rather than a cost itself. CIPS advises buyers to focus on fixed-cost elements when seeking sustainable cost reductions, as changes deliver predictable and ongoing savings.
Question 641
Which of the following are most likely to be abilities of a person with high emotional intelligence? Select TWO that apply.
Answer : B, C
Emotional Quotient is the set of skills that enables us to make our way in a complex world - the personal, social and survival aspects of overall intelligence, the elusive common sense and sensitivity that are essential to effective daily functioning. It has to do with the ability to read the political and social environment, and landscape them; to intuitively grasp what others want and need; what strengths and weaknesses are; to remain unruffled by stress; and to be engaging. The kind of person others want to be around and follow.
EQ seeks to measure emotional intelligence and is centred on abilities such as the following:
- Identifying emotions
- Evaluating how others feel
- Controlling one's own emotions
- Perceiving how others feel
- Using emotions to facilitate social communication
- Relating to others
On the other hand, cognitive ability is defined as a general mental capability involving reasoning, problem solving, planning, abstract thinking, complex idea comprehension, and learning from experience (Gottfredson, 1997).
LO 3, AC 3.3
Question 642
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?
Answer : A
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.
CIPS study guide page 29-31
Integrative Negotiation: Definition, Tips and Examples | Indeed.com
Question 643
Representatives from South African Department of Health is negotiating the price of hospital drugs with US pharmaceutical companies. Which of the following are most likely to be macro factors that influence the outcomes of the negotiation? Select TWO that apply.
Answer : B, D
All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forces which both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
Particularly, pharmaceutical industry is a heavily regulated sector, therefore, legal and regulatory matters in the industry is highly important. Otherwise, technological trends also permeate into pharmaceutical companies, technologies like digitalisation may transform the balance of power in such negotiation.
LO 1, AC 1.3
Question 644
Active listening in negotiation includes which of the following activities?
1. Hearing
2. Interpreting
3. Rapport
4. Influence
Answer : C
Listening is a hugely important skill in the world of work. It's a key part of effective communication [...].
Regarding active listening, there is a model called 'The SIER Hierarchy of Active Listening'. It details four key stages required for effective listening. As with all models associated with active listening, its purpose is to help the listener be a better, more effective listener who really hears what is being said, connects with the individual with whom they are communicating and builds effective relationships.
The model is a hierarchical model meaning that each stage builds on the stage before it. While the model is sometimes used for training in the sales arena, it is helpful in all walks of life. The stages of the model are: Sensing (including hearing and watching body language), Interpreting, Evaluating and Responding.
- CIPS study guide page 171-173
- The SIER Hierarchy of Active Listening: Become a Better Listener
LO 3, AC 3.3
Question 645
Which of the following constitutes a key element to developing high-trust supplier relationships?
Answer : C
Delivering on commitments is fundamental to building high-trust relationships. When an organization reliably fulfills its promises, it reinforces the supplier's confidence in the partnership, fostering long-term collaboration. While contract management and audits are supportive processes, delivering on commitments directly strengthens trust, as emphasized in CIPS best practices for relationship management.
Question 646
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
Answer : D
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Question 647
Economic growth can be measured by...?
Answer : B
Gross Domestic Product (GDP) is the monetary value of the goods and services manufactured or supplied in a financial period. In general terms, when the GDP rate falls or slows down, there will be a fall in demand for goods and services demanded in the economy, with a fall in firms' revenue and profit margins. When GDP is rising, there will be an increase in demand.
Consumer Price Index (CPI) is weighted measurement that evaluates the average cost of a basket of goods bought by a consumer.
Producer Price Index (PPI) is average changes in prices that a producer receives in return for its goods or services.
Small Business Lending Index (SBLI) is an indicator of small business lending trends.
Question 648
Procurement gets involved in negotiating purchase requisitions only when there is a value analysis to ensure that only value-adding aspects are included. Is this statement true?
Answer : A
Procurement can negotiate various aspects of a purchase requisition even without a formal value analysis. While value analysis can enhance cost-effectiveness, procurement professionals often negotiate on pricing, terms, and conditions to add value independently of value analysis, as per CIPS's guidelines on procurement flexibility in negotiations.
Question 649
Maria is a professional services category buyer within the National Health Service. Due to severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
Question 650
Lina Rawlins, a senior buyer for a medical equipment company, is in charge of the company's largest supplier account. Recently, the supplier's performance has declined, leading to more rejected items. Lina has asked the supplier for an urgent meeting. In the meeting, she asks: ''Can you tell me exactly what you are doing to ensure quality?''
What type of question is Lina asking?
Answer : D
Lina's question seeksdetailed informationabout the supplier's actions and is aimed at uncovering the root cause or assurance measures. This makes it aprobing question, designed to delve deeper into specifics. Probing is a key technique in negotiations for uncovering critical insights, particularly duringissue resolution or when seeking complianceon performance terms.
Question 651
Mike is a junior buyer who has been working for a manufacturing organisation for two years, specializing in purchasing research. Over this time, he has built good relationships within his team and with other departments. Which of the following sources of power is Mike most likely to possess?
Answer : A
Referent power is based on personal relationships and the respect or admiration one earns within an organization. Given Mike's positive relationships and his rapport with team members and other departments, he is most likely to have referent power. This power type is influential in negotiation as people are more willing to work with someone they respect, as outlined in CIPS power dynamics in negotiation.
Question 652
A procurement expert has been asked to ensure they consider emotional intelligence in their negotiation strategy. They have agreed to this and have started planning their approach. Which of the following describes emotional intelligence?
Answer : C
Emotional intelligence involves the ability to recognize and manage one's emotions and empathize with others. This skill allows negotiators to respond appropriately to both their own feelings and the emotional cues of the other party, fostering a more constructive and adaptive negotiation environment. CIPS highlights emotional intelligence as a valuable asset in understanding and influencing negotiation dynamics.
Question 653
It may be more difficult to buy on a credit from supplier who locates in a country with a hyperinflation? Is this assumption true?
Answer : B
If the inflation rate is running high, then obtaining credit as a buyer is normally more difficult or expensive as money in the future will be worth less than money today.
Question 654
A buyer is leading a negotiation with a supplier for plumbing parts for a large construction project with a five-year term. The buyer knows copper pipe costs will reduce after year two, while plastic component costs are forecast to rise significantly. In the negotiation, the buyer should seek to...
Answer : C
Effective negotiation preparation requires buyers to align pricing mechanisms with cost forecasts and risk exposure. Since copper prices are forecast to fall, fixing them would disadvantage the buyer; a variable price allows the buyer to benefit from market reductions. Conversely, where plastic component costs are expected to rise, fixing prices protects the buyer from inflationary increases. CIPS highlights the importance of selectively applying fixed and variable pricing to manage risk intelligently rather than adopting a single approach across all components. This mixed strategy demonstrates strong commercial awareness and supports value-for-money outcomes over long-term contracts.
Question 655
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier takes steps to make their closing statements, they are most likely to be doing which of the following?
Answer : A
As a negotiation nears theclosure stage, experienced negotiators look forbuying signals--- both verbal (e.g., positive affirmations) and non-verbal (e.g., nodding, leaning in). These cues indicate readiness to agree and allow the negotiator to move confidently into closing the deal.
''At the closing stage, negotiators should observe both verbal and non-verbal buying signals. These cues can indicate readiness to commit, helping to time the final proposal or acceptance effectively.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Closing the Negotiation)
Question 656
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?
Answer : C
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.
CIPS study guide page 164-165
What Is a Coalition Anyway?
Question 657
John Browne, a junior buyer for a corporation, is analyzing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : C
Foreign exchange rates impact import costs, profit margins, and overall turnover when transactions are conducted in foreign currencies. Understanding these fluctuations allows buyersto anticipate changes in purchasing costs, supporting informed decision-making, as highlighted in CIPS guidance on global procurement considerations.
Question 658
Telephone is most likely to be used for which of the following negotiations?
Answer : C
Many commercial negotiations could be considered routine or just not worth the investment for buyers, and using the phone can make more sense and can be more immediate.
LO 2, AC 2.4
Question 659
The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : C
For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.
Question 660
Which of the following can be prepared before a negotiation with a supplier to achieve an agreement to benefit both parties?
Zone of potential agreement
Attendee list for the negotiation talks
Walk-away point
Venue for the negotiation talks
Answer : B
Zone of Potential Agreement (1) and Walk-away point (3) are key elements in negotiation planning. Establishing a Zone of Potential Agreement helps identify where interests align, whilethe Walk-away point sets the limit of acceptable terms. Both are essential to preparing a negotiation framework that benefits both parties, as per CIPS best practices.
Question 661
A procurement team has discussed, in advance of a negotiation, what they will do if there is no agreement with the current supplier. They have decided that they will perform the services themselves in-house on a trial basis if no deal is made. Which of the following describes what they have prepared here?
Answer : A
Question 662
The stages of commercial negotiation involve which of the following characteristics?
Answer : C
The typical stages of commercial negotiation are Preparing, opening, bargaining, agreement, and closure. This sequence facilitates a structured approach where negotiators prepare strategies, initiate discussions, engage in bargaining, reach agreements, and formally close the negotiation. This structure is emphasized in CIPS materials as essential for achieving a balanced negotiation process.
Question 663
What is a benefit to the buyer of having a BATNA (best alternative to a negotiated agreement) in a negotiation?
Answer : C
A BATNA provides the buyer with the confidence to walk away if terms are not favorable, ensuring they don't settle for a suboptimal agreement. Knowing the best alternative enables buyers to negotiate from a position of strength, as per CIPS's guidance on negotiation strategies.
Question 664
A procurement manager withholds important information to strengthen negotiating power. Is this appropriate when using an integrative negotiation style?
Answer : B
Integrative negotiation relies on openness and trust, aiming to identify underlying interests, not just positions. Withholding information is typical of distributive (win-lose) bargaining, where each side protects its bottom line. In an integrative context, hiding key details prevents mutual understanding, reduces creative option-building, and damages relationship trust. Instead, transparency enables value creation---such as joint cost reduction or innovation. CIPS emphasises that power must be balanced with openness when integrative outcomes are desired.
Question 665
In a negotiation for a new contract, the supplier suggests the buyer to shorten payment period from 45 days to 15 days because they are investing in new facilities to expand the supply capacity. The buyer replies that she can only sign off the deal if the payment period is 30 days ormore since it often takes at least 30 days for her company to collect the payment from customers. A permission from senior management is required for this suggestion. In order to ensure that supplier understands the matter, she reiterates it throughout the meeting. Which tactics is she using?
1. Outrageous initial demand
2. Salami slicing
3. Lack of authority
4. Broken record
Answer : C
In the scenario, the buyer states that permission from senior management is required to shorten payment period and she only has authority to sign off a deal in which the payment period lasts at least 30 days. The buyer is using lack of authority. The buyer also repeats the matter again throughout the negotiation. This is a common tactic known as broken record.
Question 666
Which of the following are tactics of distributive bargaining?
Withholding information that may open up common ground
Coercing the other party to accept your position
Finding common ground between parties
Being open about all your common needs
Answer : C
Distributive bargainingfocuses onmaximizing one's own gainat the expense of the other party. Common tactics includewithholding informationandcoercion. It is typically used in zero-sum negotiations where parties compete over a fixed value.
''Tactics in distributive bargaining include withholding key information, making extreme opening offers, and using pressure to achieve concessions. These are aimed at maximizing individual outcomes.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.5 - Tactics of Distributive Bargaining)
Question 667
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?
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
Question 668
XYZ Ltd decides to go to market for a cleaning contract to service a number of offices. It knows that it will get a price which may, or may not, be better than the one it is currently paying. To gain leverage in the marketplace, the organisation decides to add other related services to the scope, such as gardening, security and maintenance, which increase the value of the contract. This is an example of which forms of spend consolidation?
Answer : B
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
- Vendor base reduction: straightforward reduction of number of suppliers in any category
- Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
- Volume redistribution: making recommendations following spend analysis to move from one supplier to another
- Volume consolidation across categories: certain purchase requirements may be common across a number of categories. In the scenario, XYZ has combined different categories but closely related to office services into a larger contract so that they can increase their leverage.
- Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
- Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
LO 1, AC 1.3
Question 669
Which of the following are hardball tactics in negotiations? Select TWO that apply.
Answer : B, C
In difficult negotiations and disputes, hardball tactics like punishment and threats often seem like the only way to win concessions. Some negotiators seem to believe that hardball tactics are the key to success in any negotiation. They resort to extreme demands and even unethical behaviour to try to get the upper hand in a negotiation.
The following are 8 typical hardball tactics:
1. Good cop / Bad cop
2. Low ball / High ball
3. Bogey
4. The Nibble
5. Chicken
6. Intimidation
7. Aggressive Behaviour
8. Snow Job
You can read the details of each tactic here.
In the contrary to hardball tactics, negotiators can adopt integrative approach to the negotiation. Some of integrative tactics are:
1. Expand the Pie
2. Bridging
3. Post Settlement --Settlement
Et cetera
Question 670
When engaging in commercial negotiations, it is important to bear in mind that the suppliers need to make a reasonable profit to maintain continuity of supply. It is therefore necessary for the buyer to have a clear understanding of the break-even analysis concept which relates to cost, volume, and profit.
What is 'contribution' in relation to break-even analysis?
Answer : C
Inbreak-even analysis,contributionrefers to the amount from sales revenue that exceedsvariable costs, which then contributes to coveringfixed costsand ultimately generating profit. Understanding this concept enables buyers to better analyze supplier pricing and negotiate more effectively. For example, if a product is priced significantly above its variable cost, there may be room fordiscounts or added value, as the supplier is still contributing toward fixed costs.
Question 671
Which of the following are typical characteristics of activity-based costing (ABC) method? Select TWO that apply.
Answer : A, E
Activity-based costing is an alternative approach to traditional absorption costing. The characteristics of these two methods are illustrated in the graph below:
Question 672
Are tactical ploys only used in distributive approach?
Answer : D
There are many tactics and ploys that can be used to persuade others, particularly those not trained in negotiation. But in general these tactics should be used with care, as they can backfire; and in situations where a long-term relationship is desired, they can be, if detected, become an irritant to TOP.
Tactics are particularly effective if and when you are dealing with untrained negotiators, in consumer's buying situation and in once-off encounter.
Question 673
A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?
Answer : C
Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values. A smile, a 'yes' and the type of hospitality received, (in the business context), can mean very different things in different international business cultures.
Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide towhat TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.
Question 674
Which of the following is a source of information on microeconomic factors?
Answer : B
Question 675
If the value of the British Pound in other currencies is strong, which of the following is most likely to occur?
Answer : D
Currency exchange rates are determined by macroeconomic factors and demand and supply. In general, countries with stable political and economic systems, a growing economy and a strong rule of law will have stronger and more stable currency than those without these characteristics. In this question, the British Pound is stronger than other currency, which means that buyers who import goods from the UK have to pay higher in their own currencies.
LO 2, AC 2.2
Question 676
A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?
Answer : B
To answer this question, you should know The seller's perspective as in 'How to Negotiate Professionally':
In the scenario, the buyer's spend is low, while they seem unattractive to seller (as they tend to pay late). So the buyer is classified as Nuisance in seller's perspective.
Question 677
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 678
Which of the following is considered a strength of a 'logical' style negotiator?
Answer : B
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of logical style are described below:
Question 679
Which of the following is a source of power in organisational relationships?
Answer : A
Question 680
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Answer : C
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Question 681
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship style can be characterised by which of the following? Select the TWO that apply.
Answer : A, D
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question 682
The stages of commercial negotiation involve which of the following characteristics?
Answer : C
The typical stages of commercial negotiation are Preparing, opening, bargaining, agreement, and closure. This sequence facilitates a structured approach where negotiators prepare strategies, initiate discussions, engage in bargaining, reach agreements, and formally close the negotiation. This structure is emphasized in CIPS materials as essential for achieving a balanced negotiation process.
Question 683
A good negotiator invests time in understanding the needs of the individuals in a negotiation. Is this statement true?
Answer : D
Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing tounderstand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:
The organisation - What the organisation wants to achieve. This is generally well stated and understood
The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual
Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.
Question 684
A negotiation process ends once the negotiating meeting has finished. Is this statement true?
Answer : C
Question 685
To buying organisation, savings can be achieved from different saving levers or tactics. Which of the following are means that deliver savings through optimising specifications?
Answer : A, B
If driving greater value and efficiency from your supply base is your end, you should remember that there are many ways to do this without seeking to negotiate lower prices. Below are 7 types of saving levers:
Question 686
Economic growth can be measured by...?
Answer : B
Gross Domestic Product (GDP) is the monetary value of the goods and services manufactured or supplied in a financial period. In general terms, when the GDP rate falls or slows down, there will be a fall in demand for goods and services demanded in the economy, with a fall in firms' revenue and profit margins. When GDP is rising, there will be an increase in demand.
Consumer Price Index (CPI) is weighted measurement that evaluates the average cost of a basket of goods bought by a consumer.
Producer Price Index (PPI) is average changes in prices that a producer receives in return for its goods or services.
Small Business Lending Index (SBLI) is an indicator of small business lending trends.
Question 687
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 688
Which of the following is a variable cost?
Answer : D
Variable costs change in proportion to production volume, such as packaging, raw materials, and delivery. Fixed costs (rent, insurance, loan repayments) remain constant regardless of output. Recognising the difference is crucial when negotiating supplier pricing, as variable costs are often more open to tradeable adjustments (e.g., bulk discounts). Buyers who understand cost structures can challenge inflated fixed allocations or negotiate on genuine variable elements. This knowledge is vital in price breakdown discussions and in cost-modelling negotiations.
Question 689
Which of the following are tactics of distributive bargaining?
Withholding information that may open up common ground
Coercing the other party to accept your position
Finding common ground between parties
Being open about all your common needs
Answer : C
Distributive bargainingfocuses onmaximizing one's own gainat the expense of the other party. Common tactics includewithholding informationandcoercion. It is typically used in zero-sum negotiations where parties compete over a fixed value.
''Tactics in distributive bargaining include withholding key information, making extreme opening offers, and using pressure to achieve concessions. These are aimed at maximizing individual outcomes.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.5 - Tactics of Distributive Bargaining)
Question 690
An integrative negotiation style involves ...
Answer : C
Integrative negotiation focuses on collaboration, transparency, and the pursuit of shared benefits. It emphasizes mutual problem-solving and long-term value creation rather than short-term wins.
Question 691
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Question 692
Which of the following can be prepared before negotiation to achieve an agreement that benefits both parties?
Zone of potential agreement (ZOPA)
Attendee list
Walk-away point
Venue for the talks
Answer : B
The ZOPA defines the range of outcomes acceptable to both parties, while the walk-away point defines the minimum acceptable deal for the buyer. Together, these guide negotiation planning to avoid unfavourable agreements. Attendee lists and venues are logistical details, important but not central to negotiation value creation. Preparation of ZOPA and walk-away ensures structured, strategic decision-making and protects against poor deals.
Question 693
A buyer requests a 2,000 reduction in price at the end of negotiations. The supplier nods and smiles, shakes hands, and leaves. Should the buyer believe the reduced price is agreed?
Answer : C
CIPS stresses that clear verbal confirmation is required for agreements. Non-verbal signals (smiles, nods, handshakes) can indicate politeness or ambiguity but do not constitute binding agreement. Assuming agreement risks later disputes or misunderstandings. Skilled negotiators ensure closure by explicitly summarising agreed terms and documenting them. Non-verbal communication is supportive, not decisive, in contract negotiation contexts.
Question 694
A procurement expert has been asked to ensure they consider emotional intelligence in their negotiation strategy. They have agreed to this and have started planning their approach. Which of the following describes emotional intelligence?
Answer : C
Emotional intelligence involves the ability to recognize and manage one's emotions and empathize with others. This skill allows negotiators to respond appropriately to both their own feelings and the emotional cues of the other party, fostering a more constructive and adaptive negotiation environment. CIPS highlights emotional intelligence as a valuable asset in understanding and influencing negotiation dynamics.
Question 695
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
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Question 696
A wide range of factors may be taken into account by suppliers when setting or negotiating prices. Which of the following are external factors in pricing decisions? Select TWO that apply.
Answer : A, D
External factors in pricing decisions include Competition in the market (A) and Customer perception of value (D). These factors are outside the supplier's direct control but influence pricing strategies to remain competitive and meet customer expectations:
Competition in the market (A): Market competition dictates how much a supplier can charge without losing business to competitors.
Customer perception of value (D): How customers perceive the product's worth affects its acceptable price range.
These factors are considered external as they relate to market dynamics rather than internal cost structures, according to CIPS's guidance on pricing influences.
Question 697
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latestmeeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : A
Jayden's use ofeye contact to demonstrate understandingis a core element ofactive and effective listening. This technique includes not only listening to spoken words but also using non-verbal cues (e.g., nodding, eye contact) to confirm comprehension and engagement. Effective listening is essential to ensure that both parties feel heard and respected, which can de-escalate tension and improve outcomes.
''Effective listening involves verbal and non-verbal behaviours that show attentiveness. Maintaining eye contact, nodding, and reflecting key points show engagement and help in building rapport and trust.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Communication Techniques in Negotiation)
Question 698
Which of the following is an advantage of consultation as an influencing tactic?
Answer : B
Consultation involves actively involving stakeholders or counterparties in decision-making. By seeking input, it fosters a sense of ownership, increasing commitment to negotiated outcomes. It is particularly effective when the negotiator has low positional power, as it shifts dynamics from authority to collaboration. Unlike coercion or compliance tactics, consultation builds engagement and long-term trust, which is critical in complex procurement where buy-in is essential for contract success. CIPS stresses its role in building influence where direct authority is limited.
Question 699
Which of the following is most likely a consequence of falling interest rate?
Answer : A
If interest rate are too low and credit is too, cheap rates can fund a spending boom with consumers and businesses buying (investment) more than they can afford to pay back.
Question 700
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Tradeables---alternative offers or concessions---are typically introduced during thebargainingstage of the negotiation. This is when both parties discuss and exchange proposals to reach a mutually acceptable agreement.
Question 701
Collaborative approach in negotiation not only can fully satisfies the concerns of both, but also ensure that neither party will seek to be opportunistic in later time during the life of the contract. Is this statement true?
Answer : B
Integrative, interest-based negotiation can facilitate constructive, positive relationship and establish contracts between parties on a foundation of goodwill. It is important to note it can only facilitate these positive outcomes, it does not guarantee that the other party will not seek to be opportunistic at a later time during the life of the contract. Previous knowledge of the behaviours of the other party regarding honouring contractual and other commitments will be useful here in predicting long-term outcomes, not ensuring that they will not leverage their advantages.
Question 702
Absorption costing is when the total cost per each unit of output:
Answer : B
Question 703
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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 704
John Browne, a junior buyer for a corporation, is analysing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : A
Question 705
Which of the following are types of non-verbal communication that could be used during a negotiation meeting? Select THREE that apply.
Answer : C, E, F
Non-verbal communicationsignificantly affects the dynamics of negotiation.Hand gestures,eye contact, andfacial expressionscan reinforce spoken words or contradict them. These elements can influence perception, trust, and the tone of the negotiation.
''Non-verbal communication includes gestures, posture, eye contact, and facial expressions. These play a critical role in how messages are received and interpreted.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Verbal and Non-Verbal Communication Techniques)
Question 706
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Answer : C
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Question 707
There are no commitments in hypothetical questions. Is this statement true?
Answer : D
There are four types of questions that can be used in a commercial negotiation:
Hypothetical questions, where you ask about a possible situation or abstract concept, are very useful at the testing and proposal phases. Hypothetical question does not state any commitment as it is only about 'if something happens, then ...'. This type of question can be useful at giving suggestion.
LO 3, AC 3.3
Question 708
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way of analysing costs is to classify them into direct and indirect costs.
Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Direct costs are expenses that can be clearly attributed to the production of specific goods. These typically include raw materials, direct labor, and other costs tied directly to the manufacturing process. They are variable with production volume and help procurement teams analyze pricing more effectively during negotiations.
Question 709
Where there are high levels of commitment to relationships between both the buyer and supplier, this is seen as collaborative and beneficial to negotiations. Is this statement correct?
Answer : A
Question 710
Lina Rawlins, a senior buyer for a medical equipment company, is in charge of the company's largest supplier account. Recently, the supplier's performance has declined, leading to more rejected items. Lina has asked the supplier for an urgent meeting. In the meeting, she asks: ''Can you tell me exactly what you are doing to ensure quality?''
What type of question is Lina asking?
Answer : D
Lina's question seeksdetailed informationabout the supplier's actions and is aimed at uncovering the root cause or assurance measures. This makes it aprobing question, designed to delve deeper into specifics. Probing is a key technique in negotiations for uncovering critical insights, particularly duringissue resolution or when seeking complianceon performance terms.
Question 711
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Consolidate the expenditure from across the organisation to increase the size and value of the requirement
Understand the supplier's costs and margins prior to the negotiation to demonstrate that you know what it costs to produce the product
Take a distributive approach to the negotiation and refuse to make concessions
Limit communication and information sharing with the supplier so as not to give anything away
Answer : A
When buyer power is low, leverage must be created rather than assumed. Consolidating organisational spend increases volume and commercial importance to the supplier, directly strengthening buyer power. Understanding supplier costs and margins reduces information asymmetry and demonstrates commercial competence, which improves credibility and influence during negotiations. Refusing concessions and limiting communication are typical of adversarial tactics and often weaken relationships when power is already limited. CIPS clearly advises buyers to use aggregation of demand and market intelligence as ethical and effective methods to rebalance power without damaging long-term supplier relationships.
Question 712
In what circumstances is the bargaining power of suppliers likely to be high, in relation to buyer power? Select THREE that apply.
Answer : A, D, E
Supplier bargaining power is stronger when there arefew suppliers,low volume requirementsfrom buyers, and when suppliers possessunique capabilities or technology(like specialized machinery). These conditions reduce buyer leverage and increase supplier influence.
Question 713
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 714
Which of the following can be prepared before a negotiation with a supplier to achieve an agreement to benefit both parties?
Zone of potential agreement
Attendee list for the negotiation talks
Walk-away point
Venue for the negotiation talks
Answer : B
Zone of Potential Agreement (1) and Walk-away point (3) are key elements in negotiation planning. Establishing a Zone of Potential Agreement helps identify where interests align, whilethe Walk-away point sets the limit of acceptable terms. Both are essential to preparing a negotiation framework that benefits both parties, as per CIPS best practices.
Question 715
Which of the following statements about oligopoly is incorrect?
Answer : D
An oligopoly exists when there are small number of producers that exert a significant influence in the market. Oligopoly's main characteristics are discussed as follows:
- Interdependence
The most important feature of oligopoly is the interdependence in decision-making of the few firms which comprise the industry. This is because when the number of competitors is few, any change in price, output, product etc. by a firm will have a direct effect on the fortune of its rivals, which will then retaliate in changing their own prices, output or products as the case may be.
- Importance of advertising and selling costs
A direct effect of interdependence of oligopolists is that the various firms have to employ various aggressive and defensive marketing weapons to gain a greater share in the market or to prevent a fall in their market share. For this various firms have to incur a good deal of costs on advertising and on other measures of sales promotion. Therefore, there is a great importance of advertising and selling costs under conditions of market situation characterised by oligopoly
- Group behaviour
Another important feature of oligopoly is that for the proper solution to the problem of determination of price and output under, it analysis of group behaviour is impor-tant.
- Indeterminateness of demand curve facing an oligopolist
In this question, 'Prices in oligopoly are predicted to fluctuate widely and frequently' is an incorrect statement as producers in oligopoly often try to set up price. Prices fluctuate more frequently in perfect competition.
LO 2, AC 2.2
Question 716
Which of the following situations would increase a buyer's bargaining power?
Answer : A
When a buyer's purchase represents asignificant portion of a supplier's revenue, it increases the buyer's leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.
''Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer's ability to influence terms.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)
Question 717
Which of the following are features of a single-sourced type of relationship on the relationship spectrum?
Exclusivity granted in relation to a particular product
The supplier is an oligopoly market structure
The supplier is trusted and collaborative
Framework contracts are used to identify the supplier
Answer : B
Single-sourced relationships often involve exclusivity for a specific product (1) and a high level of trust and collaboration (3) between buyer and supplier. This type of relationship is selected forstrategic procurement purposes, often involving long-term partnerships, which align with CIPS's relationship spectrum guidelines.
Question 718
Which of the following can help both parties to break the vicious cycle of blame when a relationship needs repairing? Select TWO that apply.
Answer : A, C
In order to break vicious cycle of blame, procurement will need to use their negotiation and conflict management skills, adopting a collaborative and integrative approach. Your first action should be to establish the facts that led to the situation where the relationship broke down. Most day-to-day relationship between buying organisations and suppliers do not of course involve procurement staff, so you will need to consult with your business partners internally to establish their point of view of where the issue and sources of conflict are. You should also contact the supplier and get their side of the story - this is particularly to when you have previously identified the supplier as critical or otherwise important to your operations. Ideally you will be able to apply principled negotiation here, separating the people from the issue, focusing on interests and not positions, and then looking for options of mutual benefits.
Question 719
According to Fiona Dent and Mike Brent, which of the following are characteristics of Push approach? Select TWO that apply.
Answer : B, E
According to the book 'Influencing: Skills and techniques for business success' by Fiona Dent and Mike Brent, there are two major influencing styles. Push tends to be directive. It tells, and is clear and resolute, but needs to be employed in situations where firmness is required because of difficulties that exist or weakness is evident. Pull is more participatory and collaborative. It seeks to incorporate everyone's perspective. It can appear wishy-washy if not skilfully employed. Thatapproach should be followed which is most likely to secure commitment and not mere compliance.
The two divisions can be further divided into four style categories: directive; persuasive reasoning; collaborative -- team oriented, people oriented to inspire them with a vision. The directive style relies on your expertise and reputation being respected by others, and where there really does seem to be one answer. It is 'I' driven whereas persuasive reasoning is more 'we' and issue driven. Directive styles can make the user appear as 'a bull in a china shop'; persuasive reasoning can be portrayed as tough guy.
Collaborative influencing takes the 'we' element further and seeks to mobilise everyone's ideas in a journey of discovery. It may have the flavour of 'I'm your best friend', which may not go down too well. Visioning style is concerned to stir people's emotions in support of achieving an objective. This last one has been used by demagogues to stir people's hearts and minds for evil purposes as well as good.
A useful table offers the benefits, problems, words and body language associated with each style along with advice on when to use and when to avoid each. Cases and exercises illustrate these styles.
Empathy comes in for extended treatment with the definition of 'standing in the other's shoes'. This does not necessarily happen just intuitively, and therefore before a specific influencing effort there should be an intense effort to think about the other person or persons and to sense what it might feel like to be them -- their hopes, fears, concerns, what turns them on, what turns them off, where are they coming from.
Influencing by Fiona Elsa Dent and Mike Brent, 2006 (bd-cons.com)
CIPS study guide page 163-165
Question 720
Which of the following are microeconomic factors? Select THREE that apply.
Answer : B, D, F
Microeconomic factors refer to elements that affect individual businesses or sectors rather than the economy as a whole. In this case:
Availability of investors (B): Access to investors impacts capital availability for businesses.
Distribution channels (D): Distribution methods directly influence a business's ability to get products to market.
Levels of competition (F): Competition affects pricing and strategic decisions within specific industries.
Taxation rates, unemployment levels, and inflation rates are considered macroeconomic factors, affecting the economy on a broader scale, as per CIPS's definitions of microeconomic vs. macroeconomic influences.
Question 721
Where can we find the data on macroeconomics?
1. From trade journal
2. From supplier's marketing catalogue
3. From stock exchange market
4. From government's statistics
Answer : B
Macroeconomic indicators are statistics or data readings that reflect the economic circumstances of a particular country, region or sector. They are used by analysts and governments to assess the current and future health of the economy and financial markets.
Macroeconomic indicators will vary in their meaning and the impact that they have on the economy, but broadly speaking there are two main types of indicator.
- Leading indicators, which forecast where an economy might be heading. They are often used by governments to implement policies because they represent the first phase of a new economic cycle. These include the yield curve, interest rates and share prices.
- Lagging indicators, which reflect an economy's historical performance and only change after a trend has been established. They are used to confirm a trend is underway. These include gross domestic product (GDP), inflation and employment figures.
There is also the category of coincident indicators, but these are generally grouped in with lagging indicators as they either happen at the same time or after an economic shift.
The best macroeconomic indicator to watch will heavily depend on your personal preferences, what positions you are taking and which country your portfolio is focused on. However, there are some very common indicators that most traders and investors will keep an eye on.
For simplicity's sake, we have split these out into leading and lagging indicators.
Top leading indicators:
1. The stock market
2. House prices
3. Bond yields
4. Production and manufacturing statistics
5. Retail sales
6. Interest rates
Top lagging indicators:
1. GDP growth rates
2. The Consumer Price Index (CPI) and inflation
3. Currency strength and stability
4. Labour market statistics
5. Commodity prices
A procurement professional may find stock market data from the security exchange, while most lagging indicators (such as GDP, CPI, unemployment rate, currency and inflation rate, etc) can be found from government statistics data.
- CIPS study guide page 117-118
- What Are the Key Macroeconomic Indicators?| IG EN
LO 2, AC 2.2
Question 722
Which of the following is NOT a barrier to entry in a monopolized market?
Answer : B
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 723
How can having a best alternative to a negotiated agreement (BATNA) support the buyer in a negotiation? Select THREE options that apply.
Answer : A, B, F
Having a BATNA:
Increases assertiveness (A): Knowing the fallback position empowers the buyer to negotiate more confidently.
Reduces the chance of a poor agreement (B): A BATNA ensures the buyer does not feel pressured to accept suboptimal terms.
Identifies walk-away points (F): It sets a clear boundary, allowing the buyer to exit negotiations if terms don't meet minimum requirements.
These align with CIPS's guidance on using BATNA to strengthen negotiation strategies.
Question 724
''A negotiation ends once the meeting finishes.'' Is this statement true?
Answer : D
Negotiations do not end at the meeting; they continue through reflection, documentation, and post-negotiation review. Best practice involves assessing whether objectives were met, capturing lessons learned, and ensuring written confirmation of terms. Without this, misunderstandings or missed improvements can occur. Reflection allows organisations to continuously strengthen negotiation strategies and build learning cycles.
Question 725
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction.
What is the mark-up profit percentage earned by the supplier on this transaction?
Answer : D
Mark-upis calculated as:
Mark-up%=(ProfitCost)100\text{Mark-up \%} = \left( \frac{\text{Profit}}{\text{Cost}} \right) \times 100Mark-up%=(CostProfit)100
In this case:
Profit = $240 - $160 = $80
Cost = $160
Mark-up = (80 / 160) 100 =50%
''Understanding mark-up percentages helps in assessing supplier pricing behaviour and negotiating realistic margins.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Pricing Models and Profit Margins)
Question 726
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
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.
Question 727
Which of the following are most likely to turn buying organisation into an unattractive customer in supplier's perspective? Select TWO that apply.
Answer : A, D
Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation. Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:
Simple procurement processes: Using SRM technology may help to simplify the process
Simple contracting processes
Clear and concise documentation: Reduced paperwork helps both supplier and buyer save their time and resources.
Absence of onerous supplier terms and conditions
On-time payment
Transparent processes: Unclear tender award criteria can be seen as opaque. Suppliers who attended the tendering processes cannot know the reasons why their bids are rejected and hesitate to attend other tendering.
Ethical behaviour: Suppliers may prefer a buyer who adopts CSR policy because they can predict potential customer's behaviour. Demands for kickback are unethical behaviours.
Question 728
Where a negotiator uses numerical reasoning with facts as part of their negotiation approach, which of the following techniques will they be adopting?
Answer : B
Using logic involves applying numerical data and factual evidence to support arguments in a negotiation. Logical reasoning appeals to objective analysis rather than emotional or coercive tactics and is effective in convincing the other party through structured, fact-based arguments, aligning with CIPS's guidance on logical negotiation techniques.
Question 729
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 730
Which of the following types of questions are likely to be the most effective to check facts in negotiations?
Answer : D
Closed questions are useful for verifying facts, as they prompt specific, concise responses. These questions allow the negotiator to confirm details without ambiguity, which is crucial for clarity in negotiation settings, as highlighted in CIPS's guidelines on questioning techniques.
Question 731
Which of the following are recognised techniques in contract negotiation? Select THREE that apply.
Answer : A, C, F
The question asks about negotiation techniques which are not present in the book. In this question, there are only 3 recognised techniques:
- Framing and reframing: A frame is an assumption, or set of assumptions, that guides our attention and behavior. Reframing is the ability to identify and significantly change assumptions or perspectives. Framing has a significant impact on the effectiveness of negotiation outcomes and negotiator working relationships. You can read more on framing and reframing here.
- Anchoring: Anchoring bias is well-known cognitive bias in negotiation and in other contexts. The anchoring bias describes the common tendency to give too much weight to the first number put forth in a discussion and then inadequately adjust from that starting point, or the ''anchor.'' We even fixate on anchors when we know they are irrelevant to the discussion at hand. You can read more on anchoring here.
- Pacing and leading: Pacing and leading is a two-step lever of persuasion. First -- You ''match your pace'' to the person you want to influence in as many ways as possible. You can do this by mimicking the way the person talks, stands, their appearance, etc. You can also mimic less tangible aspects like the way they act, or their emotional state. Second -- Once you've set your pace with someone, lead them to whatever decision or behavior you want them to take! You can read more on pacing and leading here.
LO 3, AC 3.2
Question 732
Which of the following is the purpose of using stakeholder support level scale?
Answer : C
In order to estimate the gap and the progress towards desired level of support, a stakeholder support scale can be used by the procurement internally. The support level scale measures stakeholder commitment. Current support level for the procurement/negotiation objectives should be gained from engagement with key stakeholders. The following is an example of stakeholder support level scale:
LO 1, AC 1.1
Question 733
A good negotiator invests time in understanding the needs of the individuals in a negotiation. Is this statement true?
Answer : D
Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing tounderstand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:
The organisation - What the organisation wants to achieve. This is generally well stated and understood
The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual
Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.
Question 734
A procurement professional is preparing for a negotiation with supplier. She is setting targets for price which her company is seeking to achieve. Which of the following acronyms can help her identify limits before engaging in the negotiation?
Answer : A
MIL criteria indicate 3 limits that negotiator should establish:
M - Must achieve: minimum target/maximum you can concede on this point; the mandatory requirement or fall back position
I - Intend to achieve: realistic target you are aiming for on this point
L -- Like to achieve: stretch target to achieve on this point.
PPCA is purchase cost analysis
TIMWOOD indicates 7 types of waste in Lean principles
The RAQSCI model is a mnemonic summary of a business model used to define and structure business requirements
Question 735
When planning a negotiation for sourcing internationally, which of the following divergent positions, and therefore potential conflict areas, should be prepared for? Select TWO that apply:
Answer : A, C, D
Question 736
Which of the following is the definition of safety margin?
Answer : A
As a financial metric, the margin of safety (safety margin) is equal to the difference between current or forecasted sales and sales at the break-even point. The margin of safety is sometimes reported as a ratio, in which the aforementioned formula is divided by current or forecasted sales to yield a percentage value. The figure is used in both break-even analysis and forecasting to inform a firm's management of the existing cushion in actual sales or budgeted sales before the firm would incur a loss.
This is a question that a student met in her actual exam. The margin of safety is not even mentioned in the CIPS study guide.
Question 737
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 738
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 739
Which of the following are microeconomic factors? Select THREE that apply.
Answer : B, D, F
Microeconomic factors refer to elements that affect individual businesses or sectors rather than the economy as a whole. In this case:
Availability of investors (B): Access to investors impacts capital availability for businesses.
Distribution channels (D): Distribution methods directly influence a business's ability to get products to market.
Levels of competition (F): Competition affects pricing and strategic decisions within specific industries.
Taxation rates, unemployment levels, and inflation rates are considered macroeconomic factors, affecting the economy on a broader scale, as per CIPS's definitions of microeconomic vs. macroeconomic influences.
Question 740
Which type of negotiation strategy should be adopted when the relationship is important and both parties want to help each other achieve their goals?
Answer : A
The collaborative strategy (win-win, integrative) focuses on joint problem-solving, transparency, and trust. It is best when long-term relationships are critical, and both parties see value in mutual success. By contrast, competitive (win-lose) is adversarial, accommodative sacrifices one party's interests, and avoidance seeks disengagement. Collaborative strategies are common in partnerships, innovation projects, and sustainable procurement. They require sharing information, identifying tradeables, and aligning objectives beyond price to long-term outcomes.
Question 741
Which best describes features of the recovery phase in a business cycle? Select TWO.
Answer : B, D
In the recovery phase, economies move out of recession: consumer spending rises, demand grows, and prices begin to stabilise or increase. Confidence improves, investment starts picking up, and spare capacity is gradually absorbed. Low confidence and falling investment are features of recession, while full capacity is linked to boom phases. For negotiators, recovery phases may mean suppliers regain confidence to raise prices, requiring careful market analysis.
Question 742
Which of the following is an advantage of a fixed-price agreement?
Answer : C
Fixed-price agreements give buyers financial certainty, reducing exposure to supplier inefficiencies, cost increases, or inflation. The supplier bears the risk of cost overruns. While it doesn't automatically improve quality or payment terms, it allows buyers to forecast budgets and manage risk effectively. This makes fixed-price contracts especially useful for projects with defined scopes, where costs are predictable. In contrast, cost-plus contracts keep the risk with the buyer and require constant monitoring of supplier costs, making them less attractive in terms of risk management.
Question 743
Which of the following is an example of non-verbal communication?
Answer : C
Question 744
Where can we find the data on macroeconomics?
1. From trade journal
2. From supplier's marketing catalogue
3. From stock exchange market
4. From government's statistics
Answer : B
Macroeconomic indicators are statistics or data readings that reflect the economic circumstances of a particular country, region or sector. They are used by analysts and governments to assess the current and future health of the economy and financial markets.
Macroeconomic indicators will vary in their meaning and the impact that they have on the economy, but broadly speaking there are two main types of indicator.
- Leading indicators, which forecast where an economy might be heading. They are often used by governments to implement policies because they represent the first phase of a new economic cycle. These include the yield curve, interest rates and share prices.
- Lagging indicators, which reflect an economy's historical performance and only change after a trend has been established. They are used to confirm a trend is underway. These include gross domestic product (GDP), inflation and employment figures.
There is also the category of coincident indicators, but these are generally grouped in with lagging indicators as they either happen at the same time or after an economic shift.
The best macroeconomic indicator to watch will heavily depend on your personal preferences, what positions you are taking and which country your portfolio is focused on. However, there are some very common indicators that most traders and investors will keep an eye on.
For simplicity's sake, we have split these out into leading and lagging indicators.
Top leading indicators:
1. The stock market
2. House prices
3. Bond yields
4. Production and manufacturing statistics
5. Retail sales
6. Interest rates
Top lagging indicators:
1. GDP growth rates
2. The Consumer Price Index (CPI) and inflation
3. Currency strength and stability
4. Labour market statistics
5. Commodity prices
A procurement professional may find stock market data from the security exchange, while most lagging indicators (such as GDP, CPI, unemployment rate, currency and inflation rate, etc) can be found from government statistics data.
- CIPS study guide page 117-118
- What Are the Key Macroeconomic Indicators?| IG EN
LO 2, AC 2.2
Question 745
An organization should develop different relationships which are appropriate to each supplier situation. Which ONE of the following analysis methods could help to identify these?
Answer : B
The relationship spectrum categorizes supplier relationships based on factors like strategic importance, allowing organizations to tailor their approach to each supplier relationship. CIPS emphasizes the relationship spectrum as a valuable tool for assessing and managing supplier interactions based on strategic relevance.
Question 746
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way of analysing costs is to classify them into direct and indirect costs.
Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Direct costs are expenses that can be clearly attributed to the production of specific goods. These typically include raw materials, direct labor, and other costs tied directly to the manufacturing process. They are variable with production volume and help procurement teams analyze pricing more effectively during negotiations.
Question 747
An integrative negotiation style involves ...
Answer : C
Integrative negotiation focuses on collaboration, transparency, and the pursuit of shared benefits. It emphasizes mutual problem-solving and long-term value creation rather than short-term wins.
Question 748
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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:
Text Description automatically generated with low confidence
Question 749
When is an adversarial style of negotiation appropriate?
Answer : A
An adversarial negotiation style is appropriate when one party has high bargaining power and is focused on maximizing its benefit rather than maintaining a long-term relationship. This approach often involves competitive tactics that leverage power disparities, aligning with CIPS guidance on when adversarial tactics may be strategically used in negotiations.
Question 750
Freefields Housing Authority (FHA) is a housing provider that has outsourced a range of management services using fixed-price long-term contracts. FHA's regular supplier credit reviews have identified that some key outsourced service suppliers are at risk of insolvency due to high inflation rates observed in the macroeconomic climate. Which of the following actions would enable FHA to reduce this risk for the lifetime of the affected contracts?
Answer : B
Question 751
In a negotiation for a new contract, the supplier suggests the buyer to shorten payment period from 45 days to 15 days because they are investing in new facilities to expand the supply capacity. The buyer replies that she can only sign off the deal if the payment period is 30 days ormore since it often takes at least 30 days for her company to collect the payment from customers. A permission from senior management is required for this suggestion. In order to ensure that supplier understands the matter, she reiterates it throughout the meeting. Which tactics is she using?
1. Outrageous initial demand
2. Salami slicing
3. Lack of authority
4. Broken record
Answer : C
In the scenario, the buyer states that permission from senior management is required to shorten payment period and she only has authority to sign off a deal in which the payment period lasts at least 30 days. The buyer is using lack of authority. The buyer also repeats the matter again throughout the negotiation. This is a common tactic known as broken record.
Question 752
Neville is a senior procurement specialist in a automaker. He has good relationship with his team mates and other departments because of his amazing purchasing skills and kindness. Which of the following sources of power is Neville likely to possess?
Answer : B
In 1959, French and Raven described five bases of power:
1. Legitimate -- This comes from the belief that a person has the formal right to make demands, and to expect others to be compliant and obedient.
2. Reward -- This results from one person's ability to compensate another for compliance.
3. Expert -- This is based on a person's high levels of skill and knowledge.
4. Referent -- This is the result of a person's perceived attractiveness, worthiness and right to others' respect.
5. Coercive -- This comes from the belief that a person can punish others for noncompliance.
Six years later, Raven added an extra power base:
6. Informational -- This results from a person's ability to control the information that others need to accomplish something.
In the scenario, Neville attracts and keeps good relationship with his colleagues not because of neither position nor reward nor coercion. He has good skills and kindness, which increase his charisma. His source of power is referent power.
CIPS study guide page 47-50
French and Raven's Five Forms of Power
Question 753
Commercial negotiation ends at the award of a contract. Is this statement true?
Answer : C
Negotiation doesn't end after the contract is awarded. The needs for negotiation can arise in any post-award stages. For example, at supplier development and relationship management stage,improvement in supplier capability, capacity, and product/service range can be negotiated. Negotiations with long-term strategic critical suppliers should be carried out in a partnering style, with a win-win starting point assumed.
In some sectors such as transport, utilities and infrastructure, tenderers may 'bid low' or even make a loss to win major contracts with a view to negotiating lucrative changes, variations and 'add-ons' over the life of the contract when the supplier is bedded in and the buyer is in the weaker position to push back or challenge. Even in less complex contract, it is very likely that there will be a need to negotiate with that supplier again after the awarding of the contract.
LO 1, AC 1.1
Question 754
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as:
Answer : C
Question 755
Which of the following is considered a strength of a 'logical' style negotiator?
Answer : B
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of logical style are described below:
Question 756
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : A
Question 757
What letter R in the acronym SMART stands for?
Answer : C
SMART is an acronym that you can use to guide your goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound
A student met this question in the L4M5 exam. SMART is mentioned primarily in L4M3 Commercial Contracting.
LO: Unknown, AC: Unknown
Question 758
During a negotiation, Jos Gmez (salesperson for a strategic supplier) says his sales director will not approve discounts on initial purchases. However, he offers a 5% discount on the aftercare package, which gives the same monetary saving. Sally Pampas needs both the product and the aftercare package and aims for a 5% discount off the purchase price. To achieve a win-win (integrative) outcome, Sally should:
Answer : B
Integrative (win-win) negotiation looks for value-equivalent tradeables across the bargaining mix (price, service, warranty, aftercare, etc.). If the same total saving is achieved via aftercare---and the buyer needs it---accepting the tradeable meets objectives without forcing a distributive fight on unit price.
===========
Question 759
Lina Rawlins, a senior buyer, asks a supplier: ''Can you tell me exactly what you are doing to ensure quality?'' What type of question is this?
Answer : C
A probing question seeks deeper information, clarifying specifics beyond surface-level responses. Lina's question is factual, detailed, and investigative --- designed to uncover processes and commitments. Hypothetical questions test options (''what if...''), reflective restate or summarise to confirm understanding, and leading steer the respondent toward a desired answer. Probing is essential in negotiations to validate claims, identify risks, and build persuasive arguments.
Question 760
Why is rapport building with the supplier important during the opening phase of a negotiation?
Answer : B
Building rapport sets apositive tonefor the negotiation and encourages openness. It is particularly vital during theopening phase, where first impressions are formed, and trust begins to build. Trust facilitates moreconstructive dialogue, enhances collaboration, and helps parties exploremutual interests.
''Developing rapport at the start of negotiations helps to foster trust and cooperation. This enhances the likelihood of reaching agreements that are mutually beneficial.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.4 - The Opening Phase and Relationship Building)
Question 761
Which of the following is an advantage of consultation as an influencing tactic?
Answer : B
Consultation involves actively involving stakeholders or counterparties in decision-making. By seeking input, it fosters a sense of ownership, increasing commitment to negotiated outcomes. It is particularly effective when the negotiator has low positional power, as it shifts dynamics from authority to collaboration. Unlike coercion or compliance tactics, consultation builds engagement and long-term trust, which is critical in complex procurement where buy-in is essential for contract success. CIPS stresses its role in building influence where direct authority is limited.
Question 762
During which stage in the negotiation process would negotiators use tactics and exchange concessions?
Answer : A
Thebargaining stageis where both parties begin tomake concessionsand test options. This phase involves the use of strategic tactics, including the presentation of tradeables and adjustments in position to reach mutual agreement.
''The bargaining stage is characterised by movement, trade-offs, and deal-shaping. Tactics such as anchoring, making concessions, and introducing tradeables are employed to bridge the gap between opening offers.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Stages of the Negotiation Process)
Question 763
Mike is a junior buyer who has been working for a manufacturing organisation for two years, specializing in purchasing research. Over this time, he has built good relationships within his team and with other departments. Which of the following sources of power is Mike most likely to possess?
Answer : A
Referent power is based on personal relationships and the respect or admiration one earns within an organization. Given Mike's positive relationships and his rapport with team members and other departments, he is most likely to have referent power. This power type is influential in negotiation as people are more willing to work with someone they respect, as outlined in CIPS power dynamics in negotiation.
Question 764
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 765
A good negotiator invests time in understanding the needs of the individuals in a negotiation. Is this statement true?
Answer : D
Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing tounderstand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:
The organisation - What the organisation wants to achieve. This is generally well stated and understood
The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual
Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.
Question 766
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction. What is the mark-up profit percentage earned by the supplier on this transaction?
Answer : C
The mark-up percentage is calculated as the profit divided by the cost of production, then multiplied by 100 to convert it into a percentage.
Calculation:
(
80
/
160
)
100
=
50
%
(80/160)100=50%
Thus, the supplier's mark-up percentage is 50%, as per standard pricing calculations used in procurement.
Question 767
Maria, an NHS buyer, needs cost savings due to budget cuts. She plans to achieve savings with a collaborative supplier. Which negotiation approach should she use?
Answer : D
With a collaborative supplier, the appropriate approach is Win--Win (integrative). Both sides aim to create savings while maintaining partnership value. Win--Lose would damage collaboration, while Lose--Lose sacrifices value on both sides. Win--Perceived Win is based on optics rather than actual balance. By adopting a win--win approach, Maria ensures sustainable cost reductions while protecting critical NHS supplier relationships.
Question 768
As a buyer for a large stationery company you have been notified of an upcoming price increase from your provider for paper. When you check the contract you realise that it expired 30 days ago so you are no longer in contract. You realise the supplier can now charge what they like.
You call the supplier and attempt to negotiate over the phone but are unsuccessful. What would be the best thing to do?
Answer : D
Once the contract has expired, the buyer no longer has contractual protection on pricing, which significantly weakens their position. However, this situation also creates an opportunity to re-establish leverage by offering future value. By proposing a new or extended contract, the buyer introduces certainty, continuity of business, and potential volume commitment for the supplier, which can be traded in return for moderated pricing. Accepting the increase without challenge offers no commercial control, while threats or immediate cancellation risk damaging the relationship and supply continuity. CIPS guidance emphasises using future commitment as a bargaining lever, especially when informal negotiations fail and contractual leverage no longer exists.
Question 769
Which of the following is the first step in the development of negotiation strategies?
Answer : D
Developing specific negotiation strategies in areas where risk or spend is high involves analysing a wide range of objectives and variables within the context of the organisation's business requirements. The first stage in any negotiation preparation is to define your overall objectives which may be related to a single variable such as price in the case of a standardised requirement, or many variables in the case of capital equipment. Your negotiating strategies and tactics will all be focused on achieving overall objectives.
Question 770
Where can we find the data on macroeconomics?
1. From trade journal
2. From supplier's marketing catalogue
3. From stock exchange market
4. From government's statistics
Answer : B
Macroeconomic indicators are statistics or data readings that reflect the economic circumstances of a particular country, region or sector. They are used by analysts and governments to assess the current and future health of the economy and financial markets.
Macroeconomic indicators will vary in their meaning and the impact that they have on the economy, but broadly speaking there are two main types of indicator.
- Leading indicators, which forecast where an economy might be heading. They are often used by governments to implement policies because they represent the first phase of a new economic cycle. These include the yield curve, interest rates and share prices.
- Lagging indicators, which reflect an economy's historical performance and only change after a trend has been established. They are used to confirm a trend is underway. These include gross domestic product (GDP), inflation and employment figures.
There is also the category of coincident indicators, but these are generally grouped in with lagging indicators as they either happen at the same time or after an economic shift.
The best macroeconomic indicator to watch will heavily depend on your personal preferences, what positions you are taking and which country your portfolio is focused on. However, there are some very common indicators that most traders and investors will keep an eye on.
For simplicity's sake, we have split these out into leading and lagging indicators.
Top leading indicators:
1. The stock market
2. House prices
3. Bond yields
4. Production and manufacturing statistics
5. Retail sales
6. Interest rates
Top lagging indicators:
1. GDP growth rates
2. The Consumer Price Index (CPI) and inflation
3. Currency strength and stability
4. Labour market statistics
5. Commodity prices
A procurement professional may find stock market data from the security exchange, while most lagging indicators (such as GDP, CPI, unemployment rate, currency and inflation rate, etc) can be found from government statistics data.
- CIPS study guide page 117-118
- What Are the Key Macroeconomic Indicators?| IG EN
LO 2, AC 2.2
Question 771
A garden furniture supplier currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating in the supplier's environment (their site) can unintentionally shift the power dynamic. The supplier may gain apsychological edgedue to the comfort and control of their surroundings. Best practice recommends holding negotiations in aneutral settingto ensure balance and reduce any influence based on physical context. While site visits are beneficial for supplier evaluation, they should beseparate from the negotiationto maintain objectivity.
Question 772
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 773
Absorption costing is when the total cost per each unit of output:
Answer : B
Question 774
To buying organisation, savings can be achieved from different saving levers or tactics. Which of the following are means that deliver savings through optimising specifications?
Answer : A, B
If driving greater value and efficiency from your supply base is your end, you should remember that there are many ways to do this without seeking to negotiate lower prices. Below are 7 types of saving levers:
Question 775
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 776
The only procurement risk inherent in a distributive negotiation approach is the potential loss in the outcome. Is this statement TRUE?
Answer : D
Distributive negotiation carries several risks beyond justlosing out on value. These includedamaging supplier relationships,eroding trust, andreaching an impasse, where neither party can agree. This could result in delayed projects, increased costs, or supplier withdrawal.
''Distributive negotiation can lead to a breakdown in communication, impasses, and long-term relationship damage. The win-lose mindset can prevent collaborative problem-solving.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.5 - Risks of Distributive Approaches)
Question 777
An adversarial style of negotiation is appropriate when the buyer has greater bargaining power. In what other situation may the buyer adopt this style?
Answer : A
Adversarial (win--lose) negotiation is viable when buyers can leverage abundant alternatives and substitutes, reducing supplier power. In such cases, buyers can adopt tough tactics, knowing they can switch suppliers if necessary. By contrast, limited supply, single sourcing, or monopolist suppliers constrain buyer power, making adversarial strategies risky and often ineffective. CIPS stresses that negotiation style must be matched to market conditions and the power balance.
Question 778
Maria is a professional services category buyer within the National Health Service. Due to severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
Question 779
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction.
What is the mark-up profit percentage earned by the supplier on this transaction?
Answer : D
Mark-upis calculated as:
Mark-up%=(ProfitCost)100\text{Mark-up \%} = \left( \frac{\text{Profit}}{\text{Cost}} \right) \times 100Mark-up%=(CostProfit)100
In this case:
Profit = $240 - $160 = $80
Cost = $160
Mark-up = (80 / 160) 100 =50%
''Understanding mark-up percentages helps in assessing supplier pricing behaviour and negotiating realistic margins.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Pricing Models and Profit Margins)
Question 780
Which of the following are variable costs?
Answer : D
Packaging is considered a variable cost because it fluctuates with the level of production or sales activity. Variable costs change directly in relation to the volume of output or service. In contrast:
Rent (A), Loan repayments (B), and Insurance (C) are fixed costs, as they generally do not vary with production levels within a certain range. These are recurring costs that remain constant over time, aligning with CIPS's cost classification in procurement.
Question 781
A competitive win-lose distributive approach to a negotiation is seeking to:
Answer : B
Question 782
Citywide Developments Ltd (CDL) is a construction programme management company that delivers high-value property development schemes. CDL uses named consultant design services in contracts. Recently, consultancy day rates have increased. Which of the following tradeable concessions could CDL offer when negotiating with suppliers to achieve lower rates, without lowering service quality?
Answer : D
By removing the requirement for named personnel, CDL could allow the supplier flexibility in allocating equally competent but possibly less expensive staff. This tradeable does not compromise on quality but helps control costs.
Question 783
A procurement professional is dissatisfied with how a recent negotiation was concluded. What could they do to improve their negotiation approach?
Seek feedback from the supplier on their recent performance
Prepare for all negotiations with a WIN/LOSE (distributive) approach
Involve lots of people in future negotiations
Undertake reflective practice after each negotiation
Answer : C
To improve negotiation outcomes, seeking feedback from the supplier (1) and undertaking reflective practice (4) are recommended actions. Feedback from the supplier can provide insights into areas for improvement from the counterparty's perspective, while reflective practice allows the negotiator to evaluate their own approach, outcomes, and areas for growth. This approach aligns with CIPS's emphasis on continuous improvement in negotiation skills.
Question 784
Which of the following is considered a strength of a 'logical' style negotiator?
Answer : B
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of logical style are described below:
Question 785
Which of the following are examples of variable costs?
Answer : D
Question 786
Commercial negotiation ends at the award of a contract. Is this statement true?
Answer : C
Negotiation doesn't end after the contract is awarded. The needs for negotiation can arise in any post-award stages. For example, at supplier development and relationship management stage,improvement in supplier capability, capacity, and product/service range can be negotiated. Negotiations with long-term strategic critical suppliers should be carried out in a partnering style, with a win-win starting point assumed.
In some sectors such as transport, utilities and infrastructure, tenderers may 'bid low' or even make a loss to win major contracts with a view to negotiating lucrative changes, variations and 'add-ons' over the life of the contract when the supplier is bedded in and the buyer is in the weaker position to push back or challenge. Even in less complex contract, it is very likely that there will be a need to negotiate with that supplier again after the awarding of the contract.
LO 1, AC 1.1
Question 787
In what circumstances is the bargaining power of suppliers likely to be high, in relation to buyer power? Select THREE that apply.
Answer : A, D, E
Supplier bargaining power is stronger when there arefew suppliers,low volume requirementsfrom buyers, and when suppliers possessunique capabilities or technology(like specialized machinery). These conditions reduce buyer leverage and increase supplier influence.
Question 788
IHL has been supplying to XYZ Ltd for months. XYZ Ltd procurement manager Diana realises that the IHL's input prices are dropping and this is a good time to re-negotiate the price of the contract. She invites IHL representative to XYZ headquarter to make a bargain on the current price. At the opening stage of the negotiation, Diana requests a 10% reduction in price with an increase in volume purchased.
Is Diana's action appropriate in the opening phase?
Answer : D
The opening stage of the negotiation covers the very first few minutes when the parties meet and greet each other and are seated in the negotiation room in preparation for the main event.
Typical behaviours at the opening stage: 'dos' and 'don'ts'
Do's
Be punctual and well presented (welcome their arrival)
Break the ice with small talks
Start the conditioning process
Check authority
Check agenda
Consider using visual aid to set out key objectives or make key points
Don'ts
Use strong, pushy, cold or tough style at the opening
Put down marker at this stage
Criticise other organisations/TOP's previous contacts/third parties.
In this scenario, Diana has made her proposal right at the opening stage. This is an example of 'don'ts'. Good negotiators are very careful about 'red lines'. If she puts such barrier up too early, the supplier may not try to look for more creative solutions later in the negotiation.
Question 789
Which of the following would help build trust in a relationship?
Mediation attendance
Regular meetings
Keep promises
Coercion
Answer : B
Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.
Question 790
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?
Answer : A
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.
CIPS study guide page 29-31
Integrative Negotiation: Definition, Tips and Examples | Indeed.com
Question 791
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 792
A procurement professional is negotiating with a supplier on cleaning service. She realises that there are huge cost-saving opportunities if the supplier agrees to reduce its mark-up and unnecessary employee benefits. Supplier's mark-up and employee benefits are examples of which of the following?
Answer : D
A key consideration when seeking to negotiate prices is to establish what proportion of the spend is addressable by procurement action such as negotiation. Addressability of spend is influenceable through negotiations or application of other saving effort or leverage with suppliers.
LO 2, AC 2.1
Question 793
Which of the following will help to indicate personality preferences in four dimensions?
Answer : D
The Myers--Briggs Type Indicator (MBTI) is an introspective self-report questionnaire indicating differing psychological preferences in how people perceive the world and make decisions. MBTI indicates personality preferences in four dimensions.
The Thomas--Kilmann Conflict Mode Instrument (TKI) is a conflict style inventory, which is a tool developed to measure an individual's response to conflict situations.
Mill's RESPECT mnemonic is set out by Harry A. Mills which describes seven steps to agreements
An intelligence quotient (IQ) is a total score derived from a set of standardized tests designed to assess human intelligence.
Question 794
Which one of these key approaches could be pursued for a successful negotiation of a commercial agreement?
Answer : C
Acollaborative win-win approachfocuses on mutual benefit and long-term value creation. This strategy is especially effective in strategic partnerships where trust, information sharing, and problem-solving are emphasized over competition.
''The collaborative win-win approach aims to create outcomes where both parties gain. This strengthens the relationship and leads to sustainable agreements built on trust and transparency.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Win-Win Negotiation Strategy)
Question 795
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
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
Question 796
Sally is negotiating with an oversea supplier on the price and payment period. Her company and the supplying organisation are equal in bargaining power. The supplier says that they are investing in new facilities and machinery so the payment period should not be longer than 30 days. Sally knows that her company often pays the suppliers after 45 days from the delivery, but at the moment the company has positive cash flow and it is able to pay immediately. Which of the following should be Sally's concession plan?
Answer : B
In the scenario, the length of payment period is particularly important to the supplier as they are investing new facilities. Otherwise, the buyer's company has a positive cash flow position and budget is available for a shorter payment terms. So this tradeable (payment period) is important to supplier but it is not a significant problem with the buyer. This tradeable will fall within 'Easy concession to trade' quadrant in the following matrix:
Table Description automatically generated
If the tradeable fall within this quadrant, Sally should shorten the payment period in supplier's favour and try to win as many concessions as possible in return. Asking for a discount may be a reasonable trade-off.
LO 2, AC 2.3
Question 797
Which of the following constitutes a key element to developing high-trust supplier relationships?
Answer : C
Delivering on commitments is fundamental to building high-trust relationships. When an organization reliably fulfills its promises, it reinforces the supplier's confidence in the partnership, fostering long-term collaboration. While contract management and audits are supportive processes, delivering on commitments directly strengthens trust, as emphasized in CIPS best practices for relationship management.
Question 798
An organization should develop different relationships which are appropriate to each supplier situation. Which ONE of the following analysis methods could help to identify these?
Answer : B
The relationship spectrum categorizes supplier relationships based on factors like strategic importance, allowing organizations to tailor their approach to each supplier relationship. CIPS emphasizes the relationship spectrum as a valuable tool for assessing and managing supplier interactions based on strategic relevance.
Question 799
Which of the following are most likely to be fundamentals of Fisher & Ury's principled negotiation?
1. Depersonalise the argument
2. Focus on positions
3. Generate creative options
4. Using subjective criteria
Answer : C
Principled negotiation is based on four fundamentals: people, interest, options and criteria:
1st Principle: separate the people from the problem: Negotiator should depersonalise the situation and accepting that the subject matter of the negotiation. This can be difficult for untrained negotiators, but this is a key skill to develop
2nd principle: focus on interests, not positions: It is important in principled negotiations not to focus on their parties' positions (what are expressed during negotiations), but on the interests (underlying needs) behind them
3rd principle: invent options for mutual gains: this principle aims to help the parties find a solution that both would benefit from. The more options - or tradeables - that can be brought to the table the better.
4th principle: insist on using objective criteria: is about making sure that the negotiation stays focused on outcomes based on objective criteria and that it is productive.
LO 1, AC 1.2
Question 800
Which of the following is considered a weakness of a 'dealer' style negotiator?
Answer : A
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of dealer style are described below:
LO 2, AC 2.4
Question 801
Citywide Developments Ltd (CDL) is a construction programme management company that delivers high-value property development schemes. CDL uses named consultant design services in contracts. Recently, consultancy day rates have increased. Which of the following tradeable concessions could CDL offer when negotiating with suppliers to achieve lower rates, without lowering service quality?
Answer : D
By removing the requirement for named personnel, CDL could allow the supplier flexibility in allocating equally competent but possibly less expensive staff. This tradeable does not compromise on quality but helps control costs.
Question 802
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 803
Where a negotiator uses numerical reasoning with facts as part of their negotiation approach, which of the following techniques will they be adopting?
Answer : B
Using logic involves applying numerical data and factual evidence to support arguments in a negotiation. Logical reasoning appeals to objective analysis rather than emotional or coercive tactics and is effective in convincing the other party through structured, fact-based arguments, aligning with CIPS's guidance on logical negotiation techniques.
Question 804
Which of the following occur in the planning and preparation stage of negotiation? Select THREE.
Answer : B, C, D
Planning and preparation involve analysing bargaining power, understanding the counterpart's needs, and defining the constituents (parties involved). Questioning and concessions come later during bargaining. Narrowing solutions occurs during closure. Proper planning ensures negotiators enter with clear objectives, strategies, and knowledge, reducing surprises. CIPS highlights preparation as the most critical determinant of negotiation success, aligning with the saying: ''Failing to prepare is preparing to fail.''
Question 805
When a supplier tells a buyer they have a margin of 20%, what does this mean?
Answer : A
Margin is defined as profit expressed as a percentage of the selling price, not the cost. This is a critical distinction from mark-up, which expresses profit as a percentage of cost. For example, a 20% margin means that 20% of the price charged to the buyer represents profit, while 80% represents cost. CIPS emphasises that buyers must clearly understand this difference to avoid being misled during pricing discussions. Confusing margin with mark-up can significantly weaken negotiation effectiveness.
Question 806
Which of the following is a description of mark-up?
Answer : B
Mark-up is defined as profit expressed as a percentage of the cost. It calculates the profit margin based on the cost price rather than the selling price, which allows companies to determine how much they are earning over their production or purchase costs. This aligns with standard accounting and CIPS definitions of mark-up in procurement contexts.
Question 807
When is an adversarial style of negotiation appropriate?
Answer : A
An adversarial negotiation style is appropriate when one party has high bargaining power and is focused on maximizing its benefit rather than maintaining a long-term relationship. This approach often involves competitive tactics that leverage power disparities, aligning with CIPS guidance on when adversarial tactics may be strategically used in negotiations.
Question 808
A procurement officer for a manufacturing organisation is negotiating with a supplier over the provision of components. The supplier has indicated that they have to raise their prices due to their fixed costs increasing. Which TWO of the following are types of fixed costs?
Answer : A, B
Fixed costs are costs that do not vary directly with production volume. Staff salaries and building rents remain largely constant regardless of output levels and therefore meet the definition of fixed costs. Raw materials and temporary labour vary with production levels and are therefore variable costs. Warehouse logistics often fluctuate with throughput and activity, making them variable or semi-variable rather than fixed. Understanding fixed versus variable costs is essential for buyers when assessing supplier justifications for price increases, enabling more informed and credible cost-based negotiations.
Question 809
In order to mitigate all risks involved in the negotiation process, the buyer only needs to undertake pre-negotiation research on the supply market and establish a BATNA. Is this a correct suggestion?
Answer : B
While understanding the supply market and preparing aBATNA (Best Alternative to a Negotiated Agreement)are essential, theydo not cover all risks. Comprehensive preparation includes defining thenegotiation team, setting clearobjectives, planningtradeables, and anticipatingcommunication tactics. Skipping these steps can lead to poor coordination, misunderstandings, and missed opportunities. Effective negotiation is amultifaceted process, not a single strategy.
Question 810
Which of the following is an advantage of consultation as an influencing tactic?
Answer : B
Consultation involves actively involving stakeholders or counterparties in decision-making. By seeking input, it fosters a sense of ownership, increasing commitment to negotiated outcomes. It is particularly effective when the negotiator has low positional power, as it shifts dynamics from authority to collaboration. Unlike coercion or compliance tactics, consultation builds engagement and long-term trust, which is critical in complex procurement where buy-in is essential for contract success. CIPS stresses its role in building influence where direct authority is limited.
Question 811
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
''Expanding the pie'' is a strategy used in integrative negotiations where both parties collaborate to increase the total value available before dividing it. This leads to mutual gains and supports long-term, strategic relationships.
Question 812
In which of the following scenarios could you adopt a distributive-based negotiation approach?
Answer : D
Question 813
Maria is a professional services category buyer within the National Health Service. Due to severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
Question 814
Commercial negotiations on price cover various aspects, including pricing arrangements. A buyer may negotiate a fixed-price agreement. Why is a fixed-price agreement advantageous to the buyer?
Answer : B
In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier's internal cost build-up (unlike cost-plus).
===========
Question 815
Which of the following constitutes a key element to developing high-trust supplier relationships?
Answer : C
Delivering on commitments is fundamental to building high-trust relationships. When an organization reliably fulfills its promises, it reinforces the supplier's confidence in the partnership, fostering long-term collaboration. While contract management and audits are supportive processes, delivering on commitments directly strengthens trust, as emphasized in CIPS best practices for relationship management.
Question 816
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 817
Which of the following situations would increase a buyer's bargaining power?
Answer : A
When a buyer's purchase represents asignificant portion of a supplier's revenue, it increases the buyer's leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.
''Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer's ability to influence terms.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)
Question 818
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship style can be characterised by which of the following? Select the TWO that apply.
Answer : A, D
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question 819
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction. What is the mark-up profit percentage earned by the supplier on this transaction?
Answer : C
The mark-up percentage is calculated as the profit divided by the cost of production, then multiplied by 100 to convert it into a percentage.
Calculation:
(
80
/
160
)
100
=
50
%
(80/160)100=50%
Thus, the supplier's mark-up percentage is 50%, as per standard pricing calculations used in procurement.
Question 820
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?
Answer : D
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 right strategy.
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 821
A procurement professional is preparing for a negotiation of purchasing non-critical commodity products. He knows that the product can be easily replaced by other substitutes in the market. The negotiation for these products is typified by which of the following?
Answer : C
With non-critical commodity products, the relationship will be transactional. Buyer should not spend too much time and effort into the negotiation.
LO 1, AC 1.4
Question 822
A buyer continually states, during a negotiation, that budget constraints are impacting their ability to make concessions. What type of tactic are they using?
Answer : C
Question 823
A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier over a contract for critical new services. They have decided they want to find a Win/Win (integrative) solution. Which TWO of the following would be appropriate in this scenario?
Answer : A, B
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.
Question 824
Listening is a key activity in negotiation. Which of the following are characteristics of effective listeners?
Showing empathy
Persuading
Paraphrasing
Offering immediate solutions
Answer : B
Effective listeners demonstrate empathy and use paraphrasing to confirm understanding. These skills help build rapport, validate the speaker, and ensure accurate interpretation. Persuading and immediate solutions are active interventions, not listening behaviours. CIPS emphasises active listening as central to persuasion and relationship building in negotiation, enabling buyers to uncover underlying interests and respond appropriately.
Question 825
There are no commitments in hypothetical questions. Is this statement true?
Answer : D
There are four types of questions that can be used in a commercial negotiation:
Hypothetical questions, where you ask about a possible situation or abstract concept, are very useful at the testing and proposal phases. Hypothetical question does not state any commitment as it is only about 'if something happens, then ...'. This type of question can be useful at giving suggestion.
LO 3, AC 3.3
Question 826
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 827
Which of the following is important during the proposing stage of a negotiation?
Answer : D
Question 828
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 829
A wide range of factors may be taken into account by suppliers when setting or negotiating prices. Which of the following are external factors in pricing decisions? Select TWO that apply.
Answer : A, D
External factors in pricing decisions include Competition in the market (A) and Customer perception of value (D). These factors are outside the supplier's direct control but influence pricing strategies to remain competitive and meet customer expectations:
Competition in the market (A): Market competition dictates how much a supplier can charge without losing business to competitors.
Customer perception of value (D): How customers perceive the product's worth affects its acceptable price range.
These factors are considered external as they relate to market dynamics rather than internal cost structures, according to CIPS's guidance on pricing influences.
Question 830
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction. What is the mark-up profit percentage earned by the supplier on this transaction?
Answer : C
The mark-up percentage is calculated as the profit divided by the cost of production, then multiplied by 100 to convert it into a percentage.
Calculation:
(
80
/
160
)
100
=
50
%
(80/160)100=50%
Thus, the supplier's mark-up percentage is 50%, as per standard pricing calculations used in procurement.
Question 831
A garden furniture supplier currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating in the supplier's environment (their site) can unintentionally shift the power dynamic. The supplier may gain apsychological edgedue to the comfort and control of their surroundings. Best practice recommends holding negotiations in aneutral settingto ensure balance and reduce any influence based on physical context. While site visits are beneficial for supplier evaluation, they should beseparate from the negotiationto maintain objectivity.
Question 832
John Browne, a junior buyer for a corporation, is analysing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : A
Question 833
Which of the following is the definition of safety margin?
Answer : A
As a financial metric, the margin of safety (safety margin) is equal to the difference between current or forecasted sales and sales at the break-even point. The margin of safety is sometimes reported as a ratio, in which the aforementioned formula is divided by current or forecasted sales to yield a percentage value. The figure is used in both break-even analysis and forecasting to inform a firm's management of the existing cushion in actual sales or budgeted sales before the firm would incur a loss.
This is a question that a student met in her actual exam. The margin of safety is not even mentioned in the CIPS study guide.
Question 834
A buyer is preparing for an upcoming negotiation with a large supplier on a contract renewal price. The buyer has undertaken some analysis and is concerned that changes in the organisation's macro-environment over the last year will result in a price increase. The buyer's analysis has identified changes in which of the following?
Answer : A
Question 835
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
Answer : A, C, E
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 conditionthat would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
Question 836
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as:
Answer : C
Question 837
When considering a new supply source for a product, a procurement professional reviews supplier quotations before negotiation. Which of the following is a direct cost in the supplier's quotation?
Answer : C
Direct costs are those directly attributable to the production of a unit --- such as raw materials, components, and direct labour. Here, the metal used is a clear direct cost, as it varies with production output. Rent, insurance, and sales wages are indirect (overhead) costs, which must be allocated across products. Understanding this distinction is vital in negotiations, since direct costs are easier to challenge for efficiency gains, while indirect allocations may be arbitrary. Buyers with clear knowledge of cost breakdowns can negotiate more effectively, avoiding inflated pricing.
Question 838
An adversarial style of negotiation is appropriate where the buyer has greater bargaining power over the supplier. In what other situations may the buyer adopt this style of negotiation?
Answer : B
An adversarial negotiation style is more suitable in a market with many alternative sources and substitutes (B). When there are multiple suppliers, buyers have the upper hand and can adopt a competitive stance without risking supply continuity. This aligns with CIPS guidance on the use of adversarial styles in competitive markets with numerous alternatives.
Question 839
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship style can be characterised by which of the following? Select the TWO that apply.
Answer : A, D
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question 840
A procurement professional is preparing for a negotiation with supplier. She is setting targets for price which her company is seeking to achieve. Which of the following acronyms can help her identify limits before engaging in the negotiation?
Answer : A
MIL criteria indicate 3 limits that negotiator should establish:
M - Must achieve: minimum target/maximum you can concede on this point; the mandatory requirement or fall back position
I - Intend to achieve: realistic target you are aiming for on this point
L -- Like to achieve: stretch target to achieve on this point.
PPCA is purchase cost analysis
TIMWOOD indicates 7 types of waste in Lean principles
The RAQSCI model is a mnemonic summary of a business model used to define and structure business requirements
Question 841
A procurement manager withholds important information to strengthen negotiating power. Is this appropriate when using an integrative negotiation style?
Answer : B
Integrative negotiation relies on openness and trust, aiming to identify underlying interests, not just positions. Withholding information is typical of distributive (win-lose) bargaining, where each side protects its bottom line. In an integrative context, hiding key details prevents mutual understanding, reduces creative option-building, and damages relationship trust. Instead, transparency enables value creation---such as joint cost reduction or innovation. CIPS emphasises that power must be balanced with openness when integrative outcomes are desired.
Question 842
A garden furniture supplier who is currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating at the supplier's site can give the supplier a psychological advantage due to their familiarity with the setting. To ensure a neutral and balanced negotiation environment, it's preferable to conduct negotiations in a neutral location or through structured channels, as recommended in CIPS's guidance on negotiation settings.
Question 843
Which of the following are stages within the negotiation process?
Planning and preparation
Arguing and persuasion
Accepting hospitality
Testing and proposing
Answer : C
The formal negotiation process includes planning and preparation (objectives, BATNA, MIL) and testing/proposing (exchanging offers). Hospitality is not a stage---it may support relationships but is not part of structured negotiation. Arguing/persuasion occurs within bargaining but is not defined as a stage in itself. Understanding the stages ensures structured progress and prevents disorganised discussions, which often result in suboptimal agreements.
Question 844
Which of the following types of questions are likely to be the most effective to check facts in negotiations?
Answer : D
Closed questions are useful for verifying facts, as they prompt specific, concise responses. These questions allow the negotiator to confirm details without ambiguity, which is crucial for clarity in negotiation settings, as highlighted in CIPS's guidelines on questioning techniques.
Question 845
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
''Expanding the pie'' is a strategy used in integrative negotiations where both parties collaborate to increase the total value available before dividing it. This leads to mutual gains and supports long-term, strategic relationships.
Question 846
Which factors give rise to conflict within the procurement negotiation context? Select THREE that apply.
Answer : A, C, F
Conflict can arise in procurement negotiations due to a power imbalance, which occurs when one party has more influence than the other, leading to potential exploitation or dissatisfaction. Differences in goals between parties---such as cost minimization for buyers and profit maximization for suppliers---also contribute to tension. Surprisingly, similar motives can lead to conflict as well, particularly when both parties are competing for limited benefits or market share.
Question 847
Listening is a key activity in negotiation. Which of the following are characteristics of effective listeners?
Showing empathy
Persuading
Paraphrasing
Offering immediate solutions
Answer : B
Effective listeners demonstrate empathy and use paraphrasing to confirm understanding. These skills help build rapport, validate the speaker, and ensure accurate interpretation. Persuading and immediate solutions are active interventions, not listening behaviours. CIPS emphasises active listening as central to persuasion and relationship building in negotiation, enabling buyers to uncover underlying interests and respond appropriately.
Question 848
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?
Answer : A
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 849
Which of the following is a key element to developing high-trust supplier relationships?
Answer : C
Trust develops when organisations consistently deliver on commitments---meeting deadlines, respecting terms, and fulfilling promises. While audits, contract management, and data gathering support oversight, they do not in themselves build trust. In collaborative negotiations, reliability becomes the foundation of long-term partnerships, reducing the need for constant monitoring. CIPS highlights that trust is fragile and must be reinforced through transparency, consistent behaviour, and alignment of actions with words. This credibility is more persuasive than any formal monitoring.
Question 850
Which of the following is important during the proposing stage of a negotiation?
Answer : B
During the proposing stage, parties move toward agreement by narrowing down a wide range of potential options. This helps focus the negotiation and aligns both parties toward practical, mutual outcomes. It's an essential step to keep the process structured and productive.
Question 851
Which of the following is the internal factor that is taken into price of a product?
Answer : A
In order to answer this question, you should better consider each option:
'Exchange rate' is the value of one nation's currency versus the currency of another nation or economic zone. This is a macroeconomic factor.
'Elasticity' refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. This is a microeconomic factor
Consumer tastes refer to the products and services that consumers consciously choose over others. Consumer tastes are so powerful that they can change how businesses conduct their activity. Like elasticity, this is also a microeconomic factor.
Among 4 options, only risk management is the internal factor. Risk pricing is a strategy applied by many companies in the world. To learn how to price the risk, you can read an article from McKinsey: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-to-price-risk-to-win-and-profit
This is a question that a student met in her actual exam. The knowledge section is unknown.
LO: Unknown, AC: Unknown
Question 852
When a supplier tells a buyer they have a margin of 20%, what does this mean?
Answer : A
Margin is defined as profit expressed as a percentage of the selling price, not the cost. This is a critical distinction from mark-up, which expresses profit as a percentage of cost. For example, a 20% margin means that 20% of the price charged to the buyer represents profit, while 80% represents cost. CIPS emphasises that buyers must clearly understand this difference to avoid being misled during pricing discussions. Confusing margin with mark-up can significantly weaken negotiation effectiveness.
Question 853
Which of the following are most likely to harm trust between buyer and supplier in a commercial relationship? Select TWO that apply.
Answer : A, D
Trust-destroying behaviours:
- Rumours of partnership or relationship breaking down
- Emotion-based assessment of performance
- Avoiding accountability, passing the blame to others
- General mood -- resentment, distrust, frustration, etc
LO 1, AC 1.4
Question 854
Which type of question style is a negotiator using if they ask the other party
''Can you deliver our items by Friday 17th?''
Answer : B
This is a closed question because it requires a definite, factual response such as ''yes'' or ''no''. Closed questions are particularly useful in negotiations for confirming specific commitments, including delivery dates, prices, quantities, or contractual terms. They reduce ambiguity and are commonly used during the later stages of negotiation to confirm agreement and progress toward closure. Probing questions seek deeper explanation, leading questions influence the answer, and multiple questions combine several issues at once. CIPS highlights the importance of choosing question styles appropriately depending on the negotiation objective and stage.
Question 855
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Consolidate the expenditure from across the organisation to increase the size and value of the requirement
Understand the supplier's costs and margins prior to the negotiation to demonstrate that you know what it costs to produce the product
Take a distributive approach to the negotiation and refuse to make concessions
Limit communication and information sharing with the supplier so as not to give anything away
Answer : A
When buyer power is low, leverage must be created rather than assumed. Consolidating organisational spend increases volume and commercial importance to the supplier, directly strengthening buyer power. Understanding supplier costs and margins reduces information asymmetry and demonstrates commercial competence, which improves credibility and influence during negotiations. Refusing concessions and limiting communication are typical of adversarial tactics and often weaken relationships when power is already limited. CIPS clearly advises buyers to use aggregation of demand and market intelligence as ethical and effective methods to rebalance power without damaging long-term supplier relationships.
Question 856
Which TWO strategies are recognised for achieving a win--lose outcome?
Making the other party lower its resistance point
Making the other party believe this settlement is the best it can achieve
Employing empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
Win--lose strategies focus on gaining advantage at the other party's expense. Forcing them to lower their resistance point or persuading them the deal is their best option are classic distributive tactics. Empathy, compromise, and creativity belong to integrative approaches aimed at mutual benefit. Recognising these distinctions ensures negotiators adopt the right strategy for the relationship type and context.
Question 857
Community Meal Partners (CMP) is a not-for-profit company that delivers cooked meals to older residents in their homes. CMP uses a fleet of bespoke vans with onboard ovens. In planning the future procurement of the fleet, CMP has conducted a review of the microeconomics of the van supply market and found that the vans are supplied by a monopoly supplier due to patented technology. Which of the following strategies could CMP utilise to optimise its bargaining position with the van supplier?
Answer : A
When facing a monopoly supplier, buyers must find creative ways to introduce leverage. Publicly exploring alternative solutions can create the perception of competition or a fallback plan, thus shifting bargaining power slightly toward the buyer.
Question 858
Sunita's supplier states: ''Meeting your needs is meeting my needs because we are in this together.'' What type of negotiation is being undertaken?
Answer : D
This statement reflects shared goals and mutual benefit, hallmarks of integrative negotiation. Unlike adversarial or distributive (win-lose) strategies, integrative approaches seek joint value and collaboration. The language of partnership (''we are in this together'') signals alignment and cooperative intent. Lose-lose outcomes, by contrast, occur when both sides compromise excessively or fail to reach creative solutions. Integrative strategies foster long-term partnerships where value is maximised for both.
Question 859
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Answer : A
Question 860
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 861
Which of the following may help the procurement professional increase expert power in commercial negotiation? Select TWO that apply.
Answer : C, E
Expert power is based on a person's high levels of skill and knowledge, formal training, qualifications and experience in a particular procurement category would give someone expert status and mean that in negotiation their voice is listened to as a more objective, informed knowledge leader. Expert power is based on facts, knowledge, research, insight and study.
Legitimate power comes from rules, formal authority, organisation rank, staff rate or official position held.
Reward power comes from one person's ability to compensate or reward another for compliance.
Referent power stems from their personality, way of engaging with others and habit of acting in a way that is in line with a strong set of values and principles.
Question 862
Which of the following is the internal factor that is taken into price of a product?
Answer : A
In order to answer this question, you should better consider each option:
'Exchange rate' is the value of one nation's currency versus the currency of another nation or economic zone. This is a macroeconomic factor.
'Elasticity' refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. This is a microeconomic factor
Consumer tastes refer to the products and services that consumers consciously choose over others. Consumer tastes are so powerful that they can change how businesses conduct their activity. Like elasticity, this is also a microeconomic factor.
Among 4 options, only risk management is the internal factor. Risk pricing is a strategy applied by many companies in the world. To learn how to price the risk, you can read an article from McKinsey: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-to-price-risk-to-win-and-profit
This is a question that a student met in her actual exam. The knowledge section is unknown.
LO: Unknown, AC: Unknown
Question 863
Which of the following is a description of mark-up?
Answer : B
Mark-up is defined as profit expressed as a percentage of the cost. It calculates the profit margin based on the cost price rather than the selling price, which allows companies to determine how much they are earning over their production or purchase costs. This aligns with standard accounting and CIPS definitions of mark-up in procurement contexts.
Question 864
Commercial negotiations on price cover various aspects, including pricing arrangements. A buyer may negotiate a fixed-price agreement. Why is a fixed-price agreement advantageous to the buyer?
Answer : B
In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier's internal cost build-up (unlike cost-plus).
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Question 865
Which of the following are characteristics of the pull approach?
Aimed at securing compliance, often against resistance
Influencers are fully aware of the process, which is overt
Persuasion or interpersonal influence
Can secure commitment if influencers accept the viewpoint as fitting their goals
Answer : B
The pull approach relies on persuasion, interpersonal influence, and aligning proposals with others' goals to secure commitment. It is not about forcing compliance (that is push). By engaging influencers and presenting a vision they can adopt, pull fosters buy-in and voluntary agreement. This method is particularly effective in collaborative negotiations where relationships and long-term trust are important.
Question 866
If the price of a good is above the equilibrium price, which of the following will happen?
Answer : D
In microeconomics, equilibrium price is determined when the quantity demanded is equal to the quantity supplied at equilibrium price in a market, there will be no shortages and no surpluses. If we combine our supply and demand curves on one graph, the point at which they converge determines the equilibrium price. If the price is set above this price and you read across the graph you will see the supply excess demand and there will be a surplus. In order to reduce this surplus, the price will need to fall. The scenario is illustrated in the graph below:
Question 867
A procurement manager is about to lead an important negotiation with a new IT supplier and has insisted the first meeting takes place at the buying organisation's office. Will this give one party an advantage?
Answer : A
Contextual (environmental) power includes home-ground advantage, control of the venue, access to colleagues and data, and comfort with logistics---all of which can tilt confidence and leverage toward the host (the buyer).
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Question 868
Which of the following statements about oligopoly is incorrect?
Answer : D
An oligopoly exists when there are small number of producers that exert a significant influence in the market. Oligopoly's main characteristics are discussed as follows:
- Interdependence
The most important feature of oligopoly is the interdependence in decision-making of the few firms which comprise the industry. This is because when the number of competitors is few, any change in price, output, product etc. by a firm will have a direct effect on the fortune of its rivals, which will then retaliate in changing their own prices, output or products as the case may be.
- Importance of advertising and selling costs
A direct effect of interdependence of oligopolists is that the various firms have to employ various aggressive and defensive marketing weapons to gain a greater share in the market or to prevent a fall in their market share. For this various firms have to incur a good deal of costs on advertising and on other measures of sales promotion. Therefore, there is a great importance of advertising and selling costs under conditions of market situation characterised by oligopoly
- Group behaviour
Another important feature of oligopoly is that for the proper solution to the problem of determination of price and output under, it analysis of group behaviour is impor-tant.
- Indeterminateness of demand curve facing an oligopolist
In this question, 'Prices in oligopoly are predicted to fluctuate widely and frequently' is an incorrect statement as producers in oligopoly often try to set up price. Prices fluctuate more frequently in perfect competition.
LO 2, AC 2.2
Question 869
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
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.
Question 870
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latestmeeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : A
Jayden's use ofeye contact to demonstrate understandingis a core element ofactive and effective listening. This technique includes not only listening to spoken words but also using non-verbal cues (e.g., nodding, eye contact) to confirm comprehension and engagement. Effective listening is essential to ensure that both parties feel heard and respected, which can de-escalate tension and improve outcomes.
''Effective listening involves verbal and non-verbal behaviours that show attentiveness. Maintaining eye contact, nodding, and reflecting key points show engagement and help in building rapport and trust.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Communication Techniques in Negotiation)
Question 871
When planning a negotiation for sourcing internationally, which of the following divergent positions, and therefore potential conflict areas, should be prepared for? Select TWO that apply:
Answer : A, C, D
Question 872
The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : C
For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.
Question 873
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Answer : C
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Question 874
A breakeven analysis uses which of the following aspects as part of the analysis?
Answer : A, D
Question 875
Hammad Alsuwaidi is a procurement professional leading a negotiation for a vehicle rental contract. Hammad has a clear goal to negotiate a two-year contract in exchange for a minimum of a 20% discount. During the negotiation, Hammad presents to the supplier the facts, figures, and justification for a 20% discount. Which of the persuasion methods below has Hammad chosen?
Answer : A
Hammad's approach of presenting facts, figures, and justifications aligns with the Push persuasion method. The Push strategy involves directly presenting information, data, and logical arguments to convince the other party of a certain outcome. In this scenario, Hammad is using objective evidence to influence the supplier towards agreeing to a discount, which is characteristic of the Push method, as per CIPS guidance on negotiation tactics.
Question 876
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 877
Different types of relationships impact commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate power derives from formal authority or position, giving the buyer leverage in negotiations. This power type is more effective in establishing credibility and enforcing terms, as highlighted in CIPS's framework for negotiation power sources, unlike informal sources like personality or friendship.
Question 878
Logibox Ltd is releasing a new range of stackable storage boxes. It has adopted a pricing strategy that aims to sell at a price the consumer is prepared to pay.
Which of the following is it using?
Answer : C
Question 879
Which of the following would cause a demand curve for a good to be price inelastic?
Answer : D
Essential goods and services such as electricity, fuel, basic food stuffs, commuter transport and habitual products such as tobacco, alcohol and sugar-based drinks are often sited as facing a relatively inelastic demand curve. This means when the price goes up, the quantity demanded does not decrease very much and so they are often the target of government taxation.
LO2, AC 2.2
Question 880
John Browne, a junior buyer for a corporation, is analyzing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : C
Foreign exchange rates impact import costs, profit margins, and overall turnover when transactions are conducted in foreign currencies. Understanding these fluctuations allows buyersto anticipate changes in purchasing costs, supporting informed decision-making, as highlighted in CIPS guidance on global procurement considerations.
Question 881
John and a supplier agree on a long-term relationship based on trust, respect, and shared risk/reward. What type of relationship is this?
Answer : A
A partnership is characterised by trust, mutual respect, and joint sharing of risks and rewards. Both sides collaborate on innovation and improvement. In contrast, transactional or arm's-length relationships are short-term and price-driven, while outsourcing simply transfers responsibility without guaranteeing collaboration. CIPS emphasises partnerships as enablers of integrative negotiations, where joint value and long-term benefits can be achieved.
Question 882
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
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.
Question 883
Which of the following are behaviours that builds trust between the buyer and the supplier in business relationship? Select TWO that apply.
Answer : A, C
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 884
If the price of a good is above the equilibrium price, which of the following will happen?
Answer : D
In microeconomics, equilibrium price is determined when the quantity demanded is equal to the quantity supplied at equilibrium price in a market, there will be no shortages and no surpluses. If we combine our supply and demand curves on one graph, the point at which they converge determines the equilibrium price. If the price is set above this price and you read across the graph you will see the supply excess demand and there will be a surplus. In order to reduce this surplus, the price will need to fall. The scenario is illustrated in the graph below:
Question 885
Which of the following stages of the CIPS Procurement Cycle are typically where commercial negotiations take place?
Contract management and improvement
Develop tender documentation
Market sector analysis
Contract award and implementation
Answer : A
Commercial negotiations commonly take place during Contract Management and Improvement (1) and Contract Award and Implementation (4) stages. During these stages:
Contract Management and Improvement (1): Ongoing negotiations may be required to adjust terms and conditions as part of managing the contract lifecycle.
Contract Award and Implementation (4): Initial negotiations finalize terms, setting the foundation for successful contract execution.
These stages are pivotal in ensuring both initial and ongoing alignment, as outlined in the CIPS Procurement Cycle.
Question 886
Which of the following are internal factors when a supplier is making its pricing decision?
Answer : D
Question 887
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?
Answer : A
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.
CIPS study guide page 29-31
Integrative Negotiation: Definition, Tips and Examples | Indeed.com
Question 888
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 889
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 890
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 891
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier makes their closing statements, they are most likely to be doing which of the following?
Answer : B
As negotiations near closure, skilled negotiators carefully observe for buying signals---verbal cues (''That sounds reasonable...'') and non-verbal cues (nodding, smiling, leaning forward). These indicate readiness to agree and confirm whether it is the right time to close. At this stage, both sides usually stop gathering data or building rapport, as the focus is on confirming alignment and avoiding last-minute derailments. Closing too early may risk missing concessions, but delaying risks cooling momentum. Recognising buying signals ensures closure occurs at the optimal point, aligning with preparation and tactical awareness.
Question 892
Which of the following is an example of non-verbal communication?
Answer : C
Question 893
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 894
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?
Answer : C
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.
CIPS study guide page 164-165
What Is a Coalition Anyway?
Question 895
Which of the following situations would increase a buyer's bargaining power?
Answer : A
When a buyer's purchase represents asignificant portion of a supplier's revenue, it increases the buyer's leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.
''Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer's ability to influence terms.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)
Question 896
Which of the following is NOT a barrier to entry in a monopolized market?
Answer : B
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 897
One of the most important steps in preparing for negotiations is to appraise the relative power of the parties. The buying organisation must assess its bargaining power against that of the supplier it intends to negotiate with. This information is necessary in facilitating the preparation, the negotiation team and the negotiation strategy.
In what situation is the bargaining power of buyers likely to be high relative to suppliers?
Answer : B
Whenmany supplierscompete forfew buyers, buyers gain leverage. This competition can drive prices down and increase the buyer's ability to negotiate favorable terms. Conversely, if the buyer is dependent on a supplier (as in A), the buyer's power diminishes.
''Buyer power increases when there are many suppliers and few buyers. The buyer has multiple options and can negotiate from a position of strength.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Relative Bargaining Power and Market Dynamics)
Question 898
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Question 899
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
A junior team member can effectively contribute as a note taker (1) and observer (3), allowing them to support the meeting without taking on roles that require more experience, like chairing or serving as an expert. This aligns with CIPS's recommendations for assigning junior roles in negotiations.
Question 900
Which of the following are most likely to be macro factors that may influence the balance of power in commercial negotiation? Select THREE that apply.
Answer : A, B, D
All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forces which both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
LO 1, AC 1.3
Question 901
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latestmeeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : A
Jayden's use ofeye contact to demonstrate understandingis a core element ofactive and effective listening. This technique includes not only listening to spoken words but also using non-verbal cues (e.g., nodding, eye contact) to confirm comprehension and engagement. Effective listening is essential to ensure that both parties feel heard and respected, which can de-escalate tension and improve outcomes.
''Effective listening involves verbal and non-verbal behaviours that show attentiveness. Maintaining eye contact, nodding, and reflecting key points show engagement and help in building rapport and trust.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Communication Techniques in Negotiation)
Question 902
Which of the following are behaviours that builds trust between the buyer and the supplier in business relationship? Select TWO that apply.
Answer : A, C
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 903
Upper Woodborough Council is a government organisation that is seeking to reduce regular expenditure on facilities management services. Which of the following charges is an example of a fixed cost, that the council could renegotiate with the facilities management contractor to achieve savings?
Answer : D
Fixed costs are regular, predictable charges that do not vary directly with usage or demand. Monthly cleaning services are typically charged at a fixed, recurring rate, making them a clear example of a fixed cost that can be renegotiated to achieve savings. Fuel costs and reactive maintenance vary with activity levels, while inflation indexation is a pricing mechanism rather than a cost itself. CIPS advises buyers to focus on fixed-cost elements when seeking sustainable cost reductions, as changes deliver predictable and ongoing savings.
Question 904
Which of the following is NOT a barrier to entry in a monopolized market?
Answer : B
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 905
Leitax is a consumer electronics firm with headquarters in the US and with a global sales presence. The company maintains seven to nine models in its product portfolio, each of which has multiple SKUs. Product life ranges from fifteen to nine months and is getting shorter. The demand planning and master planning processes at the company were ill-defined. Data relevant to forecasting were usually inaccurate, incomplete, or unavailable and the lack of objectives and monitoring mechanisms for the demand planning process meant that process improvement could not be managed. Support for supply management was equally ill-defined, as master production schedules were sporadic and unreliable and suppliers had learned to mistrust them. Leitax's newly appointed Supply chain director, Jessica realises that the ''buy-in'' of different functional groups was critical to the improvement of demand planning. She invites relevant stakeholders to a meeting so that they can express their opinions openly. What tactic is Jessica using?
Answer : A
There are nine commonly used influence tactic:
1. Rational persuasion includes using facts, data, and logical arguments to try to convince others that your point of view is the best alternative. This is the most commonly applied influence tactic.
2. Legitimating
3. Personal appeals
4. Exchange
5. Ingratiation
6. Pressure refers to exerting undue influence on someone to do what you want or else something undesirable will occur.
7. Coalitions refer to a group of individuals working together toward a common goal to influence others.
8. Inspirational appeals
9. Consultation refers to the influence agent's asking others for help in directly influencing or planning to influence another person or group.
In the scenario, there is a problem with demand forecasting and supply chain planning in Leitax. The new Supply chain director invites the stakeholders to a meeting to find the solution. She is using coalition tactics.
- CIPS study guide page 163-168
- Cross-Functional Alignment in Supply Chain Planning: A Case Study of Sales and Operations Planning
- 13.3 The Power to Influence -- Organizational Behavior (umn.edu)
LO 3, AC 3.2
Question 906
Which of the following are examples of variable costs?
Building and site rent
Annual insurance premium
Raw materials expenditure
Delivery costs for materials
Answer : D
Variable costsare expenses that change in proportion to business activity or production volume.Raw materialsanddelivery costsdirectly increase as more products are produced. In contrast,rentandinsuranceare fixed costs that remain constant regardless of output levels.
''Variable costs are directly linked to production output. Raw materials and logistics (e.g., delivery) scale with order volume, impacting supplier pricing and buyer negotiations.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Direct and Variable Cost Classifications)
Question 907
A buyer requests a 2,000 reduction in price at the end of negotiations. The supplier nods and smiles, shakes hands, and leaves. Should the buyer believe the reduced price is agreed?
Answer : C
CIPS stresses that clear verbal confirmation is required for agreements. Non-verbal signals (smiles, nods, handshakes) can indicate politeness or ambiguity but do not constitute binding agreement. Assuming agreement risks later disputes or misunderstandings. Skilled negotiators ensure closure by explicitly summarising agreed terms and documenting them. Non-verbal communication is supportive, not decisive, in contract negotiation contexts.
Question 908
One difference between perfect competition and monopolistic competition is that...?
Answer : D
Monopolistic competition exists in market where there are many competing producers but they will try to use product differentiation. Although their products may be very similar, their ability to differentiate means that they can act as monopolies in short run, irrespective of the actions of their competitors.
In perfect competition, there are no barriers to entry to the market or exit from the market. In monopolistic competition, there tend to be fewer barriers to entry or exit in these markets than inoligopolistic markets, but it doesn't mean that there are absolutely no barriers to entry in monopolistic competition.
In perfect competition, the demand curve is perfectly elastic, which means that it will be horizontal. Otherwise, in monopolistic competition market, the demand curve will have normal downward slope.
LO 2, AC 2.2
Question 909
Which of the following can help both parties to break the vicious cycle of blame when a relationship needs repairing? Select TWO that apply.
Answer : A, C
In order to break vicious cycle of blame, procurement will need to use their negotiation and conflict management skills, adopting a collaborative and integrative approach. Your first action should be to establish the facts that led to the situation where the relationship broke down. Most day-to-day relationship between buying organisations and suppliers do not of course involve procurement staff, so you will need to consult with your business partners internally to establish their point of view of where the issue and sources of conflict are. You should also contact the supplier and get their side of the story - this is particularly to when you have previously identified the supplier as critical or otherwise important to your operations. Ideally you will be able to apply principled negotiation here, separating the people from the issue, focusing on interests and not positions, and then looking for options of mutual benefits.
Question 910
A procurement expert has been asked to ensure they consider emotional intelligence in their negotiation strategy. They have agreed to this and have started planning their approach. Which of the following describes emotional intelligence?
Answer : C
Emotional intelligence involves the ability to recognize and manage one's emotions and empathize with others. This skill allows negotiators to respond appropriately to both their own feelings and the emotional cues of the other party, fostering a more constructive and adaptive negotiation environment. CIPS highlights emotional intelligence as a valuable asset in understanding and influencing negotiation dynamics.
Question 911
Power is used only in adversarial negotiation situations to secure a 'win' outcome against the other side. Is this statement correct?
Answer : C
Question 912
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?
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
Question 913
Which of the following situations would increase a buyer's bargaining power?
Answer : A
When a buyer's purchase represents asignificant portion of a supplier's revenue, it increases the buyer's leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.
''Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer's ability to influence terms.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)
Question 914
Which of the following is active listening?
Answer : C
Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS's guidelines for effective negotiation communication.
Question 915
Which of the following can be prepared before a negotiation with a supplier to achieve an agreement to benefit both parties?
Zone of potential agreement
Attendee list for the negotiation talks
Walk-away point
Venue for the negotiation talks
Answer : B
Zone of Potential Agreement (1) and Walk-away point (3) are key elements in negotiation planning. Establishing a Zone of Potential Agreement helps identify where interests align, whilethe Walk-away point sets the limit of acceptable terms. Both are essential to preparing a negotiation framework that benefits both parties, as per CIPS best practices.
Question 916
To buying organisation, savings can be achieved from different saving levers or tactics. Which of the following are means that deliver savings through optimising specifications?
Answer : A, B
If driving greater value and efficiency from your supply base is your end, you should remember that there are many ways to do this without seeking to negotiate lower prices. Below are 7 types of saving levers:
Question 917
Which of the following are elements of price negotiations? Select the TWO that apply.
Answer : A, C
Price negotiations extend beyond headline unit price and include elements that influence total commercial value. Pricing arrangements (such as fixed, variable, indexed, or cost-plus pricing) directly affect financial risk and cost certainty. Terms of payment influence cash flow, working capital, and overall cost of ownership, making them core price-related negotiation variables. Sales tax is typically regulated and not negotiable, while cash flow management and administration costs are internal organisational concerns rather than negotiated price elements. CIPS emphasises a holistic approach to price negotiations that considers structure and payment terms, not just price level.
Question 918
A breakeven analysis uses which of the following aspects as part of the analysis?
Answer : A, D
Question 919
Which of the following are types of questions that are useful in opening and testing phases of a negotiation? Select the TWO that apply.
Answer : C, E
In the opening phase, parties should confirm understanding and get the issues on the table.
The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.
Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.
Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening and testing stages.
Question 920
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier makes their closing statements, they are most likely to be doing which of the following?
Answer : B
As negotiations near closure, skilled negotiators carefully observe for buying signals---verbal cues (''That sounds reasonable...'') and non-verbal cues (nodding, smiling, leaning forward). These indicate readiness to agree and confirm whether it is the right time to close. At this stage, both sides usually stop gathering data or building rapport, as the focus is on confirming alignment and avoiding last-minute derailments. Closing too early may risk missing concessions, but delaying risks cooling momentum. Recognising buying signals ensures closure occurs at the optimal point, aligning with preparation and tactical awareness.
Question 921
A buyer has lost trust in a supplier but wishes to repair the relationship. What is the appropriate first step?
Answer : A
Rebuilding trust requires acknowledgement of the issue and supplier commitment to improvement. Cosmetic gestures such as hospitality or price reductions do not address the core problem. Nor should KPIs be artificially lowered, as this masks underperformance. Trust is restored when accountability is accepted and corrective actions are implemented transparently. This aligns with CIPS' emphasis on trust-building behaviours: honesty, responsibility, and consistent performance.
Question 922
A supplier can produce a product for $160 and sells it for $240, making $80 profit. What is the mark-up profit percentage?
Answer : A
Mark-up % = Profit Cost 100. Here, profit is $80, cost is $160. So, (80 160) 100 = 50%. This differs from margin, which is profit selling price. Mark-up analysis helps buyers understand supplier pricing structures, detect hidden margins, and strengthen negotiation. By knowing whether a supplier is working with high or low mark-up levels, buyers can challenge prices more effectively or justify alternative offers. This analytical preparation supports objective negotiation rather than reliance on supplier claims.
Question 923
Which of the following is an objective of proposing phase?
Answer : D
In the study guide, CIPS lists 5 stages of an negotiation:
The opening phase: confirm understanding and get the issues on the table. At this stage, both parties should check agenda, authority and create atmosphere conducive to agreement
The testing phase is an information gathering stage where the hypothesis and assumptions you have made in the planning stage can be tested and confirmed or disconfirmed
The proposing phase: Both sides may start making tentative proposals regarding their offering.
The bargaining phase: Both parties trade concessions; the preliminary stages are over and proposals move from being tentative and general to being more definite and specific.
The agreement and closing phase: both parties should seek agreement or if TOP does not have the final authority, some sort of acknowledgement of what key terms are should be sought.
Question 924
A garden furniture supplier currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating in the supplier's environment (their site) can unintentionally shift the power dynamic. The supplier may gain apsychological edgedue to the comfort and control of their surroundings. Best practice recommends holding negotiations in aneutral settingto ensure balance and reduce any influence based on physical context. While site visits are beneficial for supplier evaluation, they should beseparate from the negotiationto maintain objectivity.
Question 925
Which of the following is a source of power in organisational relationships?
Answer : A
Question 926
Which type of negotiation strategy should be adopted when the relationship is important and both parties want to help each other achieve their goals?
Answer : A
The collaborative strategy (win-win, integrative) focuses on joint problem-solving, transparency, and trust. It is best when long-term relationships are critical, and both parties see value in mutual success. By contrast, competitive (win-lose) is adversarial, accommodative sacrifices one party's interests, and avoidance seeks disengagement. Collaborative strategies are common in partnerships, innovation projects, and sustainable procurement. They require sharing information, identifying tradeables, and aligning objectives beyond price to long-term outcomes.
Question 927
In which of the following scenarios could you adopt a distributive-based negotiation approach?
Answer : D
Question 928
A break-even analysis uses which aspects as part of the calculation?
Fixed cost
Buying cost minus variable cost per unit
Variable cost
Selling price minus variable cost per unit
Answer : A
Break-even analysis identifies the sales volume required to cover fixed costs. It relies on:
Fixed costs (constant regardless of output).
Question 929
Which of the following would help build trust in a relationship?
Mediation attendance
Regular meetings
Keep promises
Coercion
Answer : B
Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.
Question 930
In general, which of the following is the consequence of a flatter demand curve?
Answer : B
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor.
In microeconomic graphs, elasticity and inelasticity can be shown by the slope of the demand curve. If a demand curve is almost horizontal, then the product pricing can be described as very elastic. If a demand curve is almost vertical, then the product pricing can be described as very inelastic.
The formulae of elasticity:
Text Description automatically generated with low confidence
Table Description automatically generated with medium confidence
LO 2, AC 2.2
Question 931
According to Professor Gavin Kennedy, in which of the following forms of dispute resolution, both parties will voluntarily exchange their ideas and beliefs?
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.
Question 932
Citywide Developments Ltd (CDL) is a construction programme management company that delivers high-value property development schemes. CDL uses named consultant design services in contracts. Recently, consultancy day rates have increased. Which of the following tradeable concessions could CDL offer when negotiating with suppliers to achieve lower rates, without lowering service quality?
Answer : D
By removing the requirement for named personnel, CDL could allow the supplier flexibility in allocating equally competent but possibly less expensive staff. This tradeable does not compromise on quality but helps control costs.
Question 933
Which of the following are sources of power in organisational relationships?
Coercive power
Intruded power
Referent power
Tactical power
Answer : C
Coercive powerstems from the ability to apply pressure or sanctions, whilereferent powercomes from reputation, charisma, or respect. These are both recognised power sources in negotiations. ''Intruded'' and ''tactical'' power are not classified within the standard power framework used in CIPS materials.
''Sources of power include coercive (based on threats or penalties), referent (based on personal appeal or influence), and others such as reward, expert, and legitimate power.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Power in Negotiation)
Question 934
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Question 935
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 936
Which of the following is active listening?
Answer : C
Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS's guidelines for effective negotiation communication.
Question 937
Which of the following is the first step in the development of negotiation strategies?
Answer : D
Developing specific negotiation strategies in areas where risk or spend is high involves analysing a wide range of objectives and variables within the context of the organisation's business requirements. The first stage in any negotiation preparation is to define your overall objectives which may be related to a single variable such as price in the case of a standardised requirement, or many variables in the case of capital equipment. Your negotiating strategies and tactics will all be focused on achieving overall objectives.
Question 938
A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier over a contract for critical new services. They have decided they want to find a Win/Win (integrative) solution. Which TWO of the following would be appropriate in this scenario?
Answer : A, B
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.
Question 939
Can a party gain huge advantages in negotiation from setting room layout?
Answer : B
Essentially, for trained negotiators under most circumstances, the physical locations of negotiations and the room layout should not make much difference to the outcomes of the meeting. It is reasonable to assume that most commercial negotiations are based at least initially on a principled- or pragmatic-type approach. It is arguable also that any advantage gained through intentionally creating an uncomfortable environment to put short-term pressure on TOP is likely to be short-lived as TOP will likely reflect on this later and seek means to get even.
Question 940
Should a buyer use closed questions in a negotiation?
Answer : A
Asking questions the right way is both an art and a science. Ask the question the wrong way, and the other negotiator might act like a turtle, becoming defensive and withdrawing into their shell. Ask the question the right way, and the other negotiator might ''spill the beans.''.
Closed Questions: How and when to use them?
Closed questions are those that require a short and focused answer, and are especially helpful in the beginning stages of the negotiation to encourage interaction. They can be used to clarify a point, or to reconfirm certain facts. For example, you can use a closed question to confirm the amount of units the company can produce in a week, or to clarify that what they are really saying is that they don't feel comfortable outsourcing their accounts to India. Most closed questions only require a simple ''yes'' or ''no'' response, so there really isn't much room for misinterpretation -- great for finding out where both you and they stand.
CIPS study guide page 169
What Questions Can We Ask In Negotiations?
Question 941
Which of the following statements about oligopoly is incorrect?
Answer : D
An oligopoly exists when there are small number of producers that exert a significant influence in the market. Oligopoly's main characteristics are discussed as follows:
- Interdependence
The most important feature of oligopoly is the interdependence in decision-making of the few firms which comprise the industry. This is because when the number of competitors is few, any change in price, output, product etc. by a firm will have a direct effect on the fortune of its rivals, which will then retaliate in changing their own prices, output or products as the case may be.
- Importance of advertising and selling costs
A direct effect of interdependence of oligopolists is that the various firms have to employ various aggressive and defensive marketing weapons to gain a greater share in the market or to prevent a fall in their market share. For this various firms have to incur a good deal of costs on advertising and on other measures of sales promotion. Therefore, there is a great importance of advertising and selling costs under conditions of market situation characterised by oligopoly
- Group behaviour
Another important feature of oligopoly is that for the proper solution to the problem of determination of price and output under, it analysis of group behaviour is impor-tant.
- Indeterminateness of demand curve facing an oligopolist
In this question, 'Prices in oligopoly are predicted to fluctuate widely and frequently' is an incorrect statement as producers in oligopoly often try to set up price. Prices fluctuate more frequently in perfect competition.
LO 2, AC 2.2
Question 942
Apart from negotiation, which other approaches are available to a buyer to ''reach an agreement''? Select THREE approaches that apply.
Answer : A, B, D
CIPS recognises that agreement can be reached without formal negotiation by using alternative influence-based approaches. Accommodating involves one party yielding to preserve relationships or progress. Persuasion uses communication, reasoning, and influence to shape the other party's views and decisions. Problem solving focuses on jointly identifying solutions that address both parties' needs. These approaches are particularly useful where relationships are important or power is balanced. Team management, psychodynamic management, and validation of reporting are not recognised CIPS agreement-reaching approaches within commercial negotiation theory. The ability to choose the correct approach enhances negotiation effectiveness and relationship outcomes.
Question 943
Under EU public procurement directives, which of the following are procedures in which there is no commercial negotiation allowed?
Answer : B, C
Under the European Union public procurement directives, all public sector bodies must abide by certain rules when they procure goods and services over a threshold value. These rules are codified under 5 procurement procedures:
1. Open Procedure
2. Restricted Procedure
3. Competitive Dialogue
4. Competitive Procedure with Negotiation
5. Innovation Partnerships.
Under normal circumstances, there is no commercial negotiation allowed under the two most commonly used procedure, Open and Restricted. Under these procedures, the prices and terms and conditions of contract should be decided via reference only to the tenderers' responses to the buyer's requests for tenders, and not through 'post-tender negotiation'. Under the other procedure, negotiation within the rules is permitted. Interested learners can read more about these procedures here.
LO 1, AC 1.1
Question 944
A negotiation process ends once the negotiating meeting has finished. Is this statement true?
Answer : C
Question 945
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
Answer : A, C, E
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 conditionthat would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
Question 946
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?
Answer : C
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.
CIPS study guide page 164-165
What Is a Coalition Anyway?
Question 947
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
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
Question 948
Which type of question is most effective for checking facts in negotiation?
Answer : D
Closed questions (requiring yes/no or factual answers) are best for verifying facts, ensuring clarity and accuracy. Open questions are useful for exploration, while hypothetical test possibilities, and leading steer responses. In negotiation, closed questions confirm details such as prices, quantities, or deadlines, preventing ambiguity in agreements. CIPS stresses using the full range of question types strategically, with closed questions essential in finalising commitments.
Question 949
A buyer continually states during negotiation that budget constraints limit their concessions. What tactic is being used?
Answer : C
The broken record tactic involves repeating the same point to reinforce a position, making it difficult for the other party to ignore. Here, the buyer keeps citing budget constraints to avoid moving away from their position, hoping repetition will wear down the supplier's resistance. This tactic is common in distributive bargaining and aims to anchor discussions around a fixed limitation. While effective, overuse risks damaging relationships, so skilled negotiators balance it with genuine reasoning and integrative approaches when appropriate.
Question 950
Which of the following are examples of variable costs?
Building and site rent
Annual insurance premium
Raw materials expenditure
Delivery costs for materials
Answer : D
Variable costs fluctuate with production volume --- e.g., raw materials and delivery costs. Fixed costs such as rent and insurance remain constant regardless of output. In negotiations, suppliers may inflate fixed cost allocations to justify pricing; buyers should differentiate between fixed and variable costs to challenge pricing more effectively. Recognising true variable costs also allows negotiating for volume-related discounts.
Question 951
IHL has been supplying to XYZ Ltd for months. XYZ Ltd procurement manager Diana realises that the IHL's input prices are dropping and this is a good time to re-negotiate the price of the contract. She invites IHL representative to XYZ headquarter to make a bargain on the current price. At the opening stage of the negotiation, Diana requests a 10% reduction in price with an increase in volume purchased.
Is Diana's action appropriate in the opening phase?
Answer : D
The opening stage of the negotiation covers the very first few minutes when the parties meet and greet each other and are seated in the negotiation room in preparation for the main event.
Typical behaviours at the opening stage: 'dos' and 'don'ts'
Do's
Be punctual and well presented (welcome their arrival)
Break the ice with small talks
Start the conditioning process
Check authority
Check agenda
Consider using visual aid to set out key objectives or make key points
Don'ts
Use strong, pushy, cold or tough style at the opening
Put down marker at this stage
Criticise other organisations/TOP's previous contacts/third parties.
In this scenario, Diana has made her proposal right at the opening stage. This is an example of 'don'ts'. Good negotiators are very careful about 'red lines'. If she puts such barrier up too early, the supplier may not try to look for more creative solutions later in the negotiation.
Question 952
Any commercial negotiation process has only three stakeholders: procurement, budget holders, and users. Is this TRUE?
Answer : D
Commercial negotiations involve a wider set of stakeholders than procurement, budget holders, and users. Depending on context, directors, IT specialists, legal teams, regulators, or external partners may all be impacted. Ignoring them risks resistance or missed requirements. CIPS stresses stakeholder mapping tools (such as Mendelow's Matrix) to identify influence and interest levels, ensuring all relevant parties are managed appropriately in negotiation preparation and execution. Narrow stakeholder identification can undermine outcomes.
Question 953
The procurement manager of a private healthcare provider is running an IT project. Who would be the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : D
In the context of aninternal IT project, the relevant stakeholders would be thosedirectly involved in decision-making and implementation.Senior managementoversees funding and strategic fit, whilesoftware developersensure technical support. The general public and pharmaceutical suppliers are external and not primary stakeholders in this scenario.
''Stakeholder identification must focus on individuals or groups directly involved or affected by the procurement. This includes internal sponsors, end-users, and technical staff responsible for delivery.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Internal and External Stakeholders)
Question 954
Which of the following would be considered appropriate influencing techniques in contract negotiation? Select TWO that apply.
Answer : C, E
Framing and re-framing (C) and Anchoring (E) are powerful influencing techniques:
Framing and re-framing (C): This technique shapes how information is presented to make specific aspects more compelling or relevant.
Anchoring (E): Anchoring sets an initial reference point, which influences how subsequent information is perceived.
These techniques help negotiators control the flow and focus of discussions, aligning with CIPS recommendations for strategic influence in negotiations.
Question 955
In which of the following scenarios could you adopt a distributive-based negotiation approach?
Answer : D
Question 956
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
''Expanding the pie'' is a strategy used in integrative negotiations where both parties collaborate to increase the total value available before dividing it. This leads to mutual gains and supports long-term, strategic relationships.
Question 957
Which of the following is an example of non-verbal communication?
Answer : C
Question 958
John Browne, a junior buyer for a corporation, is analysing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : C
Foreign exchange ratesdirectly influence thecost of imported goods and services. Currency fluctuations can affect total expenditure, supplier margins, and ultimately the buyer's profitability. Even if payment is in local currency, suppliers may adjust their pricing to mitigate foreign exchange risks.
''Foreign exchange volatility can significantly impact pricing in international procurement. Buyers must assess currency risks as part of their cost evaluation and strategic preparation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.2 - Macroeconomic Considerations in Pricing)
Question 959
The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : C
For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.
Question 960
Professional buyer is planning for the next negotiation of a simple one-off contract. This negotiation is typified by which of the following? Select TWO that apply.
Answer : D, E
Professional buyers, when planning or engaging in negotiation with suppliers, should always be aware of where the intended and actual relationship with this supplier is positioned on the 'spectrum' or 'continuum' of commercial relationships. The relationship spectrum describes the range of commercial relationships between a buyer and supplier based on richness of communication, longevity and mutual dependence.
In the question, the contract is simple one-off (or spot buy), which means the relationship will likely to be more transactional. In such relationship, price is the most important criteria and buyer may adopt arm's-length approach.
Question 961
Which of the following is a source of information on microeconomic factors?
Answer : D
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Question 962
The buyer's bargaining power tends to be relatively higher than supplier's bargaining power in which of the following circumstances?
Answer : D
Buyer power gives customers/consumers (buyers) the ability to squeeze industry margins by pressuring firms (the suppliers) to reduce prices or increase the quality of services or products offered.
There are four major factors to consider when determining the bargaining power of buyers:
1. Number of buyers relative to suppliers: If the number of buyers is small relative to that of suppliers, the buyer's power will be stronger.
2. Dependence of a buyer's purchase on a particular supplier: If a buyer is able to get similar products/services from other suppliers, buyers depend less on a particular supplier. Therefore, the power of the buyer would be greater.
3. Switching costs: If there are not many alternative suppliers available, the cost of switching is high. Therefore, buyer power would be low.
4. Backward Integration: If the buyer is able to integrate or merge suppliers, the buyer has greater bargaining power over the existing suppliers.
When is Bargaining Power of Buyers High/Strong?
There are fewer buyers relative to that of suppliers
The switching costs of the buyer are low
If the buyer is able to backward integrate
The buyer purchases product in bulk (high volume)
The buyer is able to get similar product/services from other suppliers
The buyer purchases the majority of the seller's products
Several substitutes are available on the market
Product is not differentiated
CIPS study guide page 54-56
What is the Bargaining Power of Buyers?
Question 963
Where a market consists of a large producer of a product with high market power, it is known as:
Answer : C
Question 964
Which of the following should be adopted to minimise the conflict between parties in commercial negotiation?
Answer : D
Ground rules are the basic rules for doing something (Cambridge Dictionary). A negotiation goes more smoothly if ground rules are adopted. Then if something goes awry at a later time, you can point out the ground rule that has been violated. Procurement professional should seek to minimise conflict over process through agreeing 'ground rules' and approach as far as possible with the other party in advance of any negotiation meetings.
There should be two sets of ground rules: 1) ground rules for the negotiations between the two parties and 2) ground rules for the negotiating team itself. This article is about the negotiating team ground rules.
The rule of law is the condition in which all members of society, including its political leaders, accept the authority of the law.
Ground zero describes the point on the Earth's surface closest to a nuclear detonation. In the case of an explosion above the ground, ground zero refers to the point on the ground directly below the nuclear detonation.
The Ground Beam is the beam which is provided usually at the foundation level to support building walls, joists, etc.
Question 965
When is the best time for buyer to propose the negotiation agenda to potential supplier?
Answer : D
A business negotiation agenda is a formal agreed upon list of goals to be achieved or items to be discussed in a particular order during a meeting or negotiation. Agendas can be formal and obvious, or informal and subtle in negotiations.
The agenda is one of the main structural elements of negotiation, in addition to such questions as site, identification of participants, and elements of timing. Together, they answer the who, what, when, and where questions. As with other aspects of negotiation, the agenda can be used either manipulatively to enhance leverage or to improve the prospects for agreement and the possibilities for mutual gain. In most cases, it will be used both ways, reflecting the nature of negotiation as a ''mixed-motive'' situation.
Although it can be instrumental to [research] volunteer as a sole source to write the agenda, in most cases it becomes a joint activity to construct a consensual basis for subsequent negotiation. In these situations, agenda-building becomes one of the pre-negotiation activities that set the tone for the relationship (Saunders, 1985). In other situations, the parties may engage in actual negotiation without a formal or written agenda. When this occurs, the risks and uncertainties may be high but the party who appreciates the importance of the informal agenda has a tremendous advantage.
Whether one plans it or not, during the course of negotiation the parties will discuss a finite set of issues in some sequence and from a particular perceptual framework. Consciousness of the universality and centrality of the agenda is prerequisite to guiding negotiation to a successful conclusion.
CIPS study guide page 146-150
Managing the negotiation agenda | SpringerLink
What is Negotiations Agenda - Negotiation Coaching (brightfocusconsult.com)
Question 966
After studying Thomas-Kilmann conflict resolution model and considering different approaches carefully, the procurement team of XYZ Ltd. decides to adopt an avoiding approach to the upcoming negotiation with one of their suppliers. Which of the following will be the objective of XYZ procurement team in this negotiation?
Answer : B
Avoiding is unassertive and uncooperative. When avoiding, an individual does not immediately pursue his or her own concerns or those of the other person. He or she does not address the conflict. Avoiding might take the form of diplomatically sidestepping an issue, postponing an issue until a better time, or simply withdrawing from a threatening situation.
LO 1, AC 1.1
Question 967
A building firm has been awarded a contract to build a new office block, and the
building firm needs to separate its direct and indirect costs.
Which one of the following is a direct cost to the building of the new office block?
Answer : A
Question 968
Which of the following are internal factors when a supplier is making its pricing decision?
Price elasticity of demand
Environmental legislation
Risk management
The stage in the product life cycle
Answer : D
Risk management (3) and the stage in the product life cycle (4) are internal factors within the supplier's control and directly influence pricing decisions. These internal factors guide strategicpricing policies. In contrast, price elasticity of demand and environmental legislation are external factors, as per CIPS's guidelines on pricing influences.
Question 969
Which of the following are elements of price negotiations? Select the TWO that apply.
Answer : A, C
Price negotiations extend beyond headline unit price and include elements that influence total commercial value. Pricing arrangements (such as fixed, variable, indexed, or cost-plus pricing) directly affect financial risk and cost certainty. Terms of payment influence cash flow, working capital, and overall cost of ownership, making them core price-related negotiation variables. Sales tax is typically regulated and not negotiable, while cash flow management and administration costs are internal organisational concerns rather than negotiated price elements. CIPS emphasises a holistic approach to price negotiations that considers structure and payment terms, not just price level.
Question 970
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Answer : C
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Question 971
Which of the following would describe a push approach to influencing?
Exerting power or authority
Extensive use of open questioning
The party being influenced is fully aware of the process occurring
The party being influenced may not be aware of the process happening
Answer : C
A push approach typically involves exerting authority or power (1) with the party being influenced generally aware of the influence process (3). This method involves overtly directing or persuading the other party, often through explicit information or directives, as per CIPS's understanding of push influence techniques.
Question 972
A procurement manager is about to lead an important negotiation with a new IT supplier and has insisted the first meeting takes place at the buying organisation's office. Will this give one party an advantage?
Answer : A
Contextual (environmental) power includes home-ground advantage, control of the venue, access to colleagues and data, and comfort with logistics---all of which can tilt confidence and leverage toward the host (the buyer).
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Question 973
Which of the following is considered a weakness of a 'dealer' style negotiator?
Answer : A
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of dealer style are described below:
LO 2, AC 2.4
Question 974
Which of the following statements about oligopoly is incorrect?
Answer : D
An oligopoly exists when there are small number of producers that exert a significant influence in the market. Oligopoly's main characteristics are discussed as follows:
- Interdependence
The most important feature of oligopoly is the interdependence in decision-making of the few firms which comprise the industry. This is because when the number of competitors is few, any change in price, output, product etc. by a firm will have a direct effect on the fortune of its rivals, which will then retaliate in changing their own prices, output or products as the case may be.
- Importance of advertising and selling costs
A direct effect of interdependence of oligopolists is that the various firms have to employ various aggressive and defensive marketing weapons to gain a greater share in the market or to prevent a fall in their market share. For this various firms have to incur a good deal of costs on advertising and on other measures of sales promotion. Therefore, there is a great importance of advertising and selling costs under conditions of market situation characterised by oligopoly
- Group behaviour
Another important feature of oligopoly is that for the proper solution to the problem of determination of price and output under, it analysis of group behaviour is impor-tant.
- Indeterminateness of demand curve facing an oligopolist
In this question, 'Prices in oligopoly are predicted to fluctuate widely and frequently' is an incorrect statement as producers in oligopoly often try to set up price. Prices fluctuate more frequently in perfect competition.
LO 2, AC 2.2
Question 975
When considering a new supply source for a product, a procurement professional reviews supplier quotations before negotiation. Which of the following is a direct cost in the supplier's quotation?
Answer : C
Direct costs are those directly attributable to the production of a unit --- such as raw materials, components, and direct labour. Here, the metal used is a clear direct cost, as it varies with production output. Rent, insurance, and sales wages are indirect (overhead) costs, which must be allocated across products. Understanding this distinction is vital in negotiations, since direct costs are easier to challenge for efficiency gains, while indirect allocations may be arbitrary. Buyers with clear knowledge of cost breakdowns can negotiate more effectively, avoiding inflated pricing.
Question 976
Which of the following are examples of variable costs?
Answer : D
Question 977
A skilled negotiator will use a range of questioning techniques. If they wish to explore options with the other party without making any formal commitment, which style would they use?
Answer : B
Hypothetical (''What if...'') questions test possibilities and invite creative options without binding either side. They help probe interests and packages while keeping commitment provisional.
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Question 978
A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier over a contract for critical new services. They have decided they want to find a Win/Win (integrative) solution. Which TWO of the following would be appropriate in this scenario?
Answer : A, B
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.
Question 979
Maria fears her proposed pricing may be rejected by the supplier. To mitigate this risk, she is preparing a BATNA. Is this the correct approach?
Answer : B
BATNA (Best Alternative to a Negotiated Agreement) gives negotiators a fallback plan if discussions fail. It ensures they never accept worse terms than their minimum acceptable alternative. For Maria, developing a BATNA mitigates rejection risk, strengthens her bargaining power, and provides confidence. Without a BATNA, negotiators risk over-conceding or being locked into unfavourable deals. CIPS emphasises that BATNAs must be realistic, actionable, and aligned to organisational objectives---not merely theoretical alternatives.
Question 980
John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?
Answer : C
While stakeholder feedback is crucial, meetings are not always the most effective review method. Reviews may be better conducted through reports, surveys, or individual debriefs, depending on context. The key is to capture lessons learned, successes, and areas for improvement, and to record them for future negotiations. Forcing all stakeholders into one meeting risks inefficiency or unproductive blame games. CIPS stresses structured reflection and documentation as best practice, ensuring organisational learning and preparation improvements.
Question 981
Which of the following is a key element to developing high-trust supplier relationships?
Answer : C
Trust develops when organisations consistently deliver on commitments---meeting deadlines, respecting terms, and fulfilling promises. While audits, contract management, and data gathering support oversight, they do not in themselves build trust. In collaborative negotiations, reliability becomes the foundation of long-term partnerships, reducing the need for constant monitoring. CIPS highlights that trust is fragile and must be reinforced through transparency, consistent behaviour, and alignment of actions with words. This credibility is more persuasive than any formal monitoring.
Question 982
John Browne, a junior buyer for a corporation, is analysing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : C
Foreign exchange ratesdirectly influence thecost of imported goods and services. Currency fluctuations can affect total expenditure, supplier margins, and ultimately the buyer's profitability. Even if payment is in local currency, suppliers may adjust their pricing to mitigate foreign exchange risks.
''Foreign exchange volatility can significantly impact pricing in international procurement. Buyers must assess currency risks as part of their cost evaluation and strategic preparation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.2 - Macroeconomic Considerations in Pricing)
Question 983
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier makes their closing statements, they are most likely to be doing which of the following?
Answer : B
As negotiations near closure, skilled negotiators carefully observe for buying signals---verbal cues (''That sounds reasonable...'') and non-verbal cues (nodding, smiling, leaning forward). These indicate readiness to agree and confirm whether it is the right time to close. At this stage, both sides usually stop gathering data or building rapport, as the focus is on confirming alignment and avoiding last-minute derailments. Closing too early may risk missing concessions, but delaying risks cooling momentum. Recognising buying signals ensures closure occurs at the optimal point, aligning with preparation and tactical awareness.
Question 984
Representatives from South African Department of Health is negotiating the price of hospital drugs with US pharmaceutical companies. Which of the following are most likely to be macro factors that influence the outcomes of the negotiation? Select TWO that apply.
Answer : B, D
All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forces which both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
Particularly, pharmaceutical industry is a heavily regulated sector, therefore, legal and regulatory matters in the industry is highly important. Otherwise, technological trends also permeate into pharmaceutical companies, technologies like digitalisation may transform the balance of power in such negotiation.
LO 1, AC 1.3
Question 985
Distributive approach in negotiation is typified by which of the following?
Answer : C
Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Commercial situations often demand a distributive bargaining approach, if the 'pie' is inherently of a fixed size. In this case, any conflicts must be resolved by sharing it.
In win-lose approach, a negotiator wants to maximise the value obtained in a single deal, the relationship with the other party is not important. Therefore, a strong party may win more than 50% of the metaphorical 'pie'.
It should not be assumed that win-win can be applied to all commercial negotiations, or that win-lose approaches are inherently inferior.
Question 986
Which of the following are tactics of distributive bargaining?
Withholding information that may open up common ground
Coercing the other party to accept your position
Finding common ground between parties
Being open about all your common needs
Answer : C
Distributive bargainingfocuses onmaximizing one's own gainat the expense of the other party. Common tactics includewithholding informationandcoercion. It is typically used in zero-sum negotiations where parties compete over a fixed value.
''Tactics in distributive bargaining include withholding key information, making extreme opening offers, and using pressure to achieve concessions. These are aimed at maximizing individual outcomes.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.5 - Tactics of Distributive Bargaining)
Question 987
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?
Answer : A
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 988
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier takes steps to make their closing statements, they are most likely to be doing which of the following?
Answer : A
As a negotiation nears theclosure stage, experienced negotiators look forbuying signals--- both verbal (e.g., positive affirmations) and non-verbal (e.g., nodding, leaning in). These cues indicate readiness to agree and allow the negotiator to move confidently into closing the deal.
''At the closing stage, negotiators should observe both verbal and non-verbal buying signals. These cues can indicate readiness to commit, helping to time the final proposal or acceptance effectively.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Closing the Negotiation)
Question 989
'What specific tests do you carry out to ensure quality is achieved?' This is an example of which type of negotiation question?
Answer : B
The question requires more detailed answer, it is an example of probing question.
Probing questions are typically follow-up questions, and aim to elicit more detailed information on the back of the answer elicited from the open questions. Probing question are also useful to check that the supplier fully understand their offering, as well as your needs, can also be used to communicate to the suppliers that you know this category well.
LO 3, AC 3.3
Question 990
A procurement team has discussed, in advance of a negotiation, what they will do if there is no agreement with the current supplier. They have decided that they will perform the services themselves in-house on a trial basis if no deal is made. Which of the following describes what they have prepared here?
Answer : A
Question 991
A procurement expert has been asked to ensure they consider emotional intelligence in their negotiation strategy. They have agreed to this and have started planning their approach. Which of the following describes emotional intelligence?
Answer : C
Emotional intelligence involves the ability to recognize and manage one's emotions and empathize with others. This skill allows negotiators to respond appropriately to both their own feelings and the emotional cues of the other party, fostering a more constructive and adaptive negotiation environment. CIPS highlights emotional intelligence as a valuable asset in understanding and influencing negotiation dynamics.
Question 992
Toby is an international sourcing category buyer within a third sector (not-for-profit) organisation. He has chosen to use a more adversarial style of negotiation as he believes his organisation has greater bargaining power over the supplier.
In what other situation would an adversarial relationship be used by Toby?
Answer : D
An adversarial (win--lose) negotiation approach is most appropriate where the relationship is short-term and transactional, and where long-term collaboration is not required. In such situations, the buyer may focus on maximising immediate value rather than building trust or joint efficiencies. A monopoly market places power with the supplier, making adversarial tactics ineffective. Where there are mutual objectives for efficiencies, an integrative (win--win) approach is more suitable. CIPS makes clear that adversarial negotiation is not appropriate in all negotiations, only where conditions such as short-term focus, low relationship dependency, and buyer power exist.
Question 993
Which of the following are stages of a win-win approach to negotiations?
Find out where the interests of both parties align
Design new options, where everyone gets more of what they need
Limit the resources to a fixed number
Insist that the agreement includes subjective regulatory standards
Answer : A
A win-win (integrative) negotiation focuses on shared interests and joint value creation. The first step is identifying where both parties' interests align, followed by designing creative options that allow both sides to gain more of what they need. Limiting resources and imposing subjective standards are characteristics of distributive or adversarial approaches and restrict value creation. CIPS clearly distinguishes integrative negotiation as collaborative, interest-based, and solution-focused, particularly suitable for long-term and strategic supplier relationships.
Question 994
A breakeven analysis uses which of the following aspects as part of the analysis?
Answer : A, D
Question 995
John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?
Answer : C
While stakeholder feedback is crucial, meetings are not always the most effective review method. Reviews may be better conducted through reports, surveys, or individual debriefs, depending on context. The key is to capture lessons learned, successes, and areas for improvement, and to record them for future negotiations. Forcing all stakeholders into one meeting risks inefficiency or unproductive blame games. CIPS stresses structured reflection and documentation as best practice, ensuring organisational learning and preparation improvements.
Question 996
Absorption costing is when the total cost per each unit of output:
Answer : B
Question 997
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
Answer : A, C, E
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 conditionthat would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
Question 998
Which of the following are recognised techniques in contract negotiation? Select THREE that apply.
Answer : A, C, F
The question asks about negotiation techniques which are not present in the book. In this question, there are only 3 recognised techniques:
- Framing and reframing: A frame is an assumption, or set of assumptions, that guides our attention and behavior. Reframing is the ability to identify and significantly change assumptions or perspectives. Framing has a significant impact on the effectiveness of negotiation outcomes and negotiator working relationships. You can read more on framing and reframing here.
- Anchoring: Anchoring bias is well-known cognitive bias in negotiation and in other contexts. The anchoring bias describes the common tendency to give too much weight to the first number put forth in a discussion and then inadequately adjust from that starting point, or the ''anchor.'' We even fixate on anchors when we know they are irrelevant to the discussion at hand. You can read more on anchoring here.
- Pacing and leading: Pacing and leading is a two-step lever of persuasion. First -- You ''match your pace'' to the person you want to influence in as many ways as possible. You can do this by mimicking the way the person talks, stands, their appearance, etc. You can also mimic less tangible aspects like the way they act, or their emotional state. Second -- Once you've set your pace with someone, lead them to whatever decision or behavior you want them to take! You can read more on pacing and leading here.
LO 3, AC 3.2
Question 999
Which of the following are most likely to be direct costs of a steel manufacturer? Select THREE that apply.
Answer : B, E, F
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
Question 1000
A building firm has been awarded a contract to construct an office block. Which is a direct cost?
Answer : A
Direct costs are attributable to a specific project --- in construction, this includes materials and on-site labour. Legal fees, insurance, and office space are indirect costs, as they support the business overall but are not tied to one project. For buyers, distinguishing direct from indirect costs ensures pricing transparency and helps challenge excessive overhead allocations. This knowledge strengthens cost breakdown negotiations in project contracts.
Question 1001
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way of analysing costs is to classify them into direct and indirect costs.
Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Direct costs are expenses that can be clearly attributed to the production of specific goods. These typically include raw materials, direct labor, and other costs tied directly to the manufacturing process. They are variable with production volume and help procurement teams analyze pricing more effectively during negotiations.
Question 1002
Maria is a professional services category buyer within the National Health Service. Due to severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
Question 1003
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
Answer : A, D
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
Question 1004
An adversarial style of negotiation is appropriate where the buyer has greater bargaining power over the supplier. In what other situations may the buyer adopt this style of negotiation?
Answer : B
An adversarial negotiation style is more suitable in a market with many alternative sources and substitutes (B). When there are multiple suppliers, buyers have the upper hand and can adopt a competitive stance without risking supply continuity. This aligns with CIPS guidance on the use of adversarial styles in competitive markets with numerous alternatives.
Question 1005
Which TWO strategies are recognised for achieving a win--lose outcome?
Making the other party lower its resistance point
Making the other party believe this settlement is the best it can achieve
Employing empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
Win--lose strategies focus on gaining advantage at the other party's expense. Forcing them to lower their resistance point or persuading them the deal is their best option are classic distributive tactics. Empathy, compromise, and creativity belong to integrative approaches aimed at mutual benefit. Recognising these distinctions ensures negotiators adopt the right strategy for the relationship type and context.
Question 1006
''A negotiation ends once the meeting finishes.'' Is this statement true?
Answer : D
Negotiations do not end at the meeting; they continue through reflection, documentation, and post-negotiation review. Best practice involves assessing whether objectives were met, capturing lessons learned, and ensuring written confirmation of terms. Without this, misunderstandings or missed improvements can occur. Reflection allows organisations to continuously strengthen negotiation strategies and build learning cycles.
Question 1007
Ranjit is sourcing security clothing and PPE from overseas suppliers. He wants to remove foreign-exchange fluctuation risk and has asked suppliers to quote in GBP. Will this remove the fluctuation risk for the hospital?
Answer : B
Setting the contract currency to the buyer's currency transfers FX exposure to the supplier. The buyer gains price certainty in GBP, although the supplier may price in a risk premium---a common application decision when negotiating internationally.
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Question 1008
Which of the following is a variable cost?
Answer : D
Variable costs change in proportion to production volume, such as packaging, raw materials, and delivery. Fixed costs (rent, insurance, loan repayments) remain constant regardless of output. Recognising the difference is crucial when negotiating supplier pricing, as variable costs are often more open to tradeable adjustments (e.g., bulk discounts). Buyers who understand cost structures can challenge inflated fixed allocations or negotiate on genuine variable elements. This knowledge is vital in price breakdown discussions and in cost-modelling negotiations.
Question 1009
A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?
Answer : C
Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values. A smile, a 'yes' and the type of hospitality received, (in the business context), can mean very different things in different international business cultures.
Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide towhat TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.
Question 1010
The activity of listening in a negotiation includes which of the following processes?
Hearing
Interpreting
Rapport
Influencing
Answer : A
Listening involves both hearing (1) and interpreting (2) the information shared by the other party. Effective listening is an active process that goes beyond simply hearing words; it involvesinterpreting meaning, understanding the speaker's intent, and responding accordingly. CIPS emphasizes these steps as part of effective communication in negotiations.
Question 1011
Listening is a key activity in any negotiation. Which of the following are characteristics of effective listeners?
Answer : C
Question 1012
Power is used only in adversarial negotiation situations to secure a 'win' outcome against the other side. Is this statement correct?
Answer : C
Question 1013
Which characteristics are likely to feature within an integrative negotiation?
Maximising the other party's outcome to enhance relationships
Maximising joint outcomes
Short-term focus
Pursuit of goals held jointly with other party
Answer : C
Integrative negotiationfocuses onmutual gainand long-term collaboration. It seeks tomaximize joint outcomesand encourages parties to align interests andpursue shared goals. This contrasts with distributive tactics that prioritize individual wins and short-term gains.
''Integrative negotiations aim to create outcomes where both parties benefit. Shared problem-solving, information exchange, and joint goal pursuit are central features of this approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Principles of Integrative Negotiation)
Question 1014
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latest meeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : C
Question 1015
Which of the following are types of non-verbal communication that could be used during a negotiation meeting? Select THREE that apply.
Answer : C, E, F
Non-verbal communicationsignificantly affects the dynamics of negotiation.Hand gestures,eye contact, andfacial expressionscan reinforce spoken words or contradict them. These elements can influence perception, trust, and the tone of the negotiation.
''Non-verbal communication includes gestures, posture, eye contact, and facial expressions. These play a critical role in how messages are received and interpreted.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Verbal and Non-Verbal Communication Techniques)
Question 1016
Should a buyer use closed questions in a negotiation?
Answer : A
Asking questions the right way is both an art and a science. Ask the question the wrong way, and the other negotiator might act like a turtle, becoming defensive and withdrawing into their shell. Ask the question the right way, and the other negotiator might ''spill the beans.''.
Closed Questions: How and when to use them?
Closed questions are those that require a short and focused answer, and are especially helpful in the beginning stages of the negotiation to encourage interaction. They can be used to clarify a point, or to reconfirm certain facts. For example, you can use a closed question to confirm the amount of units the company can produce in a week, or to clarify that what they are really saying is that they don't feel comfortable outsourcing their accounts to India. Most closed questions only require a simple ''yes'' or ''no'' response, so there really isn't much room for misinterpretation -- great for finding out where both you and they stand.
CIPS study guide page 169
What Questions Can We Ask In Negotiations?
Question 1017
When is the best time to adopt accommodating style according to Thomas-Kilmann conflict mode instrument?
Answer : C
According to Thomas-Kilmann conflict model instrument, there are 5 conflict management styles:
Accommodating is an unassertive and cooperative approach to resolving the conflict. Accommodating means conceding to the other party with little debate or fight, not challenging or strongly putting forward your own point of view and generally giving and yielding to the other party's point of view. Accommodating is best used when:
1. When others can resolve the conflict more effectively
2. When the issue is much more important to the other person than to yourself - to satisfy the needs of others and to show you are reasonable
3. To build up social credit for later issues which are important to you
4. When continued competition would only damage your cause
5. When preserving harmony and avoiding disruption are especially important
6. To aid in the managerial development of subordinates by allowing them to experiment and learn from their own mistakes
LO 1, AC 1.1
Question 1018
Which of the following occur within the planning and preparation stage in a negotiation process? Select THREE that apply.
Answer : A, B, F
In the planning and preparation stage of negotiation, it is essential to build a strong foundation by understanding various factors that influence the negotiation outcome. According to CIPS resources, critical aspects of preparation include:
Understanding the other party (A): This helps in anticipating their needs, objectives, and potential negotiation styles, leading to more strategic discussions.
Defining the constituents (B): This involves identifying all stakeholders or parties impacted by the negotiation, ensuring their interests are considered when planning the negotiation strategy.
Analyzing the bargaining power (F): Understanding the relative power each party brings to the negotiation helps in setting realistic goals and predicting possible negotiation dynamics.
These elements are foundational in ensuring a well-rounded approach and enabling both parties to enter negotiations with clarity and strategy, enhancing the potential for a positive outcome.
Question 1019
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
Answer : A, D
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
Question 1020
Commercial negotiations on price cover various aspects, including pricing arrangements. A buyer may negotiate a fixed-price agreement. Why is a fixed-price agreement advantageous to the buyer?
Answer : B
In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier's internal cost build-up (unlike cost-plus).
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Question 1021
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as:
Answer : C
Question 1022
Which of the following are most likely to be macro factors that may influence the balance of power in commercial negotiation? Select THREE that apply.
Answer : A, B, D
All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forces which both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
LO 1, AC 1.3
Question 1023
Which of the following can help both parties to break the vicious cycle of blame when a relationship needs repairing? Select TWO that apply.
Answer : A, C
In order to break vicious cycle of blame, procurement will need to use their negotiation and conflict management skills, adopting a collaborative and integrative approach. Your first action should be to establish the facts that led to the situation where the relationship broke down. Most day-to-day relationship between buying organisations and suppliers do not of course involve procurement staff, so you will need to consult with your business partners internally to establish their point of view of where the issue and sources of conflict are. You should also contact the supplier and get their side of the story - this is particularly to when you have previously identified the supplier as critical or otherwise important to your operations. Ideally you will be able to apply principled negotiation here, separating the people from the issue, focusing on interests and not positions, and then looking for options of mutual benefits.
Question 1024
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Hypothetical questions are used to explore options or scenarios without making commitments. This technique allows negotiators to understand the other party's preferences and limitations by presenting hypothetical situations, as recommended in CIPS guidelines for negotiation questioning techniques.
Question 1025
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Question 1026
Langham Industries is seeking to expand its operations globally. The CEO has asked the procurement department to engage in a macroeconomic analysis for its potential new supply chain to meet organisational objectives and outcomes. Which of the following would be a source of macroeconomic data?
Answer : C
Published market indices are a source of macroeconomic data, as they reflect broader economic trends and provide insights into the overall market environment, which is essential for globalexpansion planning. Macroeconomic analysis focuses on high-level economic indicators, as recommended in CIPS's guidelines on sourcing macroeconomic data.
Question 1027
Effective listening is important in integrative negotiations. Is this statement correct?
Answer : A
Effective listening is crucial in integrative negotiations because it promotes understanding and collaboration. By actively listening, parties can identify shared interests and address concerns, which supports the goal of reaching mutually beneficial solutions. This is a key component in CIPS guidelines on successful integrative negotiation practices.
Question 1028
Which of the following are elements of price negotiations? Select the TWO that apply.
Answer : A, C
Price negotiations extend beyond headline unit price and include elements that influence total commercial value. Pricing arrangements (such as fixed, variable, indexed, or cost-plus pricing) directly affect financial risk and cost certainty. Terms of payment influence cash flow, working capital, and overall cost of ownership, making them core price-related negotiation variables. Sales tax is typically regulated and not negotiable, while cash flow management and administration costs are internal organisational concerns rather than negotiated price elements. CIPS emphasises a holistic approach to price negotiations that considers structure and payment terms, not just price level.
Question 1029
An adversarial style of negotiation is appropriate when the buyer has greater bargaining power. In what other situation may the buyer adopt this style?
Answer : A
Adversarial (win--lose) negotiation is viable when buyers can leverage abundant alternatives and substitutes, reducing supplier power. In such cases, buyers can adopt tough tactics, knowing they can switch suppliers if necessary. By contrast, limited supply, single sourcing, or monopolist suppliers constrain buyer power, making adversarial strategies risky and often ineffective. CIPS stresses that negotiation style must be matched to market conditions and the power balance.
Question 1030
A procurement manager withholds important information to strengthen negotiating power. Is this appropriate when using an integrative negotiation style?
Answer : B
Integrative negotiation relies on openness and trust, aiming to identify underlying interests, not just positions. Withholding information is typical of distributive (win-lose) bargaining, where each side protects its bottom line. In an integrative context, hiding key details prevents mutual understanding, reduces creative option-building, and damages relationship trust. Instead, transparency enables value creation---such as joint cost reduction or innovation. CIPS emphasises that power must be balanced with openness when integrative outcomes are desired.
Question 1031
The buyer's bargaining power tends to be relatively higher than supplier's bargaining power in which of the following circumstances?
Answer : D
Buyer power gives customers/consumers (buyers) the ability to squeeze industry margins by pressuring firms (the suppliers) to reduce prices or increase the quality of services or products offered.
There are four major factors to consider when determining the bargaining power of buyers:
1. Number of buyers relative to suppliers: If the number of buyers is small relative to that of suppliers, the buyer's power will be stronger.
2. Dependence of a buyer's purchase on a particular supplier: If a buyer is able to get similar products/services from other suppliers, buyers depend less on a particular supplier. Therefore, the power of the buyer would be greater.
3. Switching costs: If there are not many alternative suppliers available, the cost of switching is high. Therefore, buyer power would be low.
4. Backward Integration: If the buyer is able to integrate or merge suppliers, the buyer has greater bargaining power over the existing suppliers.
When is Bargaining Power of Buyers High/Strong?
There are fewer buyers relative to that of suppliers
The switching costs of the buyer are low
If the buyer is able to backward integrate
The buyer purchases product in bulk (high volume)
The buyer is able to get similar product/services from other suppliers
The buyer purchases the majority of the seller's products
Several substitutes are available on the market
Product is not differentiated
CIPS study guide page 54-56
What is the Bargaining Power of Buyers?
Question 1032
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 1033
Maria fears her proposed pricing may be rejected by the supplier. To mitigate this risk, she is preparing a BATNA. Is this the correct approach?
Answer : B
BATNA (Best Alternative to a Negotiated Agreement) gives negotiators a fallback plan if discussions fail. It ensures they never accept worse terms than their minimum acceptable alternative. For Maria, developing a BATNA mitigates rejection risk, strengthens her bargaining power, and provides confidence. Without a BATNA, negotiators risk over-conceding or being locked into unfavourable deals. CIPS emphasises that BATNAs must be realistic, actionable, and aligned to organisational objectives---not merely theoretical alternatives.
Question 1034
Which of the following is categorised as fixed cost?
Answer : B
An organisation's expense can be categorised into three groups:
Fixed Costs -- costs that do not change with output.
Variable Costs -- costs that vary in direct proportion to output.
Semi-variable costs -- 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.
CIPS study guide page 79-84
Study tips: Fixed variable and semi-variable costs - AAT Comment
Question 1035
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?
Answer : C
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.
CIPS study guide page 164-165
What Is a Coalition Anyway?
Question 1036
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
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.
Question 1037
A buyer continually states, during a negotiation, that budget constraints are impacting their ability to make concessions. What type of tactic are they using?
Answer : C
Question 1038
When prices of input materials increase, supply curve shifts to the left while demand remains stable. The shift of supply will tend to cause which of the following?
Answer : D
The case in the question is illustrated as below:
The equilibrium price initially at P0 with quantity Q0, when supply curve shifts to the left, it will converge with demand curve at new equilibrium point with price P1 and quantity Q1. As you can see from the graph, P1 is greater than P0 and Q1 is smaller than Q0.
Question 1039
As a buyer for a large stationery company you have been notified of an upcoming price increase from your provider for paper. When you check the contract you realise that it expired 30 days ago so you are no longer in contract. You realise the supplier can now charge what they like.
You call the supplier and attempt to negotiate over the phone but are unsuccessful. What would be the best thing to do?
Answer : D
Once the contract has expired, the buyer no longer has contractual protection on pricing, which significantly weakens their position. However, this situation also creates an opportunity to re-establish leverage by offering future value. By proposing a new or extended contract, the buyer introduces certainty, continuity of business, and potential volume commitment for the supplier, which can be traded in return for moderated pricing. Accepting the increase without challenge offers no commercial control, while threats or immediate cancellation risk damaging the relationship and supply continuity. CIPS guidance emphasises using future commitment as a bargaining lever, especially when informal negotiations fail and contractual leverage no longer exists.
Question 1040
Leitax is a consumer electronics firm with headquarters in the US and with a global sales presence. The company maintains seven to nine models in its product portfolio, each of which has multiple SKUs. Product life ranges from fifteen to nine months and is getting shorter. The demand planning and master planning processes at the company were ill-defined. Data relevant to forecasting were usually inaccurate, incomplete, or unavailable and the lack of objectives and monitoring mechanisms for the demand planning process meant that process improvement could not be managed. Support for supply management was equally ill-defined, as master production schedules were sporadic and unreliable and suppliers had learned to mistrust them. Leitax's newly appointed Supply chain director, Jessica realises that the ''buy-in'' of different functional groups was critical to the improvement of demand planning. She invites relevant stakeholders to a meeting so that they can express their opinions openly. What tactic is Jessica using?
Answer : A
There are nine commonly used influence tactic:
1. Rational persuasion includes using facts, data, and logical arguments to try to convince others that your point of view is the best alternative. This is the most commonly applied influence tactic.
2. Legitimating
3. Personal appeals
4. Exchange
5. Ingratiation
6. Pressure refers to exerting undue influence on someone to do what you want or else something undesirable will occur.
7. Coalitions refer to a group of individuals working together toward a common goal to influence others.
8. Inspirational appeals
9. Consultation refers to the influence agent's asking others for help in directly influencing or planning to influence another person or group.
In the scenario, there is a problem with demand forecasting and supply chain planning in Leitax. The new Supply chain director invites the stakeholders to a meeting to find the solution. She is using coalition tactics.
- CIPS study guide page 163-168
- Cross-Functional Alignment in Supply Chain Planning: A Case Study of Sales and Operations Planning
- 13.3 The Power to Influence -- Organizational Behavior (umn.edu)
LO 3, AC 3.2
Question 1041
XYZ Ltd decides to go to market for a cleaning contract to service a number of offices. It knows that it will get a price which may, or may not, be better than the one it is currently paying. To gain leverage in the marketplace, the organisation decides to add other related services to the scope, such as gardening, security and maintenance, which increase the value of the contract. This is an example of which forms of spend consolidation?
Answer : B
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
- Vendor base reduction: straightforward reduction of number of suppliers in any category
- Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
- Volume redistribution: making recommendations following spend analysis to move from one supplier to another
- Volume consolidation across categories: certain purchase requirements may be common across a number of categories. In the scenario, XYZ has combined different categories but closely related to office services into a larger contract so that they can increase their leverage.
- Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
- Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
LO 1, AC 1.3
Question 1042
Jessica Taylor, a senior buyer, is reflecting on her most recent negotiation. She has been asked by her manager to create a written record of performance.
Which of the following should Jessica include in this negotiation performance report? Select THREE that apply.
Answer : A, C, F
Post-negotiation analysis should include performance evaluation, learning outcomes, and a comparison of achieved results versus original objectives. These elements contribute to continuous improvement and future strategy development.
Question 1043
Which of the following is an advantage of a fixed-price agreement?
Answer : C
Fixed-price agreements give buyers financial certainty, reducing exposure to supplier inefficiencies, cost increases, or inflation. The supplier bears the risk of cost overruns. While it doesn't automatically improve quality or payment terms, it allows buyers to forecast budgets and manage risk effectively. This makes fixed-price contracts especially useful for projects with defined scopes, where costs are predictable. In contrast, cost-plus contracts keep the risk with the buyer and require constant monitoring of supplier costs, making them less attractive in terms of risk management.
Question 1044
When considering a new supply source for a product, a procurement professional will review the suppliers' quotations before a supplier negotiation. Which of the following is a direct cost associated with the product within a potential supplier's quotation?
Answer : A
Direct costs are those costs that can be directly attributed to the production of specific goods or services. They typically include raw materials and labor directly involved in production. Metal used in the product is a raw material that becomes part of the final product, making it a direct cost.
Question 1045
Which of the following should be adopted to minimise the conflict between parties in commercial negotiation?
Answer : D
Ground rules are the basic rules for doing something (Cambridge Dictionary). A negotiation goes more smoothly if ground rules are adopted. Then if something goes awry at a later time, you can point out the ground rule that has been violated. Procurement professional should seek to minimise conflict over process through agreeing 'ground rules' and approach as far as possible with the other party in advance of any negotiation meetings.
There should be two sets of ground rules: 1) ground rules for the negotiations between the two parties and 2) ground rules for the negotiating team itself. This article is about the negotiating team ground rules.
The rule of law is the condition in which all members of society, including its political leaders, accept the authority of the law.
Ground zero describes the point on the Earth's surface closest to a nuclear detonation. In the case of an explosion above the ground, ground zero refers to the point on the ground directly below the nuclear detonation.
The Ground Beam is the beam which is provided usually at the foundation level to support building walls, joists, etc.
Question 1046
A buyer has lost trust in a supplier but wishes to repair the relationship. What is the appropriate first step?
Answer : A
Rebuilding trust requires acknowledgement of the issue and supplier commitment to improvement. Cosmetic gestures such as hospitality or price reductions do not address the core problem. Nor should KPIs be artificially lowered, as this masks underperformance. Trust is restored when accountability is accepted and corrective actions are implemented transparently. This aligns with CIPS' emphasis on trust-building behaviours: honesty, responsibility, and consistent performance.
Question 1047
The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : C
For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.
Question 1048
The purpose of ongoing supplier relationship management following a negotiation and contract award is that it:
Answer : B
Question 1049
Which of the following is the purpose of using stakeholder support level scale?
Answer : C
In order to estimate the gap and the progress towards desired level of support, a stakeholder support scale can be used by the procurement internally. The support level scale measures stakeholder commitment. Current support level for the procurement/negotiation objectives should be gained from engagement with key stakeholders. The following is an example of stakeholder support level scale:
LO 1, AC 1.1
Question 1050
Can a party gain huge advantages in negotiation from setting room layout?
Answer : B
Essentially, for trained negotiators under most circumstances, the physical locations of negotiations and the room layout should not make much difference to the outcomes of the meeting. It is reasonable to assume that most commercial negotiations are based at least initially on a principled- or pragmatic-type approach. It is arguable also that any advantage gained through intentionally creating an uncomfortable environment to put short-term pressure on TOP is likely to be short-lived as TOP will likely reflect on this later and seek means to get even.
Question 1051
After studying Thomas-Kilmann conflict resolution model and considering different approaches carefully, the procurement team of XYZ Ltd. decides to adopt an avoiding approach to the upcoming negotiation with one of their suppliers. Which of the following will be the objective of XYZ procurement team in this negotiation?
Answer : B
Avoiding is unassertive and uncooperative. When avoiding, an individual does not immediately pursue his or her own concerns or those of the other person. He or she does not address the conflict. Avoiding might take the form of diplomatically sidestepping an issue, postponing an issue until a better time, or simply withdrawing from a threatening situation.
LO 1, AC 1.1
Question 1052
In general, which of the following is the consequence of a flatter demand curve?
Answer : B
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor.
In microeconomic graphs, elasticity and inelasticity can be shown by the slope of the demand curve. If a demand curve is almost horizontal, then the product pricing can be described as very elastic. If a demand curve is almost vertical, then the product pricing can be described as very inelastic.
The formulae of elasticity:
Text Description automatically generated with low confidence
Table Description automatically generated with medium confidence
LO 2, AC 2.2
Question 1053
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 1054
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 1055
Jane is planning for a forthcoming negotiation with a key supplier. She has learned what are important to the supplier and what are important to her company from previous contracts between them. In order to avoid negotiation deadlocks, she has set up several concession plans. But Jane has little experience in dealing with suppliers and doesn't know when to trade these concessions. When is the best time in a negotiation to trade concessions?
Answer : C
The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.
LO 3, AC 3.1
Question 1056
Which negotiation approach is focused on a win--win outcome?
Answer : C
A collaborative negotiation approach is explicitly designed to achieve win--win outcomes, where both parties work together to maximise joint value. This approach is closely associated with integrative negotiation, emphasising trust, information sharing, and joint problem-solving. Distributive and adversarial approaches are win--lose, focusing on dividing value rather than creating it. ''Collective'' is not a recognised CIPS negotiation approach. Collaborative negotiation is particularly suitable where long-term relationships, shared objectives, or strategic partnerships are important.
Question 1057
Sally is negotiating with an oversea supplier on the price and payment period. Her company and the supplying organisation are equal in bargaining power. The supplier says that they are investing in new facilities and machinery so the payment period should not be longer than 30 days. Sally knows that her company often pays the suppliers after 45 days from the delivery, but at the moment the company has positive cash flow and it is able to pay immediately. Which of the following should be Sally's concession plan?
Answer : B
In the scenario, the length of payment period is particularly important to the supplier as they are investing new facilities. Otherwise, the buyer's company has a positive cash flow position and budget is available for a shorter payment terms. So this tradeable (payment period) is important to supplier but it is not a significant problem with the buyer. This tradeable will fall within 'Easy concession to trade' quadrant in the following matrix:
Table Description automatically generated
If the tradeable fall within this quadrant, Sally should shorten the payment period in supplier's favour and try to win as many concessions as possible in return. Asking for a discount may be a reasonable trade-off.
LO 2, AC 2.3
Question 1058
''A negotiation ends once the meeting finishes.'' Is this statement true?
Answer : D
Negotiations do not end at the meeting; they continue through reflection, documentation, and post-negotiation review. Best practice involves assessing whether objectives were met, capturing lessons learned, and ensuring written confirmation of terms. Without this, misunderstandings or missed improvements can occur. Reflection allows organisations to continuously strengthen negotiation strategies and build learning cycles.
Question 1059
Which of the following can help both parties to break the vicious cycle of blame when a relationship needs repairing? Select TWO that apply.
Answer : A, C
In order to break vicious cycle of blame, procurement will need to use their negotiation and conflict management skills, adopting a collaborative and integrative approach. Your first action should be to establish the facts that led to the situation where the relationship broke down. Most day-to-day relationship between buying organisations and suppliers do not of course involve procurement staff, so you will need to consult with your business partners internally to establish their point of view of where the issue and sources of conflict are. You should also contact the supplier and get their side of the story - this is particularly to when you have previously identified the supplier as critical or otherwise important to your operations. Ideally you will be able to apply principled negotiation here, separating the people from the issue, focusing on interests and not positions, and then looking for options of mutual benefits.
Question 1060
Which of the following are examples of variable costs?
Answer : D
Question 1061
For effective commercial negotiation, an organisation must analyse and apply approaches to negotiate agreements successfully. Which one of the following would provide a successful outcome?
Answer : A
Understanding the key approaches to commercial negotiation---such as adversarial, integrative, collaborative, or accommodative---is fundamental to achieving successful outcomes. CIPS emphasises that negotiators must be able to select and apply the correct approach based on factors such as power balance, relationship importance, risk, and objectives. While understanding conflict, stakeholder power, and sourcing stages all support negotiation effectiveness, they are secondary to choosing the right negotiation approach itself. Without this core understanding, negotiators risk misalignment between strategy and context, leading to suboptimal or failed outcomes.
Question 1062
A buyer continually states, during a negotiation, that budget constraints are impacting their ability to make concessions. What type of tactic are they using?
Answer : C
Question 1063
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?
Answer : C
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 1064
Which of the following are most likely to harm trust between buyer and supplier in a commercial relationship? Select TWO that apply.
Answer : A, D
Trust-destroying behaviours:
- Rumours of partnership or relationship breaking down
- Emotion-based assessment of performance
- Avoiding accountability, passing the blame to others
- General mood -- resentment, distrust, frustration, etc
LO 1, AC 1.4
Question 1065
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 1066
A procurement manager is about to lead an important negotiation with a new IT supplier and has insisted the first meeting takes place at the buying organisation's office. Will this give one party an advantage?
Answer : A
Contextual (environmental) power includes home-ground advantage, control of the venue, access to colleagues and data, and comfort with logistics---all of which can tilt confidence and leverage toward the host (the buyer).
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Question 1067
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as ...
Answer : C
In the MIL framework, ''Must have'' refers to non-negotiable elements. For Colin's organisation,ethical and sustainable procurementis a core, uncompromisable value, making it a ''Must have'' in negotiations.
Question 1068
A procurement team has discussed, in advance of a negotiation, what they will do if there is no agreement with the current supplier. They have decided that they will perform the services themselves in-house on a trial basis if no deal is made. Which of the following describes what they have prepared here?
Answer : A
Question 1069
Which of the following occur within the planning and preparation stage in a negotiation process? Select THREE that apply.
Answer : A, B, F
In the planning and preparation stage of negotiation, it is essential to build a strong foundation by understanding various factors that influence the negotiation outcome. According to CIPS resources, critical aspects of preparation include:
Understanding the other party (A): This helps in anticipating their needs, objectives, and potential negotiation styles, leading to more strategic discussions.
Defining the constituents (B): This involves identifying all stakeholders or parties impacted by the negotiation, ensuring their interests are considered when planning the negotiation strategy.
Analyzing the bargaining power (F): Understanding the relative power each party brings to the negotiation helps in setting realistic goals and predicting possible negotiation dynamics.
These elements are foundational in ensuring a well-rounded approach and enabling both parties to enter negotiations with clarity and strategy, enhancing the potential for a positive outcome.
Question 1070
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 1071
Which of the following are types of questions that are useful in opening and testing phases of a negotiation? Select the TWO that apply.
Answer : C, E
In the opening phase, parties should confirm understanding and get the issues on the table.
The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.
Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.
Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening and testing stages.
Question 1072
Which of the following is active listening?
Answer : C
Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS's guidelines for effective negotiation communication.
Question 1073
Which characteristics are likely to feature in a partnership relationship in purchasing?
Close collaboration between supplier and buyer
Focus is on price and delivery only
Sharing of information
One-off commercial transactions
Answer : D
Partnership relationshipsare strategic and long-term. They emphasizetrust, collaboration, and information sharing. Unlike transactional relationships, they go beyond price and delivery to focus on joint value creation.
''Collaborative partnerships involve open information sharing and mutual support. These relationships are built on joint objectives, trust, and commitment to long-term success.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.2 - Types of Supplier Relationships)
Question 1074
The activity of listening in a negotiation includes which of the following processes?
Hearing
Interpreting
Rapport
Influencing
Answer : A
Listening involves both hearing (1) and interpreting (2) the information shared by the other party. Effective listening is an active process that goes beyond simply hearing words; it involvesinterpreting meaning, understanding the speaker's intent, and responding accordingly. CIPS emphasizes these steps as part of effective communication in negotiations.
Question 1075
Which of the following is a source of information on microeconomic factors?
Answer : B
Question 1076
When developing a negotiation approach, according to recognised theory (for example Mendelow), how should stakeholders with high interest but low power be managed?
Answer : C
According toMendelow's Matrix, stakeholders withhigh interest but low powershould be keptinformed. Their interest means they care about the negotiation's outcome, but their low power means they can't significantly influence it. Keeping them informed avoids alienation and ensures smoother implementation of negotiated agreements.
''Stakeholders with high interest but low power should be managed by keeping them informed. They may become powerful advocates or opponents in the future, so engaging them is a strategic approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Stakeholder Management in Commercial Negotiations)
Question 1077
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should ...
Answer : A
Sally's objective is to achieve a 5% saving. If the supplier offers this saving in a different form (aftercare package), and the total value meets her goal, then accepting this alternative shows flexibility and supports a collaborative,win-winoutcome.
Question 1078
Which of the following situations would increase a buyer's bargaining power?
Answer : A
When a buyer's purchase represents asignificant portion of a supplier's revenue, it increases the buyer's leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.
''Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer's ability to influence terms.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)
Question 1079
Which of the following is most likely a consequence of falling interest rate?
Answer : A
If interest rate are too low and credit is too, cheap rates can fund a spending boom with consumers and businesses buying (investment) more than they can afford to pay back.
Question 1080
If the value of the British Pound in other currencies is strong, which of the following is most likely to occur?
Answer : D
Currency exchange rates are determined by macroeconomic factors and demand and supply. In general, countries with stable political and economic systems, a growing economy and a strong rule of law will have stronger and more stable currency than those without these characteristics. In this question, the British Pound is stronger than other currency, which means that buyers who import goods from the UK have to pay higher in their own currencies.
LO 2, AC 2.2
Question 1081
Which of the following are stages of a win-win approach to negotiations?
Find out where the interests of both parties align
Design new options, where everyone gets more of what they need
Limit the resources to a fixed number
Insist that the agreement includes subjective regulatory standards
Answer : A
A win-win (integrative) negotiation focuses on shared interests and joint value creation. The first step is identifying where both parties' interests align, followed by designing creative options that allow both sides to gain more of what they need. Limiting resources and imposing subjective standards are characteristics of distributive or adversarial approaches and restrict value creation. CIPS clearly distinguishes integrative negotiation as collaborative, interest-based, and solution-focused, particularly suitable for long-term and strategic supplier relationships.
Question 1082
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should:
Answer : D
Question 1083
The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : C
For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.
Question 1084
Which of the following are most likely to be indirect costs of a garment manufacturer? Select THREE that apply.
Answer : D, E, F
Indirect costs are those cost that are not directly attributable to production. Examples of indirect costs including the following:
Indirect labour: This covers every person in the factory who does not directly perform a production operation such as managers, supervisors, engineers, store personnel, clerks, maintenance staff, porters, canteen staff, security and cleaners etc.
Expenses: Included in this element is every fixed and variable expenses incurred in operating the factory, such as rent, rates, utilities, insurance, depreciation, maintenance, air conditioning and the various types of energy generation required by a clothing factory.
Indirect materials: Also known as consumables, this element contains all the materials not directly connected to the makeup of a garment. Some of the typical items involved are office materials, spare parts, marker paper, maintenance materials, chalk & pins.
Direct costs are those costs of a product/service directly attributable/traceable to its production. Examples of direct costs including the following:
Direct Materials: Direct materials are all the materials and trimmings which go into the construction and finish of the garment. Typically, these materials would include cloth, lining, fusible, zips pads, tapes, labels, tickets, hangers and packaging materials.
Direct Labour: This cover the cost of all the labor directly involved in producing the garment and could include cutting, fusing, regular sewing, special machine operations, pressing, finishing, inspection and packing. Labor of all types and grade has a direct overhead which include holiday pay, sick pay, fringe benefits etc and the statutory payments made by the employer for each employee. This is usually expressed as a percentage of salary and when this percentage is added to the employee's wage, it becomes the basis for calculating direct labor costs.
Question 1085
Macroeconomics can have an impact on commercial negotiations. Is this statement correct?
Answer : A
Macroeconomic factors like inflation, interest rates, and currency fluctuations can significantly affect pricing and contractual terms. Buyers and suppliers must account for these factors during negotiations, particularly in long-term or high-value contracts.
Question 1086
Commercial negotiations on prices cover a range of aspects including pricing arrangements. A buyer may negotiate for a 'fixed price agreement'. Why is a fixed price agreement advantageous to the buyer?
Answer : B
Afixed price agreementprovides the buyer withcost predictability. Once the price is agreed upon, the buyer is insulated from any cost increases on the supplier's side. The supplier bears the risk of fluctuating input prices, which simplifies cost control and contract administration for the buyer.
''With a fixed price arrangement, the buyer is protected from future price increases and does not need to monitor the supplier's ongoing costs. This is particularly useful for budgeting and forecasting.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Fixed Price Agreements)
Question 1087
Different types of relationships impact commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate power derives from formal authority or position, giving the buyer leverage in negotiations. This power type is more effective in establishing credibility and enforcing terms, as highlighted in CIPS's framework for negotiation power sources, unlike informal sources like personality or friendship.
Question 1088
Procurement gets involved in negotiating purchase requisitions only when there is a value analysis to ensure that only value-adding aspects are included. Is this statement true?
Answer : A
Procurement can negotiate various aspects of a purchase requisition even without a formal value analysis. While value analysis can enhance cost-effectiveness, procurement professionals often negotiate on pricing, terms, and conditions to add value independently of value analysis, as per CIPS's guidelines on procurement flexibility in negotiations.
Question 1089
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
A junior team member can effectively contribute as a note taker (1) and observer (3), allowing them to support the meeting without taking on roles that require more experience, like chairing or serving as an expert. This aligns with CIPS's recommendations for assigning junior roles in negotiations.
Question 1090
During a negotiation, Jos Gmez (salesperson for a strategic supplier) says his sales director will not approve discounts on initial purchases. However, he offers a 5% discount on the aftercare package, which gives the same monetary saving. Sally Pampas needs both the product and the aftercare package and aims for a 5% discount off the purchase price. To achieve a win-win (integrative) outcome, Sally should:
Answer : B
Integrative (win-win) negotiation looks for value-equivalent tradeables across the bargaining mix (price, service, warranty, aftercare, etc.). If the same total saving is achieved via aftercare---and the buyer needs it---accepting the tradeable meets objectives without forcing a distributive fight on unit price.
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Question 1091
John is in a negotiation with a supplier. They have decided that their future
relationship will be long term, built on trust and respect, and that gains and risk
will be shared between the parties. The parties will also share ideas and
collaborate on those ideas. Which of the following is this type of relationship?
Answer : A
Question 1092
Which of the following could be regarded as the outcome of a collaborative approach to negotiation?
Answer : D
A collaborative (win--win or integrative) negotiation aims to achieve outcomes that benefit both parties while preserving or strengthening the relationship. The focus is on shared objectives, trust, transparency, and long-term value creation rather than short-term gains. Splitting the difference is a compromise-based approach and does not necessarily create joint value. Adversarial or one-sided outcomes are associated with distributive negotiation styles and often damage morale and relationships. CIPS clearly positions collaborative negotiation as the preferred approach where ongoing relationships and mutual benefit are important.
Question 1093
Which of the following types of relationship would possibly lead to a distributive negotiation?
Answer : D
Question 1094
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 1095
Where a market consists of a large producer with high power, it is known as ...
Answer : B
A monopoly occurs when a single supplier dominates a market, giving them high bargaining power over buyers. By contrast, monopsony is where a single buyer dominates, oligopoly involves a few large suppliers, and monopolistic competition refers to many suppliers with differentiated products. Monopoly power in negotiations means buyers have reduced leverage and may need to rely on regulatory frameworks or collaborative strategies to balance outcomes.
Question 1096
Which of the following should be adopted to minimise the conflict between parties in commercial negotiation?
Answer : D
Ground rules are the basic rules for doing something (Cambridge Dictionary). A negotiation goes more smoothly if ground rules are adopted. Then if something goes awry at a later time, you can point out the ground rule that has been violated. Procurement professional should seek to minimise conflict over process through agreeing 'ground rules' and approach as far as possible with the other party in advance of any negotiation meetings.
There should be two sets of ground rules: 1) ground rules for the negotiations between the two parties and 2) ground rules for the negotiating team itself. This article is about the negotiating team ground rules.
The rule of law is the condition in which all members of society, including its political leaders, accept the authority of the law.
Ground zero describes the point on the Earth's surface closest to a nuclear detonation. In the case of an explosion above the ground, ground zero refers to the point on the ground directly below the nuclear detonation.
The Ground Beam is the beam which is provided usually at the foundation level to support building walls, joists, etc.
Question 1097
Which of the following is NOT a barrier to entry in a monopolized market?
Answer : B
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 1098
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as:
Answer : C
Question 1099
Toby is an international sourcing category buyer within a third sector (not-for-profit) organisation. He has chosen to use a more adversarial style of negotiation as he believes his organisation has greater bargaining power over the supplier.
In what other situation would an adversarial relationship be used by Toby?
Answer : D
An adversarial (win--lose) negotiation approach is most appropriate where the relationship is short-term and transactional, and where long-term collaboration is not required. In such situations, the buyer may focus on maximising immediate value rather than building trust or joint efficiencies. A monopoly market places power with the supplier, making adversarial tactics ineffective. Where there are mutual objectives for efficiencies, an integrative (win--win) approach is more suitable. CIPS makes clear that adversarial negotiation is not appropriate in all negotiations, only where conditions such as short-term focus, low relationship dependency, and buyer power exist.
Question 1100
Apart from negotiation, which other approaches are available to a buyer to ''reach an agreement''? Select THREE approaches that apply.
Answer : A, B, D
CIPS recognises that agreement can be reached without formal negotiation by using alternative influence-based approaches. Accommodating involves one party yielding to preserve relationships or progress. Persuasion uses communication, reasoning, and influence to shape the other party's views and decisions. Problem solving focuses on jointly identifying solutions that address both parties' needs. These approaches are particularly useful where relationships are important or power is balanced. Team management, psychodynamic management, and validation of reporting are not recognised CIPS agreement-reaching approaches within commercial negotiation theory. The ability to choose the correct approach enhances negotiation effectiveness and relationship outcomes.
Question 1101
A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?
Answer : C
Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values. A smile, a 'yes' and the type of hospitality received, (in the business context), can mean very different things in different international business cultures.
Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide towhat TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.
Question 1102
Which of the following occur within the planning and preparation stage in a negotiation process? Select THREE that apply.
Answer : A, B, F
In the planning and preparation stage of negotiation, it is essential to build a strong foundation by understanding various factors that influence the negotiation outcome. According to CIPS resources, critical aspects of preparation include:
Understanding the other party (A): This helps in anticipating their needs, objectives, and potential negotiation styles, leading to more strategic discussions.
Defining the constituents (B): This involves identifying all stakeholders or parties impacted by the negotiation, ensuring their interests are considered when planning the negotiation strategy.
Analyzing the bargaining power (F): Understanding the relative power each party brings to the negotiation helps in setting realistic goals and predicting possible negotiation dynamics.
These elements are foundational in ensuring a well-rounded approach and enabling both parties to enter negotiations with clarity and strategy, enhancing the potential for a positive outcome.
Question 1103
A breakeven analysis uses which of the following aspects as part of the analysis?
Answer : A, D
Question 1104
Jane is planning for a forthcoming negotiation with a key supplier. She has learned what are important to the supplier and what are important to her company from previous contracts between them. In order to avoid negotiation deadlocks, she has set up several concession plans. But Jane has little experience in dealing with suppliers and doesn't know when to trade these concessions. When is the best time in a negotiation to trade concessions?
Answer : C
The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.
LO 3, AC 3.1
Question 1105
Professional buyer is planning for the next negotiation of a simple one-off contract. This negotiation is typified by which of the following? Select TWO that apply.
Answer : D, E
Professional buyers, when planning or engaging in negotiation with suppliers, should always be aware of where the intended and actual relationship with this supplier is positioned on the 'spectrum' or 'continuum' of commercial relationships. The relationship spectrum describes the range of commercial relationships between a buyer and supplier based on richness of communication, longevity and mutual dependence.
In the question, the contract is simple one-off (or spot buy), which means the relationship will likely to be more transactional. In such relationship, price is the most important criteria and buyer may adopt arm's-length approach.
Question 1106
Which of the following is active listening?
Answer : C
Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS's guidelines for effective negotiation communication.
Question 1107
Which characteristics are likely to feature within an integrative negotiation?
Maximising the other party's outcome to enhance relationships
Maximising joint outcomes
Short-term focus
Pursuit of goals held jointly with other party
Answer : C
Integrative negotiationfocuses onmutual gainand long-term collaboration. It seeks tomaximize joint outcomesand encourages parties to align interests andpursue shared goals. This contrasts with distributive tactics that prioritize individual wins and short-term gains.
''Integrative negotiations aim to create outcomes where both parties benefit. Shared problem-solving, information exchange, and joint goal pursuit are central features of this approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Principles of Integrative Negotiation)
Question 1108
A procurement expert has been asked to ensure they consider emotional intelligence in their negotiation strategy. They have agreed to this and have started planning their approach. Which of the following describes emotional intelligence?
Answer : C
Emotional intelligence involves the ability to recognize and manage one's emotions and empathize with others. This skill allows negotiators to respond appropriately to both their own feelings and the emotional cues of the other party, fostering a more constructive and adaptive negotiation environment. CIPS highlights emotional intelligence as a valuable asset in understanding and influencing negotiation dynamics.
Question 1109
Procurement gets involved in negotiating purchase requisitions only when there is a value analysis to ensure that only value-adding aspects are included. Is this statement true?
Answer : A
Procurement can negotiate various aspects of a purchase requisition even without a formal value analysis. While value analysis can enhance cost-effectiveness, procurement professionals often negotiate on pricing, terms, and conditions to add value independently of value analysis, as per CIPS's guidelines on procurement flexibility in negotiations.
Question 1110
Commercial negotiation ends at the award of a contract. Is this statement true?
Answer : C
Negotiation doesn't end after the contract is awarded. The needs for negotiation can arise in any post-award stages. For example, at supplier development and relationship management stage,improvement in supplier capability, capacity, and product/service range can be negotiated. Negotiations with long-term strategic critical suppliers should be carried out in a partnering style, with a win-win starting point assumed.
In some sectors such as transport, utilities and infrastructure, tenderers may 'bid low' or even make a loss to win major contracts with a view to negotiating lucrative changes, variations and 'add-ons' over the life of the contract when the supplier is bedded in and the buyer is in the weaker position to push back or challenge. Even in less complex contract, it is very likely that there will be a need to negotiate with that supplier again after the awarding of the contract.
LO 1, AC 1.1
Question 1111
What are the potential sources of conflict between buyer and supplier? Select TWO.
Answer : B, C
Conflicts arise in procurement when risks, costs, or gains are not fairly shared, creating perceptions of exploitation. Another frequent source is late payment of supplier invoices, which damages trust and supplier cash flow. Scheduling or early involvement, by contrast, usually supports collaboration unless poorly managed. Conflict is natural in negotiations due to divergent interests, but recognising sources allows proactive management. Skilled negotiators use integrative approaches to turn potential conflict into opportunity, aligning incentives and ensuring fairness.
Question 1112
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Answer : B
Question 1113
Which of the following occur in the planning and preparation stage of negotiation? Select THREE.
Answer : B, C, D
Planning and preparation involve analysing bargaining power, understanding the counterpart's needs, and defining the constituents (parties involved). Questioning and concessions come later during bargaining. Narrowing solutions occurs during closure. Proper planning ensures negotiators enter with clear objectives, strategies, and knowledge, reducing surprises. CIPS highlights preparation as the most critical determinant of negotiation success, aligning with the saying: ''Failing to prepare is preparing to fail.''
Question 1114
Jessica Taylor, a senior buyer, is reflecting on her most recent negotiation. She has been asked by her manager to create a written record of performance. Which of the following should Jessica include in this negotiation performance report? Select THREE that apply:
Answer : C, E, F
Question 1115
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 1116
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 1117
When is an adversarial style of negotiation appropriate?
Answer : A
An adversarial negotiation style is appropriate when one party has high bargaining power and is focused on maximizing its benefit rather than maintaining a long-term relationship. This approach often involves competitive tactics that leverage power disparities, aligning with CIPS guidance on when adversarial tactics may be strategically used in negotiations.
Question 1118
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 1119
Sunita's supplier states: ''Meeting your needs is meeting my needs because we are in this together.'' What type of negotiation is being undertaken?
Answer : D
This statement reflects shared goals and mutual benefit, hallmarks of integrative negotiation. Unlike adversarial or distributive (win-lose) strategies, integrative approaches seek joint value and collaboration. The language of partnership (''we are in this together'') signals alignment and cooperative intent. Lose-lose outcomes, by contrast, occur when both sides compromise excessively or fail to reach creative solutions. Integrative strategies foster long-term partnerships where value is maximised for both.
Question 1120
A building firm has been awarded a contract to build a new office block, and the
building firm needs to separate its direct and indirect costs.
Which one of the following is a direct cost to the building of the new office block?
Answer : A
Question 1121
When is the best time to adopt accommodating style according to Thomas-Kilmann conflict mode instrument?
Answer : C
According to Thomas-Kilmann conflict model instrument, there are 5 conflict management styles:
Accommodating is an unassertive and cooperative approach to resolving the conflict. Accommodating means conceding to the other party with little debate or fight, not challenging or strongly putting forward your own point of view and generally giving and yielding to the other party's point of view. Accommodating is best used when:
1. When others can resolve the conflict more effectively
2. When the issue is much more important to the other person than to yourself - to satisfy the needs of others and to show you are reasonable
3. To build up social credit for later issues which are important to you
4. When continued competition would only damage your cause
5. When preserving harmony and avoiding disruption are especially important
6. To aid in the managerial development of subordinates by allowing them to experiment and learn from their own mistakes
LO 1, AC 1.1
Question 1122
Which of the following is a source of information on microeconomic factors?
Answer : D
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Question 1123
A garden furniture supplier currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating in the supplier's environment (their site) can unintentionally shift the power dynamic. The supplier may gain apsychological edgedue to the comfort and control of their surroundings. Best practice recommends holding negotiations in aneutral settingto ensure balance and reduce any influence based on physical context. While site visits are beneficial for supplier evaluation, they should beseparate from the negotiationto maintain objectivity.
Question 1124
Which of the following are the most typical characteristics of integrative approach to negotiation? Select TWO that apply.
Answer : C, E
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 the pie' 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.
LO 1, AC 1.2
Question 1125
''Finding the middle ground between buyer and supplier is a satisfactory way to complete contract negotiations.'' Is this statement correct?
Answer : D
While compromise seems fair, it often erodes credibility and weakens long-term negotiation outcomes. Skilled negotiators avoid ''splitting the difference'' automatically, since it signals weak preparation and can encourage exploitation in future talks. Instead, agreements should be built on objective value, data, and tradeables. Compromise has a place, but reliance on it damages strategic positioning. CIPS stresses integrative or principled negotiation over simplistic middle-ground settlements.
Question 1126
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Answer : B
Question 1127
Which of the following is an advantage of consultation as an influencing tactic?
Answer : B
Consultation involves actively involving stakeholders or counterparties in decision-making. By seeking input, it fosters a sense of ownership, increasing commitment to negotiated outcomes. It is particularly effective when the negotiator has low positional power, as it shifts dynamics from authority to collaboration. Unlike coercion or compliance tactics, consultation builds engagement and long-term trust, which is critical in complex procurement where buy-in is essential for contract success. CIPS stresses its role in building influence where direct authority is limited.
Question 1128
When is the best time for buyer to propose the negotiation agenda to potential supplier?
Answer : D
A business negotiation agenda is a formal agreed upon list of goals to be achieved or items to be discussed in a particular order during a meeting or negotiation. Agendas can be formal and obvious, or informal and subtle in negotiations.
The agenda is one of the main structural elements of negotiation, in addition to such questions as site, identification of participants, and elements of timing. Together, they answer the who, what, when, and where questions. As with other aspects of negotiation, the agenda can be used either manipulatively to enhance leverage or to improve the prospects for agreement and the possibilities for mutual gain. In most cases, it will be used both ways, reflecting the nature of negotiation as a ''mixed-motive'' situation.
Although it can be instrumental to [research] volunteer as a sole source to write the agenda, in most cases it becomes a joint activity to construct a consensual basis for subsequent negotiation. In these situations, agenda-building becomes one of the pre-negotiation activities that set the tone for the relationship (Saunders, 1985). In other situations, the parties may engage in actual negotiation without a formal or written agenda. When this occurs, the risks and uncertainties may be high but the party who appreciates the importance of the informal agenda has a tremendous advantage.
Whether one plans it or not, during the course of negotiation the parties will discuss a finite set of issues in some sequence and from a particular perceptual framework. Consciousness of the universality and centrality of the agenda is prerequisite to guiding negotiation to a successful conclusion.
CIPS study guide page 146-150
Managing the negotiation agenda | SpringerLink
What is Negotiations Agenda - Negotiation Coaching (brightfocusconsult.com)
Question 1129
Maria fears her proposed pricing may be rejected by the supplier. To mitigate this risk, she is preparing a BATNA. Is this the correct approach?
Answer : B
BATNA (Best Alternative to a Negotiated Agreement) gives negotiators a fallback plan if discussions fail. It ensures they never accept worse terms than their minimum acceptable alternative. For Maria, developing a BATNA mitigates rejection risk, strengthens her bargaining power, and provides confidence. Without a BATNA, negotiators risk over-conceding or being locked into unfavourable deals. CIPS emphasises that BATNAs must be realistic, actionable, and aligned to organisational objectives---not merely theoretical alternatives.
Question 1130
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Tradeables---alternative offers or concessions---are typically introduced during thebargainingstage of the negotiation. This is when both parties discuss and exchange proposals to reach a mutually acceptable agreement.
Question 1131
When planning a negotiation for sourcing internationally, which of the following divergent positions, and therefore potential conflict areas, should be prepared for? Select TWO that apply:
Answer : A, C, D
Question 1132
Which type of negotiation strategy should be adopted when the relationship is important and both parties want to help each other achieve their goals?
Answer : A
The collaborative strategy (win-win, integrative) focuses on joint problem-solving, transparency, and trust. It is best when long-term relationships are critical, and both parties see value in mutual success. By contrast, competitive (win-lose) is adversarial, accommodative sacrifices one party's interests, and avoidance seeks disengagement. Collaborative strategies are common in partnerships, innovation projects, and sustainable procurement. They require sharing information, identifying tradeables, and aligning objectives beyond price to long-term outcomes.
Question 1133
Which of the following are elements of price negotiations? Select the TWO that apply.
Answer : A, C
Price negotiations extend beyond headline unit price and include elements that influence total commercial value. Pricing arrangements (such as fixed, variable, indexed, or cost-plus pricing) directly affect financial risk and cost certainty. Terms of payment influence cash flow, working capital, and overall cost of ownership, making them core price-related negotiation variables. Sales tax is typically regulated and not negotiable, while cash flow management and administration costs are internal organisational concerns rather than negotiated price elements. CIPS emphasises a holistic approach to price negotiations that considers structure and payment terms, not just price level.
Question 1134
The procurement manager of a private healthcare provider is running an IT project. Who would be the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : D
In the context of aninternal IT project, the relevant stakeholders would be thosedirectly involved in decision-making and implementation.Senior managementoversees funding and strategic fit, whilesoftware developersensure technical support. The general public and pharmaceutical suppliers are external and not primary stakeholders in this scenario.
''Stakeholder identification must focus on individuals or groups directly involved or affected by the procurement. This includes internal sponsors, end-users, and technical staff responsible for delivery.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Internal and External Stakeholders)
Question 1135
'What specific tests do you carry out to ensure quality is achieved?' This is an example of which type of negotiation question?
Answer : B
The question requires more detailed answer, it is an example of probing question.
Probing questions are typically follow-up questions, and aim to elicit more detailed information on the back of the answer elicited from the open questions. Probing question are also useful to check that the supplier fully understand their offering, as well as your needs, can also be used to communicate to the suppliers that you know this category well.
LO 3, AC 3.3
Question 1136
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
''Expanding the pie'' is a strategy used in integrative negotiations where both parties collaborate to increase the total value available before dividing it. This leads to mutual gains and supports long-term, strategic relationships.
Question 1137
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?
Answer : A
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.
CIPS study guide page 29-31
Integrative Negotiation: Definition, Tips and Examples | Indeed.com
Question 1138
A supplier can produce a product for $160 and sells it for $240, making $80 profit. What is the mark-up profit percentage?
Answer : A
Mark-up % = Profit Cost 100. Here, profit is $80, cost is $160. So, (80 160) 100 = 50%. This differs from margin, which is profit selling price. Mark-up analysis helps buyers understand supplier pricing structures, detect hidden margins, and strengthen negotiation. By knowing whether a supplier is working with high or low mark-up levels, buyers can challenge prices more effectively or justify alternative offers. This analytical preparation supports objective negotiation rather than reliance on supplier claims.
Question 1139
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : A
Question 1140
An adversarial style of negotiation is appropriate where the buyer has greater bargaining power over the supplier. In what other situations may the buyer adopt this style of negotiation?
Answer : B
An adversarial negotiation style is more suitable in a market with many alternative sources and substitutes (B). When there are multiple suppliers, buyers have the upper hand and can adopt a competitive stance without risking supply continuity. This aligns with CIPS guidance on the use of adversarial styles in competitive markets with numerous alternatives.
Question 1141
''Finding the middle ground between buyer and supplier is a satisfactory way to complete contract negotiations.'' Is this statement correct?
Answer : D
While compromise seems fair, it often erodes credibility and weakens long-term negotiation outcomes. Skilled negotiators avoid ''splitting the difference'' automatically, since it signals weak preparation and can encourage exploitation in future talks. Instead, agreements should be built on objective value, data, and tradeables. Compromise has a place, but reliance on it damages strategic positioning. CIPS stresses integrative or principled negotiation over simplistic middle-ground settlements.
Question 1142
Jessica Taylor, a senior buyer, is asked to create a written performance report after her latest negotiation. Which of the following should she include? Select THREE.
Answer : B, C, F
A negotiation performance review should focus on measuring outcomes against objectives, lessons learned, and evaluation of negotiator effectiveness. This ensures continual improvement and supports organisational learning. Pricing structures and alternative suppliers may have been reviewed earlier, but are not part of post-performance reflection. Travel expenses are irrelevant to negotiation learning. By focusing on objectives, learning, and performance, organisations embed best practice and prepare stronger strategies for future negotiations.
Question 1143
Listening is a key activity in negotiation. Which of the following are characteristics of effective listeners?
Showing empathy
Persuading
Paraphrasing
Offering immediate solutions
Answer : B
Effective listeners demonstrate empathy and use paraphrasing to confirm understanding. These skills help build rapport, validate the speaker, and ensure accurate interpretation. Persuading and immediate solutions are active interventions, not listening behaviours. CIPS emphasises active listening as central to persuasion and relationship building in negotiation, enabling buyers to uncover underlying interests and respond appropriately.
Question 1144
''BATNA is a concept that should be considered at the start of negotiations.'' Is this statement correct?
Answer : A
BATNA (Best Alternative to a Negotiated Agreement) is a core preparation concept and should always be considered before negotiations begin. It gives the buyer clarity on the minimum acceptable outcome and provides leverage by ensuring they do not accept a deal worse than their alternative. BATNA is not a legal requirement, nor should it be developed only when negotiations fail, as this weakens negotiating confidence and decision-making. CIPS emphasises BATNA as a fundamental planning tool that underpins effective and disciplined negotiation behaviour.
Question 1145
After studying Thomas-Kilmann conflict resolution model and considering different approaches carefully, the procurement team of XYZ Ltd. decides to adopt an avoiding approach to the upcoming negotiation with one of their suppliers. Which of the following will be the objective of XYZ procurement team in this negotiation?
Answer : B
Avoiding is unassertive and uncooperative. When avoiding, an individual does not immediately pursue his or her own concerns or those of the other person. He or she does not address the conflict. Avoiding might take the form of diplomatically sidestepping an issue, postponing an issue until a better time, or simply withdrawing from a threatening situation.
LO 1, AC 1.1
Question 1146
A building firm has been awarded a contract to build a new office block, and the
building firm needs to separate its direct and indirect costs.
Which one of the following is a direct cost to the building of the new office block?
Answer : A
Question 1147
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 1148
A procurement officer for a manufacturing organisation is negotiating with a supplier over the provision of components. The supplier has indicated that they have to raise their prices due to their fixed costs increasing. Which TWO of the following are types of fixed costs?
Answer : A, B
Fixed costs are costs that do not vary directly with production volume. Staff salaries and building rents remain largely constant regardless of output levels and therefore meet the definition of fixed costs. Raw materials and temporary labour vary with production levels and are therefore variable costs. Warehouse logistics often fluctuate with throughput and activity, making them variable or semi-variable rather than fixed. Understanding fixed versus variable costs is essential for buyers when assessing supplier justifications for price increases, enabling more informed and credible cost-based negotiations.
Question 1149
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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:
Text Description automatically generated with low confidence
Question 1150
Where can we find the data on macroeconomics?
1. From trade journal
2. From supplier's marketing catalogue
3. From stock exchange market
4. From government's statistics
Answer : B
Macroeconomic indicators are statistics or data readings that reflect the economic circumstances of a particular country, region or sector. They are used by analysts and governments to assess the current and future health of the economy and financial markets.
Macroeconomic indicators will vary in their meaning and the impact that they have on the economy, but broadly speaking there are two main types of indicator.
- Leading indicators, which forecast where an economy might be heading. They are often used by governments to implement policies because they represent the first phase of a new economic cycle. These include the yield curve, interest rates and share prices.
- Lagging indicators, which reflect an economy's historical performance and only change after a trend has been established. They are used to confirm a trend is underway. These include gross domestic product (GDP), inflation and employment figures.
There is also the category of coincident indicators, but these are generally grouped in with lagging indicators as they either happen at the same time or after an economic shift.
The best macroeconomic indicator to watch will heavily depend on your personal preferences, what positions you are taking and which country your portfolio is focused on. However, there are some very common indicators that most traders and investors will keep an eye on.
For simplicity's sake, we have split these out into leading and lagging indicators.
Top leading indicators:
1. The stock market
2. House prices
3. Bond yields
4. Production and manufacturing statistics
5. Retail sales
6. Interest rates
Top lagging indicators:
1. GDP growth rates
2. The Consumer Price Index (CPI) and inflation
3. Currency strength and stability
4. Labour market statistics
5. Commodity prices
A procurement professional may find stock market data from the security exchange, while most lagging indicators (such as GDP, CPI, unemployment rate, currency and inflation rate, etc) can be found from government statistics data.
- CIPS study guide page 117-118
- What Are the Key Macroeconomic Indicators?| IG EN
LO 2, AC 2.2
Question 1151
There are no commitments in hypothetical questions. Is this statement true?
Answer : D
There are four types of questions that can be used in a commercial negotiation:
Hypothetical questions, where you ask about a possible situation or abstract concept, are very useful at the testing and proposal phases. Hypothetical question does not state any commitment as it is only about 'if something happens, then ...'. This type of question can be useful at giving suggestion.
LO 3, AC 3.3
Question 1152
During a negotiation, a procurement manager suggests that the two companies should split the difference which would benefit both the supplier and buyer. Which persuasion method is she using?
Answer : A
In the scenario, the manager propose to 'split the difference', which means each party will accept some of their demands and concede some. This is known as 'Compromise'.
Question 1153
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way of analysing costs is to classify them into direct and indirect costs.
Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Direct costs are expenses that can be clearly attributed to the production of specific goods. These typically include raw materials, direct labor, and other costs tied directly to the manufacturing process. They are variable with production volume and help procurement teams analyze pricing more effectively during negotiations.
Question 1154
A good negotiator invests time in understanding the needs of the individuals in a negotiation. Is this statement true?
Answer : D
Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing tounderstand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:
The organisation - What the organisation wants to achieve. This is generally well stated and understood
The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual
Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.
Question 1155
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Answer : B
Question 1156
Which of the following is a source of power in organisational relationships?
Answer : A
Question 1157
A wide range of factors may be taken into account by suppliers when setting or negotiating prices. Which of the following are external factors in pricing decisions? Select TWO that apply.
Answer : A, D
External factors in pricing decisions include Competition in the market (A) and Customer perception of value (D). These factors are outside the supplier's direct control but influence pricing strategies to remain competitive and meet customer expectations:
Competition in the market (A): Market competition dictates how much a supplier can charge without losing business to competitors.
Customer perception of value (D): How customers perceive the product's worth affects its acceptable price range.
These factors are considered external as they relate to market dynamics rather than internal cost structures, according to CIPS's guidance on pricing influences.
Question 1158
Which of the following roles would support negotiations with an external supplier when planning a negotiation for a low-value, routine purchase? Select TWO that apply.
Answer : C, E
For low-value, routine purchases, the involvement of The procurement manager (C) and An internal business user (E) is appropriate. The procurement manager brings expertise in supplier engagement, while the internal business user provides insights on specific needs for the productor service. Involving high-level roles, like the CEO or a legal advisor, is unnecessary for routine purchases, as per CIPS guidance on resource alignment in procurement.
Question 1159
A buyer has lost trust in a supplier but wishes to repair the relationship. What is the appropriate first step?
Answer : A
Rebuilding trust requires acknowledgement of the issue and supplier commitment to improvement. Cosmetic gestures such as hospitality or price reductions do not address the core problem. Nor should KPIs be artificially lowered, as this masks underperformance. Trust is restored when accountability is accepted and corrective actions are implemented transparently. This aligns with CIPS' emphasis on trust-building behaviours: honesty, responsibility, and consistent performance.
Question 1160
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as:
Answer : C
Question 1161
The stages of commercial negotiation involve which of the following characteristics?
Answer : C
The typical stages of commercial negotiation are Preparing, opening, bargaining, agreement, and closure. This sequence facilitates a structured approach where negotiators prepare strategies, initiate discussions, engage in bargaining, reach agreements, and formally close the negotiation. This structure is emphasized in CIPS materials as essential for achieving a balanced negotiation process.
Question 1162
A garden furniture supplier currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating in the supplier's environment (their site) can unintentionally shift the power dynamic. The supplier may gain apsychological edgedue to the comfort and control of their surroundings. Best practice recommends holding negotiations in aneutral settingto ensure balance and reduce any influence based on physical context. While site visits are beneficial for supplier evaluation, they should beseparate from the negotiationto maintain objectivity.
Question 1163
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
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
Question 1164
Which of the following can be prepared before negotiation to achieve an agreement that benefits both parties?
Zone of potential agreement (ZOPA)
Attendee list
Walk-away point
Venue for the talks
Answer : B
The ZOPA defines the range of outcomes acceptable to both parties, while the walk-away point defines the minimum acceptable deal for the buyer. Together, these guide negotiation planning to avoid unfavourable agreements. Attendee lists and venues are logistical details, important but not central to negotiation value creation. Preparation of ZOPA and walk-away ensures structured, strategic decision-making and protects against poor deals.
Question 1165
Which of the following two are recognized strategies to achieve a win-lose outcome?
Making the other party lower its resistance point
Making the other party think this settlement is the best it can achieve
Employ empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
In a win-lose outcome, tactics often involve lowering the other party's resistance point (1) and convincing them that the offer is the best possible (2). These strategies are designed to maximize advantage for one party at the expense of the other, fitting with CIPS's win-lose negotiation techniques.
Question 1166
An adversarial style of negotiation is appropriate where the buyer has greater bargaining power over the supplier. In what other situations may the buyer adopt this style of negotiation?
Answer : B
An adversarial negotiation style is more suitable in a market with many alternative sources and substitutes (B). When there are multiple suppliers, buyers have the upper hand and can adopt a competitive stance without risking supply continuity. This aligns with CIPS guidance on the use of adversarial styles in competitive markets with numerous alternatives.
Question 1167
Any commercial negotiation process has only three stakeholders: procurement, budget holders, and users. Is this TRUE?
Answer : D
Commercial negotiations involve a wider set of stakeholders than procurement, budget holders, and users. Depending on context, directors, IT specialists, legal teams, regulators, or external partners may all be impacted. Ignoring them risks resistance or missed requirements. CIPS stresses stakeholder mapping tools (such as Mendelow's Matrix) to identify influence and interest levels, ensuring all relevant parties are managed appropriately in negotiation preparation and execution. Narrow stakeholder identification can undermine outcomes.
Question 1168
A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?
Answer : C
Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values. A smile, a 'yes' and the type of hospitality received, (in the business context), can mean very different things in different international business cultures.
Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide towhat TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.
Question 1169
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Answer : A
Question 1170
Maria is a professional services category buyer within the National Health Service. Due to the severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
The Win-Win approach is the most appropriate negotiation strategy in situations where collaboration and ongoing relationships are prioritized. In this case:
Achieving cost savings: The NHS aims to reduce expenses in order to reallocate funds to critical areas, making it essential that both parties work together to find cost-effective solutions.
Collaborative supplier relationship: Since Maria is working with a collaborative supplier, maintaining a positive relationship through mutual benefit is essential for continued cooperation.
Alignment with public service objectives: A Win-Win outcome aligns with the NHS's broader objectives of maximizing resources for patient care, as it ensures that savings are achieved without undermining the supplier's commitment to quality service.
This approach aligns with CIPS guidelines for maintaining productive, ethical partnerships in procurement, especially in critical sectors like healthcare.
Question 1171
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
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Question 1172
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship style can be characterised by which of the following? Select the TWO that apply.
Answer : A, D
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question 1173
Buying organisation may increase its leverage with suppliers by concentrating spend. Which of the following are most likely to be forms of supplier spend consolidation? Select THREE that apply.
Answer : A, B, E
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
Volume redistribution: making recommendations following spend analysis to move from one supplier to another
Volume consolidation across categories: certain purchase requirements may be common across a number of categories
Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
Question 1174
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 1175
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?
Answer : B
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 1176
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 1177
Procurement team is required to improve leverage with their suppliers through spend consolidation. To check whether there is any opportunity to consolidate spend, which of the following should be priority of procurement team?
Answer : A
In order to identify opportunities where you can increase your leverage with supplier, you need to understand your spend. Undertaking spend analysis of your accounts payable (AP) data is an essential first step here.
Question 1178
Which of the following is an advantage of a fixed-price agreement?
Answer : C
Fixed-price agreements give buyers financial certainty, reducing exposure to supplier inefficiencies, cost increases, or inflation. The supplier bears the risk of cost overruns. While it doesn't automatically improve quality or payment terms, it allows buyers to forecast budgets and manage risk effectively. This makes fixed-price contracts especially useful for projects with defined scopes, where costs are predictable. In contrast, cost-plus contracts keep the risk with the buyer and require constant monitoring of supplier costs, making them less attractive in terms of risk management.
Question 1179
Logibox Ltd sets prices based on what consumers are prepared to pay. Which pricing strategy is this?
Answer : C
Market pricing sets prices according to consumer demand and willingness to pay, ensuring competitiveness. Skimming sets high prices at launch to maximise early profit, penetration uses low prices to enter markets, and premium pricing positions products as luxury with high margins. Market pricing balances supplier costs with customer value perception, making it a common approach in competitive industries.
Question 1180
A supplier can produce a product for $160 and sells it for $240, making $80 profit. What is the mark-up profit percentage?
Answer : A
Mark-up % = Profit Cost 100. Here, profit is $80, cost is $160. So, (80 160) 100 = 50%. This differs from margin, which is profit selling price. Mark-up analysis helps buyers understand supplier pricing structures, detect hidden margins, and strengthen negotiation. By knowing whether a supplier is working with high or low mark-up levels, buyers can challenge prices more effectively or justify alternative offers. This analytical preparation supports objective negotiation rather than reliance on supplier claims.
Question 1181
Which of the following are hardball tactics in negotiations? Select TWO that apply.
Answer : B, C
In difficult negotiations and disputes, hardball tactics like punishment and threats often seem like the only way to win concessions. Some negotiators seem to believe that hardball tactics are the key to success in any negotiation. They resort to extreme demands and even unethical behaviour to try to get the upper hand in a negotiation.
The following are 8 typical hardball tactics:
1. Good cop / Bad cop
2. Low ball / High ball
3. Bogey
4. The Nibble
5. Chicken
6. Intimidation
7. Aggressive Behaviour
8. Snow Job
You can read the details of each tactic here.
In the contrary to hardball tactics, negotiators can adopt integrative approach to the negotiation. Some of integrative tactics are:
1. Expand the Pie
2. Bridging
3. Post Settlement --Settlement
Et cetera
Question 1182
Which of the following is categorised as fixed cost?
Answer : B
An organisation's expense can be categorised into three groups:
Fixed Costs -- costs that do not change with output.
Variable Costs -- costs that vary in direct proportion to output.
Semi-variable costs -- 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.
CIPS study guide page 79-84
Study tips: Fixed variable and semi-variable costs - AAT Comment
Question 1183
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 1184
Jessica Taylor, a senior buyer, is asked to create a written performance report after her latest negotiation. Which of the following should she include? Select THREE.
Answer : B, C, F
A negotiation performance review should focus on measuring outcomes against objectives, lessons learned, and evaluation of negotiator effectiveness. This ensures continual improvement and supports organisational learning. Pricing structures and alternative suppliers may have been reviewed earlier, but are not part of post-performance reflection. Travel expenses are irrelevant to negotiation learning. By focusing on objectives, learning, and performance, organisations embed best practice and prepare stronger strategies for future negotiations.
Question 1185
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 1186
A buyer has lost trust in a supplier but wishes to repair the relationship. What is the appropriate first step?
Answer : A
Rebuilding trust requires acknowledgement of the issue and supplier commitment to improvement. Cosmetic gestures such as hospitality or price reductions do not address the core problem. Nor should KPIs be artificially lowered, as this masks underperformance. Trust is restored when accountability is accepted and corrective actions are implemented transparently. This aligns with CIPS' emphasis on trust-building behaviours: honesty, responsibility, and consistent performance.
Question 1187
Commercial negotiations on price cover various aspects, including pricing arrangements. A buyer may negotiate a fixed-price agreement. Why is a fixed-price agreement advantageous to the buyer?
Answer : B
In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier's internal cost build-up (unlike cost-plus).
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Question 1188
Amelia needs to negotiate prices with a potential client that she has not met before. She was due to attend their offices next week, but the meeting has been cancelled. The potentialclient has offered a telephone call as an alternative, but Amelia has declined the offer as she feels negotiations cannot succeed without a face-to-face meeting. Is this the right decision?
Answer : C
While face-to-face meetings are beneficial, declining all other forms of interaction can hinder progress. Telephone calls can be effective in early negotiation stages to build rapport and set expectations. Conditioning the client through initial calls is a common and productive practice.
Question 1189
Different types of relationships impact negotiations. Which source of leverage would most support the buyer?
Answer : A
Legitimate power comes from formal authority and organisational backing, making it a credible and sustainable leverage source in negotiations. Personality power or reliance on colleagues and friends lacks long-term weight and may not influence suppliers strategically. Buyers who use legitimate power, backed by governance and authority, negotiate from a position of credibility and professionalism, reinforcing stronger outcomes.
Question 1190
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?
Answer : A
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 1191
When is the best time for buyer to propose the negotiation agenda to potential supplier?
Answer : D
A business negotiation agenda is a formal agreed upon list of goals to be achieved or items to be discussed in a particular order during a meeting or negotiation. Agendas can be formal and obvious, or informal and subtle in negotiations.
The agenda is one of the main structural elements of negotiation, in addition to such questions as site, identification of participants, and elements of timing. Together, they answer the who, what, when, and where questions. As with other aspects of negotiation, the agenda can be used either manipulatively to enhance leverage or to improve the prospects for agreement and the possibilities for mutual gain. In most cases, it will be used both ways, reflecting the nature of negotiation as a ''mixed-motive'' situation.
Although it can be instrumental to [research] volunteer as a sole source to write the agenda, in most cases it becomes a joint activity to construct a consensual basis for subsequent negotiation. In these situations, agenda-building becomes one of the pre-negotiation activities that set the tone for the relationship (Saunders, 1985). In other situations, the parties may engage in actual negotiation without a formal or written agenda. When this occurs, the risks and uncertainties may be high but the party who appreciates the importance of the informal agenda has a tremendous advantage.
Whether one plans it or not, during the course of negotiation the parties will discuss a finite set of issues in some sequence and from a particular perceptual framework. Consciousness of the universality and centrality of the agenda is prerequisite to guiding negotiation to a successful conclusion.
CIPS study guide page 146-150
Managing the negotiation agenda | SpringerLink
What is Negotiations Agenda - Negotiation Coaching (brightfocusconsult.com)
Question 1192
Which of the following is important during the proposing stage of a negotiation?
Answer : B
During the proposing stage, parties move toward agreement by narrowing down a wide range of potential options. This helps focus the negotiation and aligns both parties toward practical, mutual outcomes. It's an essential step to keep the process structured and productive.
Question 1193
Which of the following is a source of information on microeconomic factors?
Answer : D
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Question 1194
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
Answer : A, D
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
Question 1195
Apart from negotiation, which other approaches are available to a buyer to ''reach an agreement''? Select THREE approaches that apply.
Answer : A, B, D
CIPS recognises that agreement can be reached without formal negotiation by using alternative influence-based approaches. Accommodating involves one party yielding to preserve relationships or progress. Persuasion uses communication, reasoning, and influence to shape the other party's views and decisions. Problem solving focuses on jointly identifying solutions that address both parties' needs. These approaches are particularly useful where relationships are important or power is balanced. Team management, psychodynamic management, and validation of reporting are not recognised CIPS agreement-reaching approaches within commercial negotiation theory. The ability to choose the correct approach enhances negotiation effectiveness and relationship outcomes.
Question 1196
In preparation for holding negotiation meetings with existing suppliers, category manager Stephen would like to appraise the bargaining strength of his organisation. Which of the following are examples of buyer power? Select TWO that apply:
Answer : A, D
Question 1197
Why is the use of power important for integrative commercial negotiations?
Moving negotiations forward when they get stuck on certain issues
Maximising the share of value gains for the negotiator's side
Coercion of the other party into a submissive agreement
Breaking through negotiation barriers related to attitude
Answer : C
In integrative (win--win) negotiations, power is not used to dominate or coerce but to enable progress and overcome barriers. Power can help move negotiations forward when discussions stall on specific issues and can help address behavioural or attitudinal barriers that prevent collaboration. Maximising one side's share of gains and coercion are characteristics of distributive or adversarial negotiations, not integrative ones. CIPS clearly differentiates the constructive use of power in integrative negotiations as a means to facilitate dialogue, encourage engagement, and unlock joint value, rather than to force submission or extract disproportionate gains.
Question 1198
In what circumstances is the bargaining power of suppliers likely to be high, in relation to buyer power? Select THREE that apply.
Answer : A, D, E
Supplier bargaining power is stronger when there arefew suppliers,low volume requirementsfrom buyers, and when suppliers possessunique capabilities or technology(like specialized machinery). These conditions reduce buyer leverage and increase supplier influence.
Question 1199
Which of the following are variable costs?
Answer : D
Packaging is considered a variable cost because it fluctuates with the level of production or sales activity. Variable costs change directly in relation to the volume of output or service. In contrast:
Rent (A), Loan repayments (B), and Insurance (C) are fixed costs, as they generally do not vary with production levels within a certain range. These are recurring costs that remain constant over time, aligning with CIPS's cost classification in procurement.
Question 1200
Which of the following would describe a push approach to influencing?
Exerting power or authority
Extensive use of open questioning
The party being influenced is fully aware of the process occurring
The party being influenced may not be aware of the process happening
Answer : C
A push approach typically involves exerting authority or power (1) with the party being influenced generally aware of the influence process (3). This method involves overtly directing or persuading the other party, often through explicit information or directives, as per CIPS's understanding of push influence techniques.
Question 1201
Economic growth can be measured by...?
Answer : B
Gross Domestic Product (GDP) is the monetary value of the goods and services manufactured or supplied in a financial period. In general terms, when the GDP rate falls or slows down, there will be a fall in demand for goods and services demanded in the economy, with a fall in firms' revenue and profit margins. When GDP is rising, there will be an increase in demand.
Consumer Price Index (CPI) is weighted measurement that evaluates the average cost of a basket of goods bought by a consumer.
Producer Price Index (PPI) is average changes in prices that a producer receives in return for its goods or services.
Small Business Lending Index (SBLI) is an indicator of small business lending trends.
Question 1202
When engaging in commercial negotiations, it is important to bear in mind that the suppliers need to make a reasonable profit to maintain continuity of supply. It is therefore necessary for the buyer to have a clear understanding of the break-even analysis concept which relates to cost, volume, and profit.
What is 'contribution' in relation to break-even analysis?
Answer : C
Inbreak-even analysis,contributionrefers to the amount from sales revenue that exceedsvariable costs, which then contributes to coveringfixed costsand ultimately generating profit. Understanding this concept enables buyers to better analyze supplier pricing and negotiate more effectively. For example, if a product is priced significantly above its variable cost, there may be room fordiscounts or added value, as the supplier is still contributing toward fixed costs.
Question 1203
Commercial negotiation ends at the award of a contract. Is this statement true?
Answer : C
Negotiation doesn't end after the contract is awarded. The needs for negotiation can arise in any post-award stages. For example, at supplier development and relationship management stage,improvement in supplier capability, capacity, and product/service range can be negotiated. Negotiations with long-term strategic critical suppliers should be carried out in a partnering style, with a win-win starting point assumed.
In some sectors such as transport, utilities and infrastructure, tenderers may 'bid low' or even make a loss to win major contracts with a view to negotiating lucrative changes, variations and 'add-ons' over the life of the contract when the supplier is bedded in and the buyer is in the weaker position to push back or challenge. Even in less complex contract, it is very likely that there will be a need to negotiate with that supplier again after the awarding of the contract.
LO 1, AC 1.1
Question 1204
A skilled negotiator will use a range of questioning techniques. If they wish to explore options with the other party without making any formal commitment, which style would they use?
Answer : B
Hypothetical (''What if...'') questions test possibilities and invite creative options without binding either side. They help probe interests and packages while keeping commitment provisional.
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Question 1205
Which type of question should be used to receive affirmation on statement?
Answer : B
Different questioning styles can be used to elicit desired responses:
Question 1206
Buying organisation may increase its leverage with suppliers by concentrating spend. Which of the following are most likely to be forms of supplier spend consolidation? Select THREE that apply.
Answer : A, B, E
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
Volume redistribution: making recommendations following spend analysis to move from one supplier to another
Volume consolidation across categories: certain purchase requirements may be common across a number of categories
Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
Question 1207
A negotiation process ends once the negotiating meeting has finished. Is this statement true?
Answer : C
Question 1208
Which of the following are factors that might shift the demand curve for a consumer good to the right?
1. Prices of complementary goods decrease
2. Price of the consumer good decreases
3. Customers' expectation of higher prices in the future
4. Consumer tastes shift toward substitute products
Answer : C
A shift in demand occurs when an influencing factor other than price changes. Those factors are:
- The income of buyers
- The tastes and preferences of buyers
- The prices of other goods and services, especially substitutes and complements
- Expectations of buyer about the future
In this question:
- 'Prices of complementary goods decrease' will lead to quantity demanded for that complements rising, then demand for consumer good will increase accordingly.
- 'Price of the consumer good decreases' will increase the quantity demanded for that good, but it will not shift the demand curve
- 'Customers' expectation of higher prices in the future': in this scenario, customers tend to buy more to store in present, which leads to demand curve shifting to the right
- 'Consumer tastes shift toward substitute products': Demand for substitutes will rise, so demand for that consumer good will decrease and the demand curve shifts to the left.
LO 2, AC 2.2
Question 1209
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Hypothetical questions are used to explore options or scenarios without making commitments. This technique allows negotiators to understand the other party's preferences and limitations by presenting hypothetical situations, as recommended in CIPS guidelines for negotiation questioning techniques.
Question 1210
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Tradeables---alternative offers or concessions---are typically introduced during thebargainingstage of the negotiation. This is when both parties discuss and exchange proposals to reach a mutually acceptable agreement.
Question 1211
John Browne, a junior buyer for a corporation, is analysing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : A
Question 1212
An integrative negotiation style involves ...
Answer : C
Integrative negotiation focuses on collaboration, transparency, and the pursuit of shared benefits. It emphasizes mutual problem-solving and long-term value creation rather than short-term wins.
Question 1213
Which of the following are most likely to turn buying organisation into an unattractive customer in supplier's perspective? Select TWO that apply.
Answer : A, D
Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation. Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:
Simple procurement processes: Using SRM technology may help to simplify the process
Simple contracting processes
Clear and concise documentation: Reduced paperwork helps both supplier and buyer save their time and resources.
Absence of onerous supplier terms and conditions
On-time payment
Transparent processes: Unclear tender award criteria can be seen as opaque. Suppliers who attended the tendering processes cannot know the reasons why their bids are rejected and hesitate to attend other tendering.
Ethical behaviour: Suppliers may prefer a buyer who adopts CSR policy because they can predict potential customer's behaviour. Demands for kickback are unethical behaviours.
Question 1214
A buyer is preparing for an upcoming negotiation with a large supplier on a contract renewal price. The buyer has undertaken some analysis and is concerned that changes in the organisation's macro-environment over the last year will result in a price increase. The buyer's analysis has identified changes in which of the following?
Answer : A
Question 1215
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 1216
It may be more difficult to buy on a credit from supplier who locates in a country with a hyperinflation? Is this assumption true?
Answer : B
If the inflation rate is running high, then obtaining credit as a buyer is normally more difficult or expensive as money in the future will be worth less than money today.
Question 1217
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 1218
When planning a negotiation for sourcing internationally, which of the following divergent positions, and therefore potential conflict areas, should be prepared for? Select TWO that apply:
Answer : A, C, D
Question 1219
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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 1220
Where a negotiator uses numerical reasoning with facts as part of their negotiation approach, which of the following techniques will they be adopting?
Answer : B
Using logic involves applying numerical data and factual evidence to support arguments in a negotiation. Logical reasoning appeals to objective analysis rather than emotional or coercive tactics and is effective in convincing the other party through structured, fact-based arguments, aligning with CIPS's guidance on logical negotiation techniques.
Question 1221
One difference between perfect competition and monopolistic competition is that...?
Answer : D
Monopolistic competition exists in market where there are many competing producers but they will try to use product differentiation. Although their products may be very similar, their ability to differentiate means that they can act as monopolies in short run, irrespective of the actions of their competitors.
In perfect competition, there are no barriers to entry to the market or exit from the market. In monopolistic competition, there tend to be fewer barriers to entry or exit in these markets than inoligopolistic markets, but it doesn't mean that there are absolutely no barriers to entry in monopolistic competition.
In perfect competition, the demand curve is perfectly elastic, which means that it will be horizontal. Otherwise, in monopolistic competition market, the demand curve will have normal downward slope.
LO 2, AC 2.2
Question 1222
Lina Rawlins, a senior buyer, asks a supplier: ''Can you tell me exactly what you are doing to ensure quality?'' What type of question is this?
Answer : C
A probing question seeks deeper information, clarifying specifics beyond surface-level responses. Lina's question is factual, detailed, and investigative --- designed to uncover processes and commitments. Hypothetical questions test options (''what if...''), reflective restate or summarise to confirm understanding, and leading steer the respondent toward a desired answer. Probing is essential in negotiations to validate claims, identify risks, and build persuasive arguments.
Question 1223
Leitax is a consumer electronics firm with headquarters in the US and with a global sales presence. The company maintains seven to nine models in its product portfolio, each of which has multiple SKUs. Product life ranges from fifteen to nine months and is getting shorter. The demand planning and master planning processes at the company were ill-defined. Data relevant to forecasting were usually inaccurate, incomplete, or unavailable and the lack of objectives and monitoring mechanisms for the demand planning process meant that process improvement could not be managed. Support for supply management was equally ill-defined, as master production schedules were sporadic and unreliable and suppliers had learned to mistrust them. Leitax's newly appointed Supply chain director, Jessica realises that the ''buy-in'' of different functional groups was critical to the improvement of demand planning. She invites relevant stakeholders to a meeting so that they can express their opinions openly. What tactic is Jessica using?
Answer : A
There are nine commonly used influence tactic:
1. Rational persuasion includes using facts, data, and logical arguments to try to convince others that your point of view is the best alternative. This is the most commonly applied influence tactic.
2. Legitimating
3. Personal appeals
4. Exchange
5. Ingratiation
6. Pressure refers to exerting undue influence on someone to do what you want or else something undesirable will occur.
7. Coalitions refer to a group of individuals working together toward a common goal to influence others.
8. Inspirational appeals
9. Consultation refers to the influence agent's asking others for help in directly influencing or planning to influence another person or group.
In the scenario, there is a problem with demand forecasting and supply chain planning in Leitax. The new Supply chain director invites the stakeholders to a meeting to find the solution. She is using coalition tactics.
- CIPS study guide page 163-168
- Cross-Functional Alignment in Supply Chain Planning: A Case Study of Sales and Operations Planning
- 13.3 The Power to Influence -- Organizational Behavior (umn.edu)
LO 3, AC 3.2
Question 1224
Where can we find the data on macroeconomics?
1. From trade journal
2. From supplier's marketing catalogue
3. From stock exchange market
4. From government's statistics
Answer : B
Macroeconomic indicators are statistics or data readings that reflect the economic circumstances of a particular country, region or sector. They are used by analysts and governments to assess the current and future health of the economy and financial markets.
Macroeconomic indicators will vary in their meaning and the impact that they have on the economy, but broadly speaking there are two main types of indicator.
- Leading indicators, which forecast where an economy might be heading. They are often used by governments to implement policies because they represent the first phase of a new economic cycle. These include the yield curve, interest rates and share prices.
- Lagging indicators, which reflect an economy's historical performance and only change after a trend has been established. They are used to confirm a trend is underway. These include gross domestic product (GDP), inflation and employment figures.
There is also the category of coincident indicators, but these are generally grouped in with lagging indicators as they either happen at the same time or after an economic shift.
The best macroeconomic indicator to watch will heavily depend on your personal preferences, what positions you are taking and which country your portfolio is focused on. However, there are some very common indicators that most traders and investors will keep an eye on.
For simplicity's sake, we have split these out into leading and lagging indicators.
Top leading indicators:
1. The stock market
2. House prices
3. Bond yields
4. Production and manufacturing statistics
5. Retail sales
6. Interest rates
Top lagging indicators:
1. GDP growth rates
2. The Consumer Price Index (CPI) and inflation
3. Currency strength and stability
4. Labour market statistics
5. Commodity prices
A procurement professional may find stock market data from the security exchange, while most lagging indicators (such as GDP, CPI, unemployment rate, currency and inflation rate, etc) can be found from government statistics data.
- CIPS study guide page 117-118
- What Are the Key Macroeconomic Indicators?| IG EN
LO 2, AC 2.2
Question 1225
The stages of commercial negotiation involve which of the following characteristics?
Answer : C
The typical stages of commercial negotiation are Preparing, opening, bargaining, agreement, and closure. This sequence facilitates a structured approach where negotiators prepare strategies, initiate discussions, engage in bargaining, reach agreements, and formally close the negotiation. This structure is emphasized in CIPS materials as essential for achieving a balanced negotiation process.
Question 1226
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
Junior team members can play supportive roles in negotiations, such as taking notes and observing the proceedings. These roles allow them to learn and contribute without leading the negotiation. Serving as an expert or chair would typically require more experience and authority.
Question 1227
Telephone is most likely to be used for which of the following negotiations?
Answer : C
Many commercial negotiations could be considered routine or just not worth the investment for buyers, and using the phone can make more sense and can be more immediate.
LO 2, AC 2.4
Question 1228
Which of the following can be prepared before a negotiation with a supplier to achieve an agreement to benefit both parties?
Zone of potential agreement
Attendee list for the negotiation talks
Walk-away point
Venue for the negotiation talks
Answer : B
Zone of Potential Agreement (1) and Walk-away point (3) are key elements in negotiation planning. Establishing a Zone of Potential Agreement helps identify where interests align, whilethe Walk-away point sets the limit of acceptable terms. Both are essential to preparing a negotiation framework that benefits both parties, as per CIPS best practices.
Question 1229
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 1230
According to Fiona Dent and Mike Brent, which of the following are characteristics of Push approach? Select TWO that apply.
Answer : B, E
According to the book 'Influencing: Skills and techniques for business success' by Fiona Dent and Mike Brent, there are two major influencing styles. Push tends to be directive. It tells, and is clear and resolute, but needs to be employed in situations where firmness is required because of difficulties that exist or weakness is evident. Pull is more participatory and collaborative. It seeks to incorporate everyone's perspective. It can appear wishy-washy if not skilfully employed. Thatapproach should be followed which is most likely to secure commitment and not mere compliance.
The two divisions can be further divided into four style categories: directive; persuasive reasoning; collaborative -- team oriented, people oriented to inspire them with a vision. The directive style relies on your expertise and reputation being respected by others, and where there really does seem to be one answer. It is 'I' driven whereas persuasive reasoning is more 'we' and issue driven. Directive styles can make the user appear as 'a bull in a china shop'; persuasive reasoning can be portrayed as tough guy.
Collaborative influencing takes the 'we' element further and seeks to mobilise everyone's ideas in a journey of discovery. It may have the flavour of 'I'm your best friend', which may not go down too well. Visioning style is concerned to stir people's emotions in support of achieving an objective. This last one has been used by demagogues to stir people's hearts and minds for evil purposes as well as good.
A useful table offers the benefits, problems, words and body language associated with each style along with advice on when to use and when to avoid each. Cases and exercises illustrate these styles.
Empathy comes in for extended treatment with the definition of 'standing in the other's shoes'. This does not necessarily happen just intuitively, and therefore before a specific influencing effort there should be an intense effort to think about the other person or persons and to sense what it might feel like to be them -- their hopes, fears, concerns, what turns them on, what turns them off, where are they coming from.
Influencing by Fiona Elsa Dent and Mike Brent, 2006 (bd-cons.com)
CIPS study guide page 163-165
Question 1231
A supplier can produce a product for $160 and sells it for $240, making $80 profit. What is the mark-up profit percentage?
Answer : A
Mark-up % = Profit Cost 100. Here, profit is $80, cost is $160. So, (80 160) 100 = 50%. This differs from margin, which is profit selling price. Mark-up analysis helps buyers understand supplier pricing structures, detect hidden margins, and strengthen negotiation. By knowing whether a supplier is working with high or low mark-up levels, buyers can challenge prices more effectively or justify alternative offers. This analytical preparation supports objective negotiation rather than reliance on supplier claims.
Question 1232
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
Answer : B, C
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
Question 1233
Which of the following are examples of connected stakeholders in a private organisation? Select TWO that apply.
Answer : A, E
Connected stakeholders are those who, by contractual or commercial relationships, have a significant stake in organisation activity. As a general rule, connected stakeholder (with the exception of suppliers) have a low level of influence on procurement negotiations.
Examples of connected stakeholders are: suppliers, customers, bank where the organisation opens its account, shareholders.
Question 1234
Which of the following is an advantage of consultation as an influencing tactic?
Answer : B
Consultation involves actively involving stakeholders or counterparties in decision-making. By seeking input, it fosters a sense of ownership, increasing commitment to negotiated outcomes. It is particularly effective when the negotiator has low positional power, as it shifts dynamics from authority to collaboration. Unlike coercion or compliance tactics, consultation builds engagement and long-term trust, which is critical in complex procurement where buy-in is essential for contract success. CIPS stresses its role in building influence where direct authority is limited.
Question 1235
Which of the following is a key element to developing high-trust supplier relationships?
Answer : C
Trust develops when organisations consistently deliver on commitments---meeting deadlines, respecting terms, and fulfilling promises. While audits, contract management, and data gathering support oversight, they do not in themselves build trust. In collaborative negotiations, reliability becomes the foundation of long-term partnerships, reducing the need for constant monitoring. CIPS highlights that trust is fragile and must be reinforced through transparency, consistent behaviour, and alignment of actions with words. This credibility is more persuasive than any formal monitoring.
Question 1236
Which of the following types of questions should be used most often in the proposing phase?
Answer : A
At the proposing phase either side may start making tentative proposals regarding their offering. In the case of negotiation where TOP has already submitted a tender or proposal, this stage may provide an opportunity for them to make proposals to improve on their initial offers in general or in areas highlighted by the buying side in advance.
The word 'if' is very useful at this stage and allows you to test tentative proposals without committing yourself. Skilled negotiators use language very carefully. The questions with 'if' are hypothetical ones.
LO 3, AC 3.1
Question 1237
A senior buyer analyses the supply market and he realises that his organisation is treated as Exploit according to supplier's perspective model. What does he need to do?
Answer : D
The supplier's perspective model has two axes: Spend value and Attractiveness:
Exploit is the quadrant where the buyer has high spend but low attractiveness. Overarching supplier objective would be: 'Milk this customer and charge a high price to compensate for all the pain they put us through'.
The buyer should increase its attractiveness to raise the position to Core customer. To do this, a buyer may:
- Simplify procurement processes
- Simplify contracting processes
- Use clear and concise documentation
- Eliminate onerous supplier terms and conditions
- Make the payment on time
- Use transparent processes
- Promote ethical behaviours
LO 1, AC 1.4
Question 1238
Which of the following are stages within the negotiation process?
Planning and preparation
Arguing and persuasion
Accepting hospitality
Testing and proposing
Answer : C
The formal negotiation process includes planning and preparation (objectives, BATNA, MIL) and testing/proposing (exchanging offers). Hospitality is not a stage---it may support relationships but is not part of structured negotiation. Arguing/persuasion occurs within bargaining but is not defined as a stage in itself. Understanding the stages ensures structured progress and prevents disorganised discussions, which often result in suboptimal agreements.
Question 1239
Which of the following is important during the proposing stage of a negotiation?
Answer : B
During the proposing stage, parties move toward agreement by narrowing down a wide range of potential options. This helps focus the negotiation and aligns both parties toward practical, mutual outcomes. It's an essential step to keep the process structured and productive.
Question 1240
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should:
Answer : D
Question 1241
Which of the following are internal factors when a supplier is making its pricing decision?
Price elasticity of demand
Environmental legislation
Risk management
The stage in the product life cycle
Answer : D
Risk management (3) and the stage in the product life cycle (4) are internal factors within the supplier's control and directly influence pricing decisions. These internal factors guide strategicpricing policies. In contrast, price elasticity of demand and environmental legislation are external factors, as per CIPS's guidelines on pricing influences.
Question 1242
A procurement professional is dissatisfied with how a recent negotiation was concluded. What could they do to improve their negotiation approach?
Seek feedback from the supplier on their recent performance
Prepare for all negotiations with a WIN/LOSE (distributive) approach
Involve lots of people in future negotiations
Undertake reflective practice after each negotiation
Answer : C
To improve negotiation outcomes, seeking feedback from the supplier (1) and undertaking reflective practice (4) are recommended actions. Feedback from the supplier can provide insights into areas for improvement from the counterparty's perspective, while reflective practice allows the negotiator to evaluate their own approach, outcomes, and areas for growth. This approach aligns with CIPS's emphasis on continuous improvement in negotiation skills.
Question 1243
Which of the following are recognised techniques in contract negotiation? Select THREE that apply.
Answer : A, C, F
The question asks about negotiation techniques which are not present in the book. In this question, there are only 3 recognised techniques:
- Framing and reframing: A frame is an assumption, or set of assumptions, that guides our attention and behavior. Reframing is the ability to identify and significantly change assumptions or perspectives. Framing has a significant impact on the effectiveness of negotiation outcomes and negotiator working relationships. You can read more on framing and reframing here.
- Anchoring: Anchoring bias is well-known cognitive bias in negotiation and in other contexts. The anchoring bias describes the common tendency to give too much weight to the first number put forth in a discussion and then inadequately adjust from that starting point, or the ''anchor.'' We even fixate on anchors when we know they are irrelevant to the discussion at hand. You can read more on anchoring here.
- Pacing and leading: Pacing and leading is a two-step lever of persuasion. First -- You ''match your pace'' to the person you want to influence in as many ways as possible. You can do this by mimicking the way the person talks, stands, their appearance, etc. You can also mimic less tangible aspects like the way they act, or their emotional state. Second -- Once you've set your pace with someone, lead them to whatever decision or behavior you want them to take! You can read more on pacing and leading here.
LO 3, AC 3.2
Question 1244
Jane is planning for a forthcoming negotiation with a key supplier. She has learned what are important to the supplier and what are important to her company from previous contracts between them. In order to avoid negotiation deadlocks, she has set up several concession plans. But Jane has little experience in dealing with suppliers and doesn't know when to trade these concessions. When is the best time in a negotiation to trade concessions?
Answer : C
The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.
LO 3, AC 3.1
Question 1245
Which of the following are most likely to be abilities of a person with high emotional intelligence? Select TWO that apply.
Answer : B, C
Emotional Quotient is the set of skills that enables us to make our way in a complex world - the personal, social and survival aspects of overall intelligence, the elusive common sense and sensitivity that are essential to effective daily functioning. It has to do with the ability to read the political and social environment, and landscape them; to intuitively grasp what others want and need; what strengths and weaknesses are; to remain unruffled by stress; and to be engaging. The kind of person others want to be around and follow.
EQ seeks to measure emotional intelligence and is centred on abilities such as the following:
- Identifying emotions
- Evaluating how others feel
- Controlling one's own emotions
- Perceiving how others feel
- Using emotions to facilitate social communication
- Relating to others
On the other hand, cognitive ability is defined as a general mental capability involving reasoning, problem solving, planning, abstract thinking, complex idea comprehension, and learning from experience (Gottfredson, 1997).
LO 3, AC 3.3
Question 1246
The bargaining power of buyers is likely to be high in relation to suppliers in which of the following situations?
Answer : D
The bargaining power of buyers increases when the buyer is large relative to the supplier. A large buyer can leverage its size to negotiate more favorable terms due to its significant impact on the supplier's business. CIPS notes that a buyer's size and purchasing volume are key factors that enhance its negotiating power in buyer-supplier relationships.
Question 1247
One of the most important steps in preparing for negotiations is to appraise the relative power of the parties. The buying organisation must assess its bargaining power against that of the supplier it intends to negotiate with. This information is necessary in facilitating the preparation, the negotiation team and the negotiation strategy.
In what situation is the bargaining power of buyers likely to be high relative to suppliers?
Answer : B
Whenmany supplierscompete forfew buyers, buyers gain leverage. This competition can drive prices down and increase the buyer's ability to negotiate favorable terms. Conversely, if the buyer is dependent on a supplier (as in A), the buyer's power diminishes.
''Buyer power increases when there are many suppliers and few buyers. The buyer has multiple options and can negotiate from a position of strength.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Relative Bargaining Power and Market Dynamics)
Question 1248
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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 1249
Which of the following are types of questions that are useful in opening and testing phases of a negotiation? Select the TWO that apply.
Answer : C, E
In the opening phase, parties should confirm understanding and get the issues on the table.
The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.
Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.
Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening and testing stages.
Question 1250
A public agency opens a tendering process for a road building project that lasts approximately 1 year. They post their requirements on public journal and receive some interests. After conducting due diligence process and selecting the lowest bidder, the project commences. However, the supplier complains that price of material increases because of a shortage of supply, then they demands an 5% uptick in contract value. The agency investigates the increment and sees that there is indeed a fluctuation in prices of supplier's input. They are likely to accept the proposal, but they are also concerned that supplier may demand more. To avoid making another concession with the supplier, which of the following should be a priority action of the agency?
Answer : C
The agency (buyer) has made a concession about the price. Possibly the supplier will request another concession (the salami tactics). To avoid this to be happened, the agency should only allow a concession as an exception, make sure that the concession is documented and only permitted against some exceptional circumstances, and seek agreement to this from the supplier.
LO 3, AC 3.2
Question 1251
Which of the following is an advantage of a fixed-price agreement?
Answer : C
Fixed-price agreements give buyers financial certainty, reducing exposure to supplier inefficiencies, cost increases, or inflation. The supplier bears the risk of cost overruns. While it doesn't automatically improve quality or payment terms, it allows buyers to forecast budgets and manage risk effectively. This makes fixed-price contracts especially useful for projects with defined scopes, where costs are predictable. In contrast, cost-plus contracts keep the risk with the buyer and require constant monitoring of supplier costs, making them less attractive in terms of risk management.
Question 1252
When planning an international negotiation, which divergent positions may create potential conflict? Select TWO.
Answer : C, D
International negotiations often face conflicts due to cultural differences (language, communication style, decision-making norms) and timing/location (time zones, travel, scheduling). These factors can cause misunderstandings or perceived power imbalances. Team size and make-up matter but are manageable internally, while closure processes can be aligned. Recognising cultural and logistical divergences allows buyers to prepare strategies that reduce conflict and promote smoother negotiations.
Question 1253
Apart from negotiation, which other approaches are available to a buyer to ''reach an agreement''? Select THREE approaches that apply.
Answer : A, B, D
CIPS recognises that agreement can be reached without formal negotiation by using alternative influence-based approaches. Accommodating involves one party yielding to preserve relationships or progress. Persuasion uses communication, reasoning, and influence to shape the other party's views and decisions. Problem solving focuses on jointly identifying solutions that address both parties' needs. These approaches are particularly useful where relationships are important or power is balanced. Team management, psychodynamic management, and validation of reporting are not recognised CIPS agreement-reaching approaches within commercial negotiation theory. The ability to choose the correct approach enhances negotiation effectiveness and relationship outcomes.
Question 1254
Cost and price analysis is very important for buyers when they are preparing for a negotiation with supplier. Which of the following is a benefit of knowing supplier's fixed costs?
Answer : A
Knowing supplier's fixed and variable costs is beneficial for the buyer in a negotiation. With these insights, the buyer would know the volume at which the supplier reaches break-even points and then offers significant discount due to economies of scale.
LO 2, AC 2.1
Question 1255
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 1256
Different types of relationships impact on commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate poweris derived from theposition or authorityheld within the organisation. It supports the buyer's ability to influence negotiation outcomes based on formal responsibility, legal rights, or contractual mandates.
''Legitimate power stems from formal roles, authority or responsibility. It enables negotiators to assert terms backed by organisational policy or legal mandate.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Organisational Power Structures in Negotiation)
Question 1257
Which type of question should be used to receive affirmation on statement?
Answer : B
Different questioning styles can be used to elicit desired responses:
Question 1258
When might a buyer decide to use a distributive approach to a negotiation with a supplier?
Answer : B
A distributive approach is appropriate when multiple suppliers offer similar products, as this competitive environment allows the buyer to focus on maximizing their position rather than building long-term partnerships. CIPS suggests that a distributive or competitive approach is best used in non-critical purchases or when supplier dependency is low, as is the case here.
Question 1259
Which of the following are tactics of distributive bargaining?
Withholding information that may open up common ground
Coercing the other party to accept your position
Finding common ground between parties
Being open about all your common needs
Answer : C
Distributive bargainingfocuses onmaximizing one's own gainat the expense of the other party. Common tactics includewithholding informationandcoercion. It is typically used in zero-sum negotiations where parties compete over a fixed value.
''Tactics in distributive bargaining include withholding key information, making extreme opening offers, and using pressure to achieve concessions. These are aimed at maximizing individual outcomes.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.5 - Tactics of Distributive Bargaining)
Question 1260
Which of the following would describe a push approach to influencing?
Exerting power or authority
Extensive use of open questioning
The party being influenced is fully aware of the process occurring
The party being influenced may not be aware of the process happening
Answer : C
A push approach typically involves exerting authority or power (1) with the party being influenced generally aware of the influence process (3). This method involves overtly directing or persuading the other party, often through explicit information or directives, as per CIPS's understanding of push influence techniques.
Question 1261
A buyer is leading a negotiation with a supplier for plumbing parts for a large construction project with a five-year term. The buyer knows copper pipe costs will reduce after year two, while plastic component costs are forecast to rise significantly. In the negotiation, the buyer should seek to...
Answer : C
Effective negotiation preparation requires buyers to align pricing mechanisms with cost forecasts and risk exposure. Since copper prices are forecast to fall, fixing them would disadvantage the buyer; a variable price allows the buyer to benefit from market reductions. Conversely, where plastic component costs are expected to rise, fixing prices protects the buyer from inflationary increases. CIPS highlights the importance of selectively applying fixed and variable pricing to manage risk intelligently rather than adopting a single approach across all components. This mixed strategy demonstrates strong commercial awareness and supports value-for-money outcomes over long-term contracts.
Question 1262
Any commercial negotiation process has only three stakeholders: procurement, budget holders, and users. Is this TRUE?
Answer : D
Commercial negotiations involve a wider set of stakeholders than procurement, budget holders, and users. Depending on context, directors, IT specialists, legal teams, regulators, or external partners may all be impacted. Ignoring them risks resistance or missed requirements. CIPS stresses stakeholder mapping tools (such as Mendelow's Matrix) to identify influence and interest levels, ensuring all relevant parties are managed appropriately in negotiation preparation and execution. Narrow stakeholder identification can undermine outcomes.
Question 1263
Listening is a key activity in any negotiation. Which of the following are characteristics of effective listeners?
Answer : C
Question 1264
Which of the following are most likely to be fundamentals of Fisher & Ury's principled negotiation?
1. Depersonalise the argument
2. Focus on positions
3. Generate creative options
4. Using subjective criteria
Answer : C
Principled negotiation is based on four fundamentals: people, interest, options and criteria:
1st Principle: separate the people from the problem: Negotiator should depersonalise the situation and accepting that the subject matter of the negotiation. This can be difficult for untrained negotiators, but this is a key skill to develop
2nd principle: focus on interests, not positions: It is important in principled negotiations not to focus on their parties' positions (what are expressed during negotiations), but on the interests (underlying needs) behind them
3rd principle: invent options for mutual gains: this principle aims to help the parties find a solution that both would benefit from. The more options - or tradeables - that can be brought to the table the better.
4th principle: insist on using objective criteria: is about making sure that the negotiation stays focused on outcomes based on objective criteria and that it is productive.
LO 1, AC 1.2
Question 1265
What are the potential sources of conflict between buyer and supplier? Select TWO.
Answer : B, C
Conflicts arise in procurement when risks, costs, or gains are not fairly shared, creating perceptions of exploitation. Another frequent source is late payment of supplier invoices, which damages trust and supplier cash flow. Scheduling or early involvement, by contrast, usually supports collaboration unless poorly managed. Conflict is natural in negotiations due to divergent interests, but recognising sources allows proactive management. Skilled negotiators use integrative approaches to turn potential conflict into opportunity, aligning incentives and ensuring fairness.
Question 1266
Lina Rawlins is a senior buyer working for a medical equipment company. Lina is in charge of the company's largest supplier account, Great Barrington Gas (GBG), a medical equipment supplier. Recently, GBG's performance has declined, leading to an increasing number of rejected items. Lina is aware of the seriousness of this and has asked GBG to attend an urgent meeting. In the meeting, Lina asked the GBG representative, ''Can you tell me exactly what you are doing to ensure quality?" What type of question is Lina asking?
Answer : A
Lina is asking a probing question to gather more detailed information on the actions GBG is taking to address quality issues. Probing questions are intended to delve deeper into a topic and elicit specific details, making them suitable for understanding underlying issues, as per CIPS's negotiation question types.
Question 1267
Which of the following is active listening?
Answer : C
Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS's guidelines for effective negotiation communication.
Question 1268
Which of the following are external factors in supplier pricing decisions? Select TWO.
Answer : A, D
Suppliers' pricing decisions are influenced by both internal and external factors. Internal include cost of production, overheads, and lifecycle stage. External include competition (market dynamics, alternatives available) and customer perception of value (willingness to pay, brand image). These external elements are beyond supplier control but crucial in determining market price levels. Recognising these allows buyers to assess supplier pricing flexibility and to negotiate based on market realities rather than supplier cost claims.
Question 1269
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost 24%. Which of the following represents the mark-up of that company?
Answer : B
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up (%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
Question 1270
If the value of the British Pound in other currencies is strong, which of the following is most likely to occur?
Answer : D
Currency exchange rates are determined by macroeconomic factors and demand and supply. In general, countries with stable political and economic systems, a growing economy and a strong rule of law will have stronger and more stable currency than those without these characteristics. In this question, the British Pound is stronger than other currency, which means that buyers who import goods from the UK have to pay higher in their own currencies.
LO 2, AC 2.2
Question 1271
Where can we find the data on macroeconomics?
1. From trade journal
2. From supplier's marketing catalogue
3. From stock exchange market
4. From government's statistics
Answer : B
Macroeconomic indicators are statistics or data readings that reflect the economic circumstances of a particular country, region or sector. They are used by analysts and governments to assess the current and future health of the economy and financial markets.
Macroeconomic indicators will vary in their meaning and the impact that they have on the economy, but broadly speaking there are two main types of indicator.
- Leading indicators, which forecast where an economy might be heading. They are often used by governments to implement policies because they represent the first phase of a new economic cycle. These include the yield curve, interest rates and share prices.
- Lagging indicators, which reflect an economy's historical performance and only change after a trend has been established. They are used to confirm a trend is underway. These include gross domestic product (GDP), inflation and employment figures.
There is also the category of coincident indicators, but these are generally grouped in with lagging indicators as they either happen at the same time or after an economic shift.
The best macroeconomic indicator to watch will heavily depend on your personal preferences, what positions you are taking and which country your portfolio is focused on. However, there are some very common indicators that most traders and investors will keep an eye on.
For simplicity's sake, we have split these out into leading and lagging indicators.
Top leading indicators:
1. The stock market
2. House prices
3. Bond yields
4. Production and manufacturing statistics
5. Retail sales
6. Interest rates
Top lagging indicators:
1. GDP growth rates
2. The Consumer Price Index (CPI) and inflation
3. Currency strength and stability
4. Labour market statistics
5. Commodity prices
A procurement professional may find stock market data from the security exchange, while most lagging indicators (such as GDP, CPI, unemployment rate, currency and inflation rate, etc) can be found from government statistics data.
- CIPS study guide page 117-118
- What Are the Key Macroeconomic Indicators?| IG EN
LO 2, AC 2.2
Question 1272
Which of the following occur within the planning and preparation stage in a negotiation process? Select THREE that apply.
Answer : A, B, F
In the planning and preparation stage of negotiation, it is essential to build a strong foundation by understanding various factors that influence the negotiation outcome. According to CIPS resources, critical aspects of preparation include:
Understanding the other party (A): This helps in anticipating their needs, objectives, and potential negotiation styles, leading to more strategic discussions.
Defining the constituents (B): This involves identifying all stakeholders or parties impacted by the negotiation, ensuring their interests are considered when planning the negotiation strategy.
Analyzing the bargaining power (F): Understanding the relative power each party brings to the negotiation helps in setting realistic goals and predicting possible negotiation dynamics.
These elements are foundational in ensuring a well-rounded approach and enabling both parties to enter negotiations with clarity and strategy, enhancing the potential for a positive outcome.
Question 1273
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latestmeeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : A
Jayden's use ofeye contact to demonstrate understandingis a core element ofactive and effective listening. This technique includes not only listening to spoken words but also using non-verbal cues (e.g., nodding, eye contact) to confirm comprehension and engagement. Effective listening is essential to ensure that both parties feel heard and respected, which can de-escalate tension and improve outcomes.
''Effective listening involves verbal and non-verbal behaviours that show attentiveness. Maintaining eye contact, nodding, and reflecting key points show engagement and help in building rapport and trust.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Communication Techniques in Negotiation)
Question 1274
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
A junior team member can effectively contribute as a note taker (1) and observer (3), allowing them to support the meeting without taking on roles that require more experience, like chairing or serving as an expert. This aligns with CIPS's recommendations for assigning junior roles in negotiations.
Question 1275
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should ...
Answer : A
Sally's objective is to achieve a 5% saving. If the supplier offers this saving in a different form (aftercare package), and the total value meets her goal, then accepting this alternative shows flexibility and supports a collaborative,win-winoutcome.
Question 1276
A buyer has lost trust in a supplier but wishes to repair the relationship. What is the appropriate first step?
Answer : A
Rebuilding trust requires acknowledgement of the issue and supplier commitment to improvement. Cosmetic gestures such as hospitality or price reductions do not address the core problem. Nor should KPIs be artificially lowered, as this masks underperformance. Trust is restored when accountability is accepted and corrective actions are implemented transparently. This aligns with CIPS' emphasis on trust-building behaviours: honesty, responsibility, and consistent performance.
Question 1277
Citywide Developments Ltd (CDL) is a construction programme management company that delivers high-value property development schemes. CDL uses named consultant design services in contracts. Recently, consultancy day rates have increased. Which of the following tradeable concessions could CDL offer when negotiating with suppliers to achieve lower rates, without lowering service quality?
Answer : D
By removing the requirement for named personnel, CDL could allow the supplier flexibility in allocating equally competent but possibly less expensive staff. This tradeable does not compromise on quality but helps control costs.
Question 1278
The stages of commercial negotiation involve which of the following characteristics?
Answer : C
The typical stages of commercial negotiation are Preparing, opening, bargaining, agreement, and closure. This sequence facilitates a structured approach where negotiators prepare strategies, initiate discussions, engage in bargaining, reach agreements, and formally close the negotiation. This structure is emphasized in CIPS materials as essential for achieving a balanced negotiation process.
Question 1279
As a buyer for a large stationery company you have been notified of an upcoming price increase from your provider for paper. When you check the contract you realise that it expired 30 days ago so you are no longer in contract. You realise the supplier can now charge what they like.
You call the supplier and attempt to negotiate over the phone but are unsuccessful. What would be the best thing to do?
Answer : D
Once the contract has expired, the buyer no longer has contractual protection on pricing, which significantly weakens their position. However, this situation also creates an opportunity to re-establish leverage by offering future value. By proposing a new or extended contract, the buyer introduces certainty, continuity of business, and potential volume commitment for the supplier, which can be traded in return for moderated pricing. Accepting the increase without challenge offers no commercial control, while threats or immediate cancellation risk damaging the relationship and supply continuity. CIPS guidance emphasises using future commitment as a bargaining lever, especially when informal negotiations fail and contractual leverage no longer exists.
Question 1280
Which of the following are typical characteristics of activity-based costing (ABC) method? Select TWO that apply.
Answer : A, E
Activity-based costing is an alternative approach to traditional absorption costing. The characteristics of these two methods are illustrated in the graph below:
Question 1281
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?
Answer : A
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 1282
Mike is a junior buyer who has been working for a manufacturing organisation for two years, specializing in purchasing research. Over this time, he has built good relationships within his team and with other departments. Which of the following sources of power is Mike most likely to possess?
Answer : A
Referent power is based on personal relationships and the respect or admiration one earns within an organization. Given Mike's positive relationships and his rapport with team members and other departments, he is most likely to have referent power. This power type is influential in negotiation as people are more willing to work with someone they respect, as outlined in CIPS power dynamics in negotiation.
Question 1283
A procurement professional is preparing for a negotiation of purchasing non-critical commodity products. He knows that the product can be easily replaced by other substitutes in the market. The negotiation for these products is typified by which of the following?
Answer : C
With non-critical commodity products, the relationship will be transactional. Buyer should not spend too much time and effort into the negotiation.
LO 1, AC 1.4
Question 1284
Which of the following are examples of variable costs?
Building and site rent
Annual insurance premium
Raw materials expenditure
Delivery costs for materials
Answer : D
Variable costs fluctuate with production volume --- e.g., raw materials and delivery costs. Fixed costs such as rent and insurance remain constant regardless of output. In negotiations, suppliers may inflate fixed cost allocations to justify pricing; buyers should differentiate between fixed and variable costs to challenge pricing more effectively. Recognising true variable costs also allows negotiating for volume-related discounts.
Question 1285
Which of the following is the internal factor that is taken into price of a product?
Answer : A
In order to answer this question, you should better consider each option:
'Exchange rate' is the value of one nation's currency versus the currency of another nation or economic zone. This is a macroeconomic factor.
'Elasticity' refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. This is a microeconomic factor
Consumer tastes refer to the products and services that consumers consciously choose over others. Consumer tastes are so powerful that they can change how businesses conduct their activity. Like elasticity, this is also a microeconomic factor.
Among 4 options, only risk management is the internal factor. Risk pricing is a strategy applied by many companies in the world. To learn how to price the risk, you can read an article from McKinsey: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-to-price-risk-to-win-and-profit
This is a question that a student met in her actual exam. The knowledge section is unknown.
LO: Unknown, AC: Unknown
Question 1286
Procurement gets involved in negotiating purchase requisitions only when there is a value analysis to ensure that only value-adding aspects are included. Is this statement true?
Answer : A
Procurement can negotiate various aspects of a purchase requisition even without a formal value analysis. While value analysis can enhance cost-effectiveness, procurement professionals often negotiate on pricing, terms, and conditions to add value independently of value analysis, as per CIPS's guidelines on procurement flexibility in negotiations.
Question 1287
A skilled negotiator will use a range of questioning techniques. If they wish to explore options with the other party without making any formal commitment, which style would they use?
Answer : B
Hypothetical (''What if...'') questions test possibilities and invite creative options without binding either side. They help probe interests and packages while keeping commitment provisional.
===========
Question 1288
Win-lose approach is most likely to be associated with which of the following type of relationship?
Answer : A
Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Win-lose approach is useful when the relationship with the other party (TOP) is short-term and once-off.
The question mentions 4 types of relationship:
Adversarial: Both seek to maximize position at the expense of the other. Almost no trust, communication and cooperation. These suppliers will probably provide non-core products or services with the buyer purchasing them on a one-off basis.
Outsourcing relationship: Use competent suppliers to manage non-core businesses previously done in-house. Require high level of trust and collaboration
Partnership: Both work closely on long term development by sharing information, technology and ideas.High level of trust with the aim to benefit both parties (win-win)
Strategic alliance: Both parties identify areas where they could collaborate to create mutual benefits
Among these 4 types of relationship, only adversarial is once-off. Then it is the correct answer.
Question 1289
John Browne, a junior buyer for a corporation, is analysing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : C
Foreign exchange ratesdirectly influence thecost of imported goods and services. Currency fluctuations can affect total expenditure, supplier margins, and ultimately the buyer's profitability. Even if payment is in local currency, suppliers may adjust their pricing to mitigate foreign exchange risks.
''Foreign exchange volatility can significantly impact pricing in international procurement. Buyers must assess currency risks as part of their cost evaluation and strategic preparation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.2 - Macroeconomic Considerations in Pricing)
Question 1290
Freefields Housing Authority (FHA) is a housing provider that has outsourced a range of management services using fixed-price long-term contracts. FHA's regular supplier credit reviews have identified that some key outsourced service suppliers are at risk of insolvency due to high inflation rates observed in the macroeconomic climate. Which of the following actions would enable FHA to reduce this risk for the lifetime of the affected contracts?
Answer : B
Question 1291
Amelia needs to negotiate prices with a potential client that she has not met before. She was due to attend their offices next week, but the meeting has been cancelled. The potentialclient has offered a telephone call as an alternative, but Amelia has declined the offer as she feels negotiations cannot succeed without a face-to-face meeting. Is this the right decision?
Answer : C
While face-to-face meetings are beneficial, declining all other forms of interaction can hinder progress. Telephone calls can be effective in early negotiation stages to build rapport and set expectations. Conditioning the client through initial calls is a common and productive practice.
Question 1292
Which of the following is a source of information on microeconomic factors?
Answer : D
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Question 1293
Which type of question is most effective for checking facts in negotiation?
Answer : D
Closed questions (requiring yes/no or factual answers) are best for verifying facts, ensuring clarity and accuracy. Open questions are useful for exploration, while hypothetical test possibilities, and leading steer responses. In negotiation, closed questions confirm details such as prices, quantities, or deadlines, preventing ambiguity in agreements. CIPS stresses using the full range of question types strategically, with closed questions essential in finalising commitments.
Question 1294
A procurement manager withholds important information to strengthen negotiating power. Is this appropriate when using an integrative negotiation style?
Answer : B
Integrative negotiation relies on openness and trust, aiming to identify underlying interests, not just positions. Withholding information is typical of distributive (win-lose) bargaining, where each side protects its bottom line. In an integrative context, hiding key details prevents mutual understanding, reduces creative option-building, and damages relationship trust. Instead, transparency enables value creation---such as joint cost reduction or innovation. CIPS emphasises that power must be balanced with openness when integrative outcomes are desired.
Question 1295
When might a buyer decide to use a distributive approach to a negotiation with a supplier?
Answer : B
A distributive approach is appropriate when multiple suppliers offer similar products, as this competitive environment allows the buyer to focus on maximizing their position rather than building long-term partnerships. CIPS suggests that a distributive or competitive approach is best used in non-critical purchases or when supplier dependency is low, as is the case here.
Question 1296
Jessica Taylor, a senior buyer, is reflecting on her most recent negotiation. She has been asked by her manager to create a written record of performance. Which of the following should Jessica include in this negotiation performance report? Select THREE that apply:
Answer : C, E, F
Question 1297
Which of the following are sources of power in organisational relationships?
Coercive power
Intruded power
Referent power
Tactical power
Answer : C
Coercive powerstems from the ability to apply pressure or sanctions, whilereferent powercomes from reputation, charisma, or respect. These are both recognised power sources in negotiations. ''Intruded'' and ''tactical'' power are not classified within the standard power framework used in CIPS materials.
''Sources of power include coercive (based on threats or penalties), referent (based on personal appeal or influence), and others such as reward, expert, and legitimate power.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Power in Negotiation)
Question 1298
Which TWO strategies are recognised for achieving a win--lose outcome?
Making the other party lower its resistance point
Making the other party believe this settlement is the best it can achieve
Employing empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
Win--lose strategies focus on gaining advantage at the other party's expense. Forcing them to lower their resistance point or persuading them the deal is their best option are classic distributive tactics. Empathy, compromise, and creativity belong to integrative approaches aimed at mutual benefit. Recognising these distinctions ensures negotiators adopt the right strategy for the relationship type and context.
Question 1299
Jane is planning for a forthcoming negotiation with a key supplier. She has learned what are important to the supplier and what are important to her company from previous contracts between them. In order to avoid negotiation deadlocks, she has set up several concession plans. But Jane has little experience in dealing with suppliers and doesn't know when to trade these concessions. When is the best time in a negotiation to trade concessions?
Answer : C
The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.
LO 3, AC 3.1
Question 1300
Which of the following are elements of price negotiations? Select the TWO that apply.
Answer : A, C
Price negotiations extend beyond headline unit price and include elements that influence total commercial value. Pricing arrangements (such as fixed, variable, indexed, or cost-plus pricing) directly affect financial risk and cost certainty. Terms of payment influence cash flow, working capital, and overall cost of ownership, making them core price-related negotiation variables. Sales tax is typically regulated and not negotiable, while cash flow management and administration costs are internal organisational concerns rather than negotiated price elements. CIPS emphasises a holistic approach to price negotiations that considers structure and payment terms, not just price level.
Question 1301
A procurement manager has decided to bring in a junior member of their team to a negotiation meeting. Which of the following would be suitable roles for this junior member of the team?
Note taker
Expert
Observer
Chair
Answer : B
A junior team member can effectively contribute as a note taker (1) and observer (3), allowing them to support the meeting without taking on roles that require more experience, like chairing or serving as an expert. This aligns with CIPS's recommendations for assigning junior roles in negotiations.
Question 1302
Which factors give rise to conflict within the procurement negotiation context? Select THREE that apply.
Answer : A, C, F
Conflict can arise in procurement negotiations due to a power imbalance, which occurs when one party has more influence than the other, leading to potential exploitation or dissatisfaction. Differences in goals between parties---such as cost minimization for buyers and profit maximization for suppliers---also contribute to tension. Surprisingly, similar motives can lead to conflict as well, particularly when both parties are competing for limited benefits or market share.
Question 1303
Which of the following is a source of information on microeconomic factors?
Answer : B
Question 1304
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
Answer : B, C
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
Question 1305
Buying organisation may increase its leverage with suppliers by concentrating spend. Which of the following are most likely to be forms of supplier spend consolidation? Select THREE that apply.
Answer : A, B, E
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
Volume redistribution: making recommendations following spend analysis to move from one supplier to another
Volume consolidation across categories: certain purchase requirements may be common across a number of categories
Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
Question 1306
A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?
Answer : B
To answer this question, you should know The seller's perspective as in 'How to Negotiate Professionally':
In the scenario, the buyer's spend is low, while they seem unattractive to seller (as they tend to pay late). So the buyer is classified as Nuisance in seller's perspective.
Question 1307
Which of the following may help the procurement professional increase expert power in commercial negotiation? Select TWO that apply.
Answer : C, E
Expert power is based on a person's high levels of skill and knowledge, formal training, qualifications and experience in a particular procurement category would give someone expert status and mean that in negotiation their voice is listened to as a more objective, informed knowledge leader. Expert power is based on facts, knowledge, research, insight and study.
Legitimate power comes from rules, formal authority, organisation rank, staff rate or official position held.
Reward power comes from one person's ability to compensate or reward another for compliance.
Referent power stems from their personality, way of engaging with others and habit of acting in a way that is in line with a strong set of values and principles.
Question 1308
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Question 1309
Which of the following can be prepared before a negotiation with a supplier to achieve an agreement to benefit both parties?
Zone of potential agreement
Attendee list for the negotiation talks
Walk-away point
Venue for the negotiation talks
Answer : B
Zone of Potential Agreement (1) and Walk-away point (3) are key elements in negotiation planning. Establishing a Zone of Potential Agreement helps identify where interests align, whilethe Walk-away point sets the limit of acceptable terms. Both are essential to preparing a negotiation framework that benefits both parties, as per CIPS best practices.
Question 1310
Where can we find the data on macroeconomics?
1. From trade journal
2. From supplier's marketing catalogue
3. From stock exchange market
4. From government's statistics
Answer : B
Macroeconomic indicators are statistics or data readings that reflect the economic circumstances of a particular country, region or sector. They are used by analysts and governments to assess the current and future health of the economy and financial markets.
Macroeconomic indicators will vary in their meaning and the impact that they have on the economy, but broadly speaking there are two main types of indicator.
- Leading indicators, which forecast where an economy might be heading. They are often used by governments to implement policies because they represent the first phase of a new economic cycle. These include the yield curve, interest rates and share prices.
- Lagging indicators, which reflect an economy's historical performance and only change after a trend has been established. They are used to confirm a trend is underway. These include gross domestic product (GDP), inflation and employment figures.
There is also the category of coincident indicators, but these are generally grouped in with lagging indicators as they either happen at the same time or after an economic shift.
The best macroeconomic indicator to watch will heavily depend on your personal preferences, what positions you are taking and which country your portfolio is focused on. However, there are some very common indicators that most traders and investors will keep an eye on.
For simplicity's sake, we have split these out into leading and lagging indicators.
Top leading indicators:
1. The stock market
2. House prices
3. Bond yields
4. Production and manufacturing statistics
5. Retail sales
6. Interest rates
Top lagging indicators:
1. GDP growth rates
2. The Consumer Price Index (CPI) and inflation
3. Currency strength and stability
4. Labour market statistics
5. Commodity prices
A procurement professional may find stock market data from the security exchange, while most lagging indicators (such as GDP, CPI, unemployment rate, currency and inflation rate, etc) can be found from government statistics data.
- CIPS study guide page 117-118
- What Are the Key Macroeconomic Indicators?| IG EN
LO 2, AC 2.2
Question 1311
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 1312
Fast & Easy Limited, a global fast food retailer, is in a negotiation with its major meat supplier. The supplier is asking for a 2% price increase, which Fast & Easy is strongly resisting. The supplier justifies this increase by stating that currency fluctuations, an unstable economic climate, and rising transport costs have necessitated this increase. Which influencing tactic is the supplier using?
Answer : A
The supplier is using Rational persuasion by providing logical reasons, such as economic conditions and increased costs, to justify the price increase. This approach uses factual information to influence the buyer's decision, aiming to present the price hike as a reasonable adjustment, which aligns with CIPS strategies on influencing tactics in negotiations.
Question 1313
What letter R in the acronym SMART stands for?
Answer : C
SMART is an acronym that you can use to guide your goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound
A student met this question in the L4M5 exam. SMART is mentioned primarily in L4M3 Commercial Contracting.
LO: Unknown, AC: Unknown
Question 1314
Jessica Taylor, a senior buyer, is asked to create a written performance report after her latest negotiation. Which of the following should she include? Select THREE.
Answer : B, C, F
A negotiation performance review should focus on measuring outcomes against objectives, lessons learned, and evaluation of negotiator effectiveness. This ensures continual improvement and supports organisational learning. Pricing structures and alternative suppliers may have been reviewed earlier, but are not part of post-performance reflection. Travel expenses are irrelevant to negotiation learning. By focusing on objectives, learning, and performance, organisations embed best practice and prepare stronger strategies for future negotiations.
Question 1315
Different types of relationships impact negotiations. Which source of leverage would most support the buyer?
Answer : A
Legitimate power comes from formal authority and organisational backing, making it a credible and sustainable leverage source in negotiations. Personality power or reliance on colleagues and friends lacks long-term weight and may not influence suppliers strategically. Buyers who use legitimate power, backed by governance and authority, negotiate from a position of credibility and professionalism, reinforcing stronger outcomes.
Question 1316
When is an adversarial style of negotiation appropriate?
Answer : A
An adversarial negotiation style is appropriate when one party has high bargaining power and is focused on maximizing its benefit rather than maintaining a long-term relationship. This approach often involves competitive tactics that leverage power disparities, aligning with CIPS guidance on when adversarial tactics may be strategically used in negotiations.
Question 1317
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : D
An adversarial style is appropriate when issues are non-negotiable, such as health and safety commitments (D). In these scenarios, compliance is required without compromise, and a firm stance may be necessary. This aligns with CIPS guidance, where adversarial tactics are used in non-negotiable contexts to enforce strict standards.
Question 1318
Which of the following is considered a strength of a 'logical' style negotiator?
Answer : B
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of logical style are described below:
Question 1319
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Answer : C
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Question 1320
When prices of input materials increase, supply curve shifts to the left while demand remains stable. The shift of supply will tend to cause which of the following?
Answer : D
The case in the question is illustrated as below:
The equilibrium price initially at P0 with quantity Q0, when supply curve shifts to the left, it will converge with demand curve at new equilibrium point with price P1 and quantity Q1. As you can see from the graph, P1 is greater than P0 and Q1 is smaller than Q0.
Question 1321
The buyer's bargaining power tends to be relatively higher than supplier's bargaining power in which of the following circumstances?
Answer : D
Buyer power gives customers/consumers (buyers) the ability to squeeze industry margins by pressuring firms (the suppliers) to reduce prices or increase the quality of services or products offered.
There are four major factors to consider when determining the bargaining power of buyers:
1. Number of buyers relative to suppliers: If the number of buyers is small relative to that of suppliers, the buyer's power will be stronger.
2. Dependence of a buyer's purchase on a particular supplier: If a buyer is able to get similar products/services from other suppliers, buyers depend less on a particular supplier. Therefore, the power of the buyer would be greater.
3. Switching costs: If there are not many alternative suppliers available, the cost of switching is high. Therefore, buyer power would be low.
4. Backward Integration: If the buyer is able to integrate or merge suppliers, the buyer has greater bargaining power over the existing suppliers.
When is Bargaining Power of Buyers High/Strong?
There are fewer buyers relative to that of suppliers
The switching costs of the buyer are low
If the buyer is able to backward integrate
The buyer purchases product in bulk (high volume)
The buyer is able to get similar product/services from other suppliers
The buyer purchases the majority of the seller's products
Several substitutes are available on the market
Product is not differentiated
CIPS study guide page 54-56
What is the Bargaining Power of Buyers?
Question 1322
Where there are high levels of commitment to relationships between both the buyer and supplier, this is seen as collaborative and beneficial to negotiations. Is this statement correct?
Answer : A
A collaborative relationship is characterized by mutual commitment, which enhances risk management and strategic planning between buyer and supplier. High levels of trust and commitment enable both parties to work closely to achieve shared objectives, creating a beneficial negotiation environment. This approach aligns with CIPS's principles of collaborative procurement relationships.
Question 1323
Which of the following are types of non-verbal communication that could be used during a negotiation meeting? Select THREE that apply.
Answer : C, E, F
Non-verbal communicationsignificantly affects the dynamics of negotiation.Hand gestures,eye contact, andfacial expressionscan reinforce spoken words or contradict them. These elements can influence perception, trust, and the tone of the negotiation.
''Non-verbal communication includes gestures, posture, eye contact, and facial expressions. These play a critical role in how messages are received and interpreted.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Verbal and Non-Verbal Communication Techniques)
Question 1324
A negotiation process ends once the negotiating meeting has finished. Is this statement true?
Answer : C
Question 1325
An integrative negotiation style involves ...
Answer : C
Integrative negotiation focuses on collaboration, transparency, and the pursuit of shared benefits. It emphasizes mutual problem-solving and long-term value creation rather than short-term wins.
Question 1326
Which of the following are microeconomic factors? Select THREE that apply.
Answer : B, D, F
Microeconomic factors refer to elements that affect individual businesses or sectors rather than the economy as a whole. In this case:
Availability of investors (B): Access to investors impacts capital availability for businesses.
Distribution channels (D): Distribution methods directly influence a business's ability to get products to market.
Levels of competition (F): Competition affects pricing and strategic decisions within specific industries.
Taxation rates, unemployment levels, and inflation rates are considered macroeconomic factors, affecting the economy on a broader scale, as per CIPS's definitions of microeconomic vs. macroeconomic influences.
Question 1327
A purchasing organisation wants a Win-Win (integrative) solution in negotiations with a key supplier. Which TWO approaches would be appropriate?
Answer : A, B
Integrative negotiation seeks joint value creation. Collaboration builds trust and open exchange, while problem solving identifies creative tradeables that satisfy both sides. Coercion and risk transfer belong to adversarial, distributive strategies, where one side gains at the expense of the other. Persuasion can play a role, but without collaboration, it leans toward manipulation rather than true win-win. In practice, integrative approaches require willingness to share data, listen actively, and seek long-term alignment.
Question 1328
Which of the following are hardball tactics in negotiations? Select TWO that apply.
Answer : B, C
In difficult negotiations and disputes, hardball tactics like punishment and threats often seem like the only way to win concessions. Some negotiators seem to believe that hardball tactics are the key to success in any negotiation. They resort to extreme demands and even unethical behaviour to try to get the upper hand in a negotiation.
The following are 8 typical hardball tactics:
1. Good cop / Bad cop
2. Low ball / High ball
3. Bogey
4. The Nibble
5. Chicken
6. Intimidation
7. Aggressive Behaviour
8. Snow Job
You can read the details of each tactic here.
In the contrary to hardball tactics, negotiators can adopt integrative approach to the negotiation. Some of integrative tactics are:
1. Expand the Pie
2. Bridging
3. Post Settlement --Settlement
Et cetera
Question 1329
An oil refinery plant imports much of its crude oil from overseas. A procurement manager in the refinery suggests that fixing the crude oil contract price for 36 months would be beneficial for the company. Would this be a right thing to do?
Answer : C
Fixed price contract is the contract in which the price is static throughout the contract period. A fixed-price contract may give certainty to budget and simplify contract management. However, it may lead to other problems since it requires bidders to estimate and bear the financial risks associated with price escalations. If the estimates are too high or events do not materialize, the buyer will pay a steep price that may affect the economy and efficiency of the contract. In the worst case, it may mean that the bid price is then above budget and may lead to a reduction in the requirements or rebidding. If the estimates are too low, it may appear as an abnormally low bid and disrupt contract execution.
On the other hand, price adjustment provisions include formulas designed to address problems, and can protect both the borrower and contractors from price fluctuations. Price adjustment formulas allow contractors to offer more realistic prices at the time of bidding. Despite concerns that they may lead to budget uncertainties, price adjustment formulas will estimate the actual cost implications that will be encountered. They use indexes that can be used for cost projection.
According to Asia Development Bank (ADB), any contract with a delivery or completion period beyond 18 months should contain an appropriate price adjustment clause.
In the scenario, the crude oil contract is planned to last 36 months. This period is pretty long with a fluctuating commodity. Therefore, the company should use price adjustment agreement.
- CIPS study guide page 113-117
- Guidance Note on Procurement: Price Adjustment (adb.org)
LO 2, AC 2.2
Question 1330
A garden furniture supplier who is currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating at the supplier's site can give the supplier a psychological advantage due to their familiarity with the setting. To ensure a neutral and balanced negotiation environment, it's preferable to conduct negotiations in a neutral location or through structured channels, as recommended in CIPS's guidance on negotiation settings.
Question 1331
Which of the following is categorised as fixed cost?
Answer : B
An organisation's expense can be categorised into three groups:
Fixed Costs -- costs that do not change with output.
Variable Costs -- costs that vary in direct proportion to output.
Semi-variable costs -- 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.
CIPS study guide page 79-84
Study tips: Fixed variable and semi-variable costs - AAT Comment
Question 1332
''A negotiation ends once the meeting finishes.'' Is this statement true?
Answer : D
Negotiations do not end at the meeting; they continue through reflection, documentation, and post-negotiation review. Best practice involves assessing whether objectives were met, capturing lessons learned, and ensuring written confirmation of terms. Without this, misunderstandings or missed improvements can occur. Reflection allows organisations to continuously strengthen negotiation strategies and build learning cycles.
Question 1333
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 1334
Ben Dunne is a procurement manager and is responsible for a contract that supplies translation services to his organisation. Ben has the authorisation to extend the contract for a further two years, but has aimed for a further 2% discount. Ben is aware that the supplier's previous performance has been inconsistent, but during the negotiation Ben asks the supplier to present their performance to date on this contract. Which stage of the negotiation cycle is this?
Answer : D
The testing stage of the negotiation cycle is where each party explores and validates information provided by the other side. By asking the supplier to present their performance to date, Ben is testing claims, checking credibility, and assessing whether the supplier's performance supports or undermines their position in the negotiation. This is distinct from preparation (which happens before the meeting), bargaining (where concessions and tradeables are exchanged), and agreement (where final terms are confirmed). CIPS highlights that testing allows negotiators to challenge assumptions, clarify evidence, and strengthen their position before moving into bargaining or closure.
Question 1335
Effective listening is important in integrative negotiations. Is this statement correct?
Answer : A
Effective listening is crucial in integrative negotiations as it fosters mutual understanding and helps identify shared interests, leading to collaborative solutions. It enables negotiators to comprehend the other party's needs and concerns fully.
Question 1336
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 1337
For a commercial negotiation to be effective, the organisation has to identify resources required for negotiation. Which one of the following could help?
Answer : B
Involving an appropriate cross-functional team is beneficial for effective commercial negotiation because it brings together diverse perspectives and expertise relevant to the negotiation context. According to CIPS, a cross-functional team ensures that all aspects, such as technical, financial, and operational inputs, are considered, leading to more balanced and informed decision-making. This approach also helps in addressing complex negotiation elements effectively.
Question 1338
In a commercial negotiation, a procurement professional negotiates on his company's behalf. The power of buying organisation is the only factor that influences the behaviours of the other party. Is this assumption true?
Answer : B
The assumption is false, because when a procurement professional negotiates on behalf of his employer, he brings the power of his organisation (its brand, reputation and purchasing spend) as well his own personal power (that which is embedded within him) to the negotiation.
From a negotiation perspective, both organisational and personal power have the ability to influence the behaviours of other or the cause of event. This power is clearly core to negotiation, and of enormous important in seeking to achieve the objectives.
Question 1339
An adversarial style of negotiation is appropriate when the buyer has greater bargaining power. In what other situation may the buyer adopt this style?
Answer : A
Adversarial (win--lose) negotiation is viable when buyers can leverage abundant alternatives and substitutes, reducing supplier power. In such cases, buyers can adopt tough tactics, knowing they can switch suppliers if necessary. By contrast, limited supply, single sourcing, or monopolist suppliers constrain buyer power, making adversarial strategies risky and often ineffective. CIPS stresses that negotiation style must be matched to market conditions and the power balance.
Question 1340
Logibox Ltd is releasing a new range of stackable storage boxes. It has adopted a pricing strategy that aims to sell at a price the consumer is prepared to pay.
Which of the following is it using?
Answer : C
Question 1341
Any commercial negotiation process has only three stakeholders: procurement, budget holders, and users. Is this TRUE?
Answer : D
Commercial negotiations involve a wider set of stakeholders than procurement, budget holders, and users. Depending on context, directors, IT specialists, legal teams, regulators, or external partners may all be impacted. Ignoring them risks resistance or missed requirements. CIPS stresses stakeholder mapping tools (such as Mendelow's Matrix) to identify influence and interest levels, ensuring all relevant parties are managed appropriately in negotiation preparation and execution. Narrow stakeholder identification can undermine outcomes.
Question 1342
According to Mendelow's Matrix, how should stakeholders with high interest but low power be managed?
Answer : C
Mendelow's Matrix categorises stakeholders by power and interest. High-interest, low-power stakeholders must be kept informed, as they care about outcomes but lack direct influence. Keeping them informed builds trust and reduces resistance. By contrast, high power/interest stakeholders are key players, while low power/low interest require minimal effort. This tool ensures negotiation strategies align with stakeholder dynamics, preventing overlooked risks or conflicts.
Question 1343
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship style can be characterised by which of the following? Select the TWO that apply.
Answer : A, D
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question 1344
Which of the following is considered a weakness of a 'dealer' style negotiator?
Answer : A
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of dealer style are described below:
LO 2, AC 2.4
Question 1345
Jane is planning for a forthcoming negotiation with a key supplier. She has learned what are important to the supplier and what are important to her company from previous contracts between them. In order to avoid negotiation deadlocks, she has set up several concession plans. But Jane has little experience in dealing with suppliers and doesn't know when to trade these concessions. When is the best time in a negotiation to trade concessions?
Answer : C
The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.
LO 3, AC 3.1
Question 1346
For a commercial negotiation to be effective, the organisation has to identify resources required for negotiation. Which one of the following could help?
Answer : B
Involving an appropriate cross-functional team is beneficial for effective commercial negotiation because it brings together diverse perspectives and expertise relevant to the negotiation context. According to CIPS, a cross-functional team ensures that all aspects, such as technical, financial, and operational inputs, are considered, leading to more balanced and informed decision-making. This approach also helps in addressing complex negotiation elements effectively.
Question 1347
According to Fiona Dent and Mike Brent, which of the following are characteristics of Push approach? Select TWO that apply.
Answer : B, E
According to the book 'Influencing: Skills and techniques for business success' by Fiona Dent and Mike Brent, there are two major influencing styles. Push tends to be directive. It tells, and is clear and resolute, but needs to be employed in situations where firmness is required because of difficulties that exist or weakness is evident. Pull is more participatory and collaborative. It seeks to incorporate everyone's perspective. It can appear wishy-washy if not skilfully employed. Thatapproach should be followed which is most likely to secure commitment and not mere compliance.
The two divisions can be further divided into four style categories: directive; persuasive reasoning; collaborative -- team oriented, people oriented to inspire them with a vision. The directive style relies on your expertise and reputation being respected by others, and where there really does seem to be one answer. It is 'I' driven whereas persuasive reasoning is more 'we' and issue driven. Directive styles can make the user appear as 'a bull in a china shop'; persuasive reasoning can be portrayed as tough guy.
Collaborative influencing takes the 'we' element further and seeks to mobilise everyone's ideas in a journey of discovery. It may have the flavour of 'I'm your best friend', which may not go down too well. Visioning style is concerned to stir people's emotions in support of achieving an objective. This last one has been used by demagogues to stir people's hearts and minds for evil purposes as well as good.
A useful table offers the benefits, problems, words and body language associated with each style along with advice on when to use and when to avoid each. Cases and exercises illustrate these styles.
Empathy comes in for extended treatment with the definition of 'standing in the other's shoes'. This does not necessarily happen just intuitively, and therefore before a specific influencing effort there should be an intense effort to think about the other person or persons and to sense what it might feel like to be them -- their hopes, fears, concerns, what turns them on, what turns them off, where are they coming from.
Influencing by Fiona Elsa Dent and Mike Brent, 2006 (bd-cons.com)
CIPS study guide page 163-165
Question 1348
A buyer has lost trust in a supplier but wishes to repair the relationship. What is the appropriate first step?
Answer : A
Rebuilding trust requires acknowledgement of the issue and supplier commitment to improvement. Cosmetic gestures such as hospitality or price reductions do not address the core problem. Nor should KPIs be artificially lowered, as this masks underperformance. Trust is restored when accountability is accepted and corrective actions are implemented transparently. This aligns with CIPS' emphasis on trust-building behaviours: honesty, responsibility, and consistent performance.
Question 1349
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 1350
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
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Question 1351
Before engaging in a negotiation with a supplier of rechargeable lights, procurement team tries to visualise the breakdown of supplier's costs to calculate its break-even point. They estimate that total fixed expenses related to rechargeable electric light are $270,000 per month and variable expenses involved in manufacturing this product are $126 per unit. The supplier charges its customer $180 per unit. Within its current capacity, this supplier will make a profit at which of the following?
Answer : A
The analysis of cost into fixed and variable enables organisations to determine their break-even point (BE) - the point where total revenue from sales and total cost exactly balance. All costs need to be covered by sale revenue in order for a company to make a profit. If you know your fixed costs and your variable costs then you can work out the minimum quantity of goods or services you need to sell to break even. Break even point is measured in volume and can be worked out graphically or via formulae:
Price - Variable costs = Contribution
Break even point (volume) = Fixed expenses/Contribution margin per unit
In this scenario, the break even point (Q) is: 270,000/(180-126) = 5,000
To make a profit, the supplier needs to sell more than 5,000 units per month.
The BE point is thus an important determinant of flexibility of pricing for suppliers. Before BE is achieved there will be much greater reluctance to offer price concessions to customers than after BE is achieved.
LO 2, AC 2.1
Question 1352
Commercial negotiations on prices cover a range of aspects including pricing arrangements. A buyer may negotiate for a 'fixed price agreement'. Why is a fixed price agreement advantageous to the buyer?
Answer : B
Afixed price agreementprovides the buyer withcost predictability. Once the price is agreed upon, the buyer is insulated from any cost increases on the supplier's side. The supplier bears the risk of fluctuating input prices, which simplifies cost control and contract administration for the buyer.
''With a fixed price arrangement, the buyer is protected from future price increases and does not need to monitor the supplier's ongoing costs. This is particularly useful for budgeting and forecasting.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Fixed Price Agreements)
Question 1353
Effective listening is important in integrative negotiations. Is this statement correct?
Answer : A
Effective listening is crucial in integrative negotiations as it fosters mutual understanding and helps identify shared interests, leading to collaborative solutions. It enables negotiators to comprehend the other party's needs and concerns fully.
Question 1354
A procurement manager withholds important information to strengthen negotiating power. Is this appropriate when using an integrative negotiation style?
Answer : B
Integrative negotiation relies on openness and trust, aiming to identify underlying interests, not just positions. Withholding information is typical of distributive (win-lose) bargaining, where each side protects its bottom line. In an integrative context, hiding key details prevents mutual understanding, reduces creative option-building, and damages relationship trust. Instead, transparency enables value creation---such as joint cost reduction or innovation. CIPS emphasises that power must be balanced with openness when integrative outcomes are desired.
Question 1355
Which of the following are signs indicating that TOP is using coercive power in commercial negotiation? Select TWO that apply.
Answer : B, C
Coercive power comes from the belief that a person can punish other for non-compliance, and can be considered as the flip side of reward power. Coercive power rests in the individual's ability to change other people's behaviour through threat, intimidation, use of guilt, ability to embarrass or shame, or withdrawal of benefits,...
Question 1356
Which of the following is a source of power in organisational relationships?
Answer : A
Question 1357
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
Answer : D
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Question 1358
Which of the following are characteristics of the pull approach?
Aimed at securing compliance, often against resistance
Influencers are fully aware of the process, which is overt
Persuasion or interpersonal influence
Can secure commitment if influencers accept the viewpoint as fitting their goals
Answer : B
The pull approach relies on persuasion, interpersonal influence, and aligning proposals with others' goals to secure commitment. It is not about forcing compliance (that is push). By engaging influencers and presenting a vision they can adopt, pull fosters buy-in and voluntary agreement. This method is particularly effective in collaborative negotiations where relationships and long-term trust are important.
Question 1359
At which stage in a negotiation would questions be asked to obtain missing information?
Answer : D
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 1360
A procurement manager considers using an integrative negotiation approach with shortlisted suppliers. Which factor favours such an approach?
Answer : C
Integrative negotiation requires shared motivation to collaborate and focus on joint benefits. When parties are motivated to work together, they can share data, explore tradeables, and align on long-term value creation. Conversely, lack of trust, unwillingness to share, or absence of joint goals make integrative approaches unworkable, forcing adversarial or distributive methods instead. CIPS highlights that motivation and willingness to cooperate are preconditions for collaboration.
Question 1361
Jane is planning for a forthcoming negotiation with a key supplier. She has learned what are important to the supplier and what are important to her company from previous contracts between them. In order to avoid negotiation deadlocks, she has set up several concession plans. But Jane has little experience in dealing with suppliers and doesn't know when to trade these concessions. When is the best time in a negotiation to trade concessions?
Answer : C
The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.
LO 3, AC 3.1
Question 1362
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Consolidate the expenditure from across the organisation to increase the size and value of the requirement
Understand the supplier's costs and margins prior to the negotiation to demonstrate that you know what it costs to produce the product
Take a distributive approach to the negotiation and refuse to make concessions
Limit communication and information sharing with the supplier so as not to give anything away
Answer : A
When buyer power is low, leverage must be created rather than assumed. Consolidating organisational spend increases volume and commercial importance to the supplier, directly strengthening buyer power. Understanding supplier costs and margins reduces information asymmetry and demonstrates commercial competence, which improves credibility and influence during negotiations. Refusing concessions and limiting communication are typical of adversarial tactics and often weaken relationships when power is already limited. CIPS clearly advises buyers to use aggregation of demand and market intelligence as ethical and effective methods to rebalance power without damaging long-term supplier relationships.
Question 1363
Neville is a senior procurement specialist in a automaker. He has good relationship with his team mates and other departments because of his amazing purchasing skills and kindness. Which of the following sources of power is Neville likely to possess?
Answer : B
In 1959, French and Raven described five bases of power:
1. Legitimate -- This comes from the belief that a person has the formal right to make demands, and to expect others to be compliant and obedient.
2. Reward -- This results from one person's ability to compensate another for compliance.
3. Expert -- This is based on a person's high levels of skill and knowledge.
4. Referent -- This is the result of a person's perceived attractiveness, worthiness and right to others' respect.
5. Coercive -- This comes from the belief that a person can punish others for noncompliance.
Six years later, Raven added an extra power base:
6. Informational -- This results from a person's ability to control the information that others need to accomplish something.
In the scenario, Neville attracts and keeps good relationship with his colleagues not because of neither position nor reward nor coercion. He has good skills and kindness, which increase his charisma. His source of power is referent power.
CIPS study guide page 47-50
French and Raven's Five Forms of Power
Question 1364
Which factors give rise to conflict within the procurement negotiation context? Select THREE that apply.
Answer : A, C, F
Conflict can arise in procurement negotiations due to a power imbalance, which occurs when one party has more influence than the other, leading to potential exploitation or dissatisfaction. Differences in goals between parties---such as cost minimization for buyers and profit maximization for suppliers---also contribute to tension. Surprisingly, similar motives can lead to conflict as well, particularly when both parties are competing for limited benefits or market share.
Question 1365
A buyer continually states during negotiation that budget constraints limit their concessions. What tactic is being used?
Answer : C
The broken record tactic involves repeating the same point to reinforce a position, making it difficult for the other party to ignore. Here, the buyer keeps citing budget constraints to avoid moving away from their position, hoping repetition will wear down the supplier's resistance. This tactic is common in distributive bargaining and aims to anchor discussions around a fixed limitation. While effective, overuse risks damaging relationships, so skilled negotiators balance it with genuine reasoning and integrative approaches when appropriate.
Question 1366
Which of the following are examples of variable costs?
Building and site rent
Annual insurance premium
Raw materials expenditure
Delivery costs for materials
Answer : D
Variable costs fluctuate with production volume --- e.g., raw materials and delivery costs. Fixed costs such as rent and insurance remain constant regardless of output. In negotiations, suppliers may inflate fixed cost allocations to justify pricing; buyers should differentiate between fixed and variable costs to challenge pricing more effectively. Recognising true variable costs also allows negotiating for volume-related discounts.
Question 1367
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Question 1368
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?
Answer : A
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 1369
Which of the following are internal factors when a supplier is making its pricing decision?
Price elasticity of demand
Environmental legislation
Risk management
The stage in the product life cycle
Answer : D
Risk management (3) and the stage in the product life cycle (4) are internal factors within the supplier's control and directly influence pricing decisions. These internal factors guide strategicpricing policies. In contrast, price elasticity of demand and environmental legislation are external factors, as per CIPS's guidelines on pricing influences.
Question 1370
A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier over a contract for critical new services. They have decided they want to find a Win/Win (integrative) solution. Which TWO of the following would be appropriate in this scenario?
Answer : A, B
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.
Question 1371
Maria is a professional services category buyer within the National Health Service. Due to the severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
The Win-Win approach is the most appropriate negotiation strategy in situations where collaboration and ongoing relationships are prioritized. In this case:
Achieving cost savings: The NHS aims to reduce expenses in order to reallocate funds to critical areas, making it essential that both parties work together to find cost-effective solutions.
Collaborative supplier relationship: Since Maria is working with a collaborative supplier, maintaining a positive relationship through mutual benefit is essential for continued cooperation.
Alignment with public service objectives: A Win-Win outcome aligns with the NHS's broader objectives of maximizing resources for patient care, as it ensures that savings are achieved without undermining the supplier's commitment to quality service.
This approach aligns with CIPS guidelines for maintaining productive, ethical partnerships in procurement, especially in critical sectors like healthcare.
Question 1372
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : D
An adversarial style is appropriate when issues are non-negotiable, such as health and safety commitments (D). In these scenarios, compliance is required without compromise, and a firm stance may be necessary. This aligns with CIPS guidance, where adversarial tactics are used in non-negotiable contexts to enforce strict standards.
Question 1373
Which type of negotiation strategy should be adopted when the relationship is important and both parties want to help each other achieve their goals?
Answer : A
The collaborative strategy (win-win, integrative) focuses on joint problem-solving, transparency, and trust. It is best when long-term relationships are critical, and both parties see value in mutual success. By contrast, competitive (win-lose) is adversarial, accommodative sacrifices one party's interests, and avoidance seeks disengagement. Collaborative strategies are common in partnerships, innovation projects, and sustainable procurement. They require sharing information, identifying tradeables, and aligning objectives beyond price to long-term outcomes.
Question 1374
In which of the following scenarios could you adopt a distributive-based negotiation approach?
Answer : D
Question 1375
Which of the following can be prepared before negotiation to achieve an agreement that benefits both parties?
Zone of potential agreement (ZOPA)
Attendee list
Walk-away point
Venue for the talks
Answer : B
The ZOPA defines the range of outcomes acceptable to both parties, while the walk-away point defines the minimum acceptable deal for the buyer. Together, these guide negotiation planning to avoid unfavourable agreements. Attendee lists and venues are logistical details, important but not central to negotiation value creation. Preparation of ZOPA and walk-away ensures structured, strategic decision-making and protects against poor deals.
Question 1376
Which of the following are hardball tactics in negotiations? Select TWO that apply.
Answer : B, C
In difficult negotiations and disputes, hardball tactics like punishment and threats often seem like the only way to win concessions. Some negotiators seem to believe that hardball tactics are the key to success in any negotiation. They resort to extreme demands and even unethical behaviour to try to get the upper hand in a negotiation.
The following are 8 typical hardball tactics:
1. Good cop / Bad cop
2. Low ball / High ball
3. Bogey
4. The Nibble
5. Chicken
6. Intimidation
7. Aggressive Behaviour
8. Snow Job
You can read the details of each tactic here.
In the contrary to hardball tactics, negotiators can adopt integrative approach to the negotiation. Some of integrative tactics are:
1. Expand the Pie
2. Bridging
3. Post Settlement --Settlement
Et cetera
Question 1377
Which of the following is a challenge when calculating absorption costing?
Answer : A
Absorption costing allocates indirect overheads to units, which is inherently judgemental; selecting allocation bases that ''fairly'' load overhead to products is the well-known difficulty. (By contrast, option B describes activity-based costing concepts---cost pools and drivers.)
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Question 1378
Which of the following are most likely to be fundamentals of Fisher & Ury's principled negotiation?
1. Depersonalise the argument
2. Focus on positions
3. Generate creative options
4. Using subjective criteria
Answer : C
Principled negotiation is based on four fundamentals: people, interest, options and criteria:
1st Principle: separate the people from the problem: Negotiator should depersonalise the situation and accepting that the subject matter of the negotiation. This can be difficult for untrained negotiators, but this is a key skill to develop
2nd principle: focus on interests, not positions: It is important in principled negotiations not to focus on their parties' positions (what are expressed during negotiations), but on the interests (underlying needs) behind them
3rd principle: invent options for mutual gains: this principle aims to help the parties find a solution that both would benefit from. The more options - or tradeables - that can be brought to the table the better.
4th principle: insist on using objective criteria: is about making sure that the negotiation stays focused on outcomes based on objective criteria and that it is productive.
LO 1, AC 1.2
Question 1379
Which of the following are examples of connected stakeholders in a private organisation? Select TWO that apply.
Answer : A, E
Connected stakeholders are those who, by contractual or commercial relationships, have a significant stake in organisation activity. As a general rule, connected stakeholder (with the exception of suppliers) have a low level of influence on procurement negotiations.
Examples of connected stakeholders are: suppliers, customers, bank where the organisation opens its account, shareholders.
Question 1380
A buyer continually states, during a negotiation, that budget constraints are impacting their ability to make concessions. What type of tactic are they using?
Answer : C
Question 1381
As a buyer for a large stationery company you have been notified of an upcoming price increase from your provider for paper. When you check the contract you realise that it expired 30 days ago so you are no longer in contract. You realise the supplier can now charge what they like.
You call the supplier and attempt to negotiate over the phone but are unsuccessful. What would be the best thing to do?
Answer : D
Once the contract has expired, the buyer no longer has contractual protection on pricing, which significantly weakens their position. However, this situation also creates an opportunity to re-establish leverage by offering future value. By proposing a new or extended contract, the buyer introduces certainty, continuity of business, and potential volume commitment for the supplier, which can be traded in return for moderated pricing. Accepting the increase without challenge offers no commercial control, while threats or immediate cancellation risk damaging the relationship and supply continuity. CIPS guidance emphasises using future commitment as a bargaining lever, especially when informal negotiations fail and contractual leverage no longer exists.
Question 1382
Which of the following is the first step in the development of negotiation strategies?
Answer : D
Developing specific negotiation strategies in areas where risk or spend is high involves analysing a wide range of objectives and variables within the context of the organisation's business requirements. The first stage in any negotiation preparation is to define your overall objectives which may be related to a single variable such as price in the case of a standardised requirement, or many variables in the case of capital equipment. Your negotiating strategies and tactics will all be focused on achieving overall objectives.
Question 1383
The activity of listening in a negotiation includes which of the following processes?
Hearing
Interpreting
Rapport
Influencing
Answer : A
Listening involves both hearing (1) and interpreting (2) the information shared by the other party. Effective listening is an active process that goes beyond simply hearing words; it involvesinterpreting meaning, understanding the speaker's intent, and responding accordingly. CIPS emphasizes these steps as part of effective communication in negotiations.
Question 1384
In a negotiation for a new contract, the supplier suggests the buyer to shorten payment period from 45 days to 15 days because they are investing in new facilities to expand the supply capacity. The buyer replies that she can only sign off the deal if the payment period is 30 days ormore since it often takes at least 30 days for her company to collect the payment from customers. A permission from senior management is required for this suggestion. In order to ensure that supplier understands the matter, she reiterates it throughout the meeting. Which tactics is she using?
1. Outrageous initial demand
2. Salami slicing
3. Lack of authority
4. Broken record
Answer : C
In the scenario, the buyer states that permission from senior management is required to shorten payment period and she only has authority to sign off a deal in which the payment period lasts at least 30 days. The buyer is using lack of authority. The buyer also repeats the matter again throughout the negotiation. This is a common tactic known as broken record.
Question 1385
When is the best time to adopt accommodating style according to Thomas-Kilmann conflict mode instrument?
Answer : C
According to Thomas-Kilmann conflict model instrument, there are 5 conflict management styles:
Accommodating is an unassertive and cooperative approach to resolving the conflict. Accommodating means conceding to the other party with little debate or fight, not challenging or strongly putting forward your own point of view and generally giving and yielding to the other party's point of view. Accommodating is best used when:
1. When others can resolve the conflict more effectively
2. When the issue is much more important to the other person than to yourself - to satisfy the needs of others and to show you are reasonable
3. To build up social credit for later issues which are important to you
4. When continued competition would only damage your cause
5. When preserving harmony and avoiding disruption are especially important
6. To aid in the managerial development of subordinates by allowing them to experiment and learn from their own mistakes
LO 1, AC 1.1
Question 1386
A competitive win-lose distributive approach to a negotiation is seeking to:
Answer : B
Question 1387
Community Meal Partners (CMP) is a not-for-profit company that delivers cooked meals to older residents in their homes. CMP uses a fleet of bespoke vans with onboard ovens. In planning the future procurement of the fleet, CMP has conducted a review of the microeconomics of the van supply market and found that the vans are supplied by a monopoly supplier due to patented technology. Which of the following strategies could CMP utilise to optimise its bargaining position with the van supplier?
Answer : A
When facing a monopoly supplier, buyers must find creative ways to introduce leverage. Publicly exploring alternative solutions can create the perception of competition or a fallback plan, thus shifting bargaining power slightly toward the buyer.
Question 1388
When a supplier tells a buyer they have a margin of 20%, what does this mean?
Answer : A
Margin is defined as profit expressed as a percentage of the selling price, not the cost. This is a critical distinction from mark-up, which expresses profit as a percentage of cost. For example, a 20% margin means that 20% of the price charged to the buyer represents profit, while 80% represents cost. CIPS emphasises that buyers must clearly understand this difference to avoid being misled during pricing discussions. Confusing margin with mark-up can significantly weaken negotiation effectiveness.
Question 1389
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latestmeeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : A
Jayden's use ofeye contact to demonstrate understandingis a core element ofactive and effective listening. This technique includes not only listening to spoken words but also using non-verbal cues (e.g., nodding, eye contact) to confirm comprehension and engagement. Effective listening is essential to ensure that both parties feel heard and respected, which can de-escalate tension and improve outcomes.
''Effective listening involves verbal and non-verbal behaviours that show attentiveness. Maintaining eye contact, nodding, and reflecting key points show engagement and help in building rapport and trust.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Communication Techniques in Negotiation)
Question 1390
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way ofanalysing costs is to classify them into direct and indirect costs. Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Question 1391
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Question 1392
A skilled negotiator will use a range of questioning techniques. If they wish to explore options with the other party without making any formal commitment, which style would they use?
Answer : B
Hypothetical (''What if...'') questions test possibilities and invite creative options without binding either side. They help probe interests and packages while keeping commitment provisional.
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Question 1393
Different types of relationships impact negotiations. Which source of leverage would most support the buyer?
Answer : A
Legitimate power comes from formal authority and organisational backing, making it a credible and sustainable leverage source in negotiations. Personality power or reliance on colleagues and friends lacks long-term weight and may not influence suppliers strategically. Buyers who use legitimate power, backed by governance and authority, negotiate from a position of credibility and professionalism, reinforcing stronger outcomes.
Question 1394
There are no commitments in hypothetical questions. Is this statement true?
Answer : D
There are four types of questions that can be used in a commercial negotiation:
Hypothetical questions, where you ask about a possible situation or abstract concept, are very useful at the testing and proposal phases. Hypothetical question does not state any commitment as it is only about 'if something happens, then ...'. This type of question can be useful at giving suggestion.
LO 3, AC 3.3
Question 1395
Upper Woodborough Council is a government organisation that is seeking to reduce regular expenditure on facilities management services. Which of the following charges is an example of a fixed cost, that the council could renegotiate with the facilities management contractor to achieve savings?
Answer : D
Fixed costs are regular, predictable charges that do not vary directly with usage or demand. Monthly cleaning services are typically charged at a fixed, recurring rate, making them a clear example of a fixed cost that can be renegotiated to achieve savings. Fuel costs and reactive maintenance vary with activity levels, while inflation indexation is a pricing mechanism rather than a cost itself. CIPS advises buyers to focus on fixed-cost elements when seeking sustainable cost reductions, as changes deliver predictable and ongoing savings.
Question 1396
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Question 1397
Colin Smith is preparing to negotiate for a chemical used in fertiliser. His organisation's objective is ethical and sustainable procurement. Using the Must--Intend--Like (MIL) framework, how should Colin categorise this objective?
Answer : D
In MIL planning, ''Musts'' are non-negotiable requirements (policy, law, mandatory standards). Ethical/sustainable procurement is typically a policy/legislative compliance requirement, so it belongs in Must; ''Intend/Like'' cover important and desirable aims respectively.
Question 1398
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
Answer : D
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Question 1399
Which negotiation approach is focused on a win--win outcome?
Answer : C
A collaborative negotiation approach is explicitly designed to achieve win--win outcomes, where both parties work together to maximise joint value. This approach is closely associated with integrative negotiation, emphasising trust, information sharing, and joint problem-solving. Distributive and adversarial approaches are win--lose, focusing on dividing value rather than creating it. ''Collective'' is not a recognised CIPS negotiation approach. Collaborative negotiation is particularly suitable where long-term relationships, shared objectives, or strategic partnerships are important.
Question 1400
Which of the following are variable costs?
Answer : D
Packaging is considered a variable cost because it fluctuates with the level of production or sales activity. Variable costs change directly in relation to the volume of output or service. In contrast:
Rent (A), Loan repayments (B), and Insurance (C) are fixed costs, as they generally do not vary with production levels within a certain range. These are recurring costs that remain constant over time, aligning with CIPS's cost classification in procurement.
Question 1401
Can a party gain huge advantages in negotiation from setting room layout?
Answer : B
Essentially, for trained negotiators under most circumstances, the physical locations of negotiations and the room layout should not make much difference to the outcomes of the meeting. It is reasonable to assume that most commercial negotiations are based at least initially on a principled- or pragmatic-type approach. It is arguable also that any advantage gained through intentionally creating an uncomfortable environment to put short-term pressure on TOP is likely to be short-lived as TOP will likely reflect on this later and seek means to get even.
Question 1402
Power is used only in adversarial negotiation situations to secure a 'win' outcome against the other side. Is this statement correct?
Answer : C
Question 1403
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 1404
Which of the following are most likely to be indirect costs of a garment manufacturer? Select THREE that apply.
Answer : D, E, F
Indirect costs are those cost that are not directly attributable to production. Examples of indirect costs including the following:
Indirect labour: This covers every person in the factory who does not directly perform a production operation such as managers, supervisors, engineers, store personnel, clerks, maintenance staff, porters, canteen staff, security and cleaners etc.
Expenses: Included in this element is every fixed and variable expenses incurred in operating the factory, such as rent, rates, utilities, insurance, depreciation, maintenance, air conditioning and the various types of energy generation required by a clothing factory.
Indirect materials: Also known as consumables, this element contains all the materials not directly connected to the makeup of a garment. Some of the typical items involved are office materials, spare parts, marker paper, maintenance materials, chalk & pins.
Direct costs are those costs of a product/service directly attributable/traceable to its production. Examples of direct costs including the following:
Direct Materials: Direct materials are all the materials and trimmings which go into the construction and finish of the garment. Typically, these materials would include cloth, lining, fusible, zips pads, tapes, labels, tickets, hangers and packaging materials.
Direct Labour: This cover the cost of all the labor directly involved in producing the garment and could include cutting, fusing, regular sewing, special machine operations, pressing, finishing, inspection and packing. Labor of all types and grade has a direct overhead which include holiday pay, sick pay, fringe benefits etc and the statutory payments made by the employer for each employee. This is usually expressed as a percentage of salary and when this percentage is added to the employee's wage, it becomes the basis for calculating direct labor costs.
Question 1405
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?
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
Question 1406
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 1407
Maria, an NHS buyer, needs cost savings due to budget cuts. She plans to achieve savings with a collaborative supplier. Which negotiation approach should she use?
Answer : D
With a collaborative supplier, the appropriate approach is Win--Win (integrative). Both sides aim to create savings while maintaining partnership value. Win--Lose would damage collaboration, while Lose--Lose sacrifices value on both sides. Win--Perceived Win is based on optics rather than actual balance. By adopting a win--win approach, Maria ensures sustainable cost reductions while protecting critical NHS supplier relationships.
Question 1408
When engaging in commercial negotiations, it is important to bear in mind that the suppliers need to make a reasonable profit to maintain continuity of supply. It is therefore necessary for the buyer to have a clear understanding of the break-even analysis concept which relates to cost, volume, and profit.
What is 'contribution' in relation to break-even analysis?
Answer : C
Inbreak-even analysis,contributionrefers to the amount from sales revenue that exceedsvariable costs, which then contributes to coveringfixed costsand ultimately generating profit. Understanding this concept enables buyers to better analyze supplier pricing and negotiate more effectively. For example, if a product is priced significantly above its variable cost, there may be room fordiscounts or added value, as the supplier is still contributing toward fixed costs.
Question 1409
When planning a negotiation for sourcing internationally, which of the following divergent positions, and therefore potential conflict areas, should be prepared for? Select TWO that apply:
Answer : A, C, D
Question 1410
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 1411
When considering a new supply source for a product, a procurement professional reviews supplier quotations before negotiation. Which of the following is a direct cost in the supplier's quotation?
Answer : C
Direct costs are those directly attributable to the production of a unit --- such as raw materials, components, and direct labour. Here, the metal used is a clear direct cost, as it varies with production output. Rent, insurance, and sales wages are indirect (overhead) costs, which must be allocated across products. Understanding this distinction is vital in negotiations, since direct costs are easier to challenge for efficiency gains, while indirect allocations may be arbitrary. Buyers with clear knowledge of cost breakdowns can negotiate more effectively, avoiding inflated pricing.
Question 1412
Which of the following should be done when undertaking a reflection activity on negotiation? Select TWO that apply.
Answer : A, E
Giving positive group and individual feedback is easy, as is self-congratulation and, in many cases, it is hoped, this will be an accurate reflection on actual performance. When it comes to developmental or difficult feedback, it is only natural to want to move on and not reflect on the negative or developmental points, or why a negotiation did not achieve its objectives. But this is a mistake. The best learning opportunities come from reflection on what could be done better, and this can be achieved without blame, threat or condemnation. Everyone and every team will make mistakes and/or have areas where they could have improved. Clearly, if every reflection session concludes that an individual or team keeps making the same mistake, then there is a case to change roles or consider alternative approaches.
About Dos and Don'ts of reflection, you can refer here: https://offices.depaul.edu/human-resources/employee-relations/Documents/Self%20Assesement.pdf
Question 1413
Which of the following types of question are likely to be the most effective to check facts in negotiations?
Answer : A
Closed questions are designed to elicit specific, factual responses --- typically ''yes'' or ''no'' or a brief piece of information. These are particularly useful when verifying details during negotiation. For example, asking ''Did you receive the revised schedule on Monday?'' ensures clarity and reduces ambiguity.
Question 1414
Which of the following is a disadvantage of absorption costing method?
Answer : D
Absorption costing is an approach to allocating overheads in which indirect costs are loaded or absorbed into direct costs related to specific jobs, processes or outputs, using an estimated basis of allocation.
Graphical user interface, text, chat or text message, website Description automatically generated
Question 1415
What is the most likely outcome when two organisations with adversarial relationship negotiate with each other?
Answer : C
An adversarial relationship in purchasing and supply arises when identical or equivalent good or services are available from competing suppliers and buyers/sellers are trying to gain an advantage over each other. Low levels of trust are characteristic of adversarial relationships. The outcome when two organisations with adversarial negotiate is most likely to be win-lose.
Adversarial purchasing - Wikipedia
CIPS study guide page 32-35
Question 1416
In preparation for holding negotiation meetings with existing suppliers, category manager Stephen would like to appraise the bargaining strength of his organisation. Which of the following are examples of buyer power? Select TWO that apply:
Answer : A, D
Question 1417
During which stage in the negotiation process would negotiators use tactics and exchange concessions?
Answer : A
Thebargaining stageis where both parties begin tomake concessionsand test options. This phase involves the use of strategic tactics, including the presentation of tradeables and adjustments in position to reach mutual agreement.
''The bargaining stage is characterised by movement, trade-offs, and deal-shaping. Tactics such as anchoring, making concessions, and introducing tradeables are employed to bridge the gap between opening offers.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Stages of the Negotiation Process)
Question 1418
What letter R in the acronym SMART stands for?
Answer : C
SMART is an acronym that you can use to guide your goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound
A student met this question in the L4M5 exam. SMART is mentioned primarily in L4M3 Commercial Contracting.
LO: Unknown, AC: Unknown
Question 1419
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as:
Answer : C
Question 1420
Which of the following are hardball tactics in negotiations? Select TWO that apply.
Answer : B, C
In difficult negotiations and disputes, hardball tactics like punishment and threats often seem like the only way to win concessions. Some negotiators seem to believe that hardball tactics are the key to success in any negotiation. They resort to extreme demands and even unethical behaviour to try to get the upper hand in a negotiation.
The following are 8 typical hardball tactics:
1. Good cop / Bad cop
2. Low ball / High ball
3. Bogey
4. The Nibble
5. Chicken
6. Intimidation
7. Aggressive Behaviour
8. Snow Job
You can read the details of each tactic here.
In the contrary to hardball tactics, negotiators can adopt integrative approach to the negotiation. Some of integrative tactics are:
1. Expand the Pie
2. Bridging
3. Post Settlement --Settlement
Et cetera
Question 1421
A break-even analysis uses which aspects as part of the calculation?
Fixed cost
Buying cost minus variable cost per unit
Variable cost
Selling price minus variable cost per unit
Answer : A
Break-even analysis identifies the sales volume required to cover fixed costs. It relies on:
Fixed costs (constant regardless of output).
Question 1422
Which characteristics are likely to feature within an integrative negotiation?
Maximising the other party's outcome to enhance relationships
Maximising joint outcomes
Short-term focus
Pursuit of goals held jointly with the other party
Answer : D
Integrative negotiation emphasises maximising joint outcomes and pursuing shared goals, moving beyond narrow self-interest. Unlike distributive negotiations, it does not focus on short-term wins or zero-sum positions. Instead, integrative strategies build sustainable value and strengthen partnerships. Maximising the other party's outcome alone is more accommodative than integrative. Therefore, true integrative practice balances both parties' interests for long-term gain.
Question 1423
Which of the following types of questions are likely to be the most effective to check facts in negotiations?
Answer : D
Closed questions are useful for verifying facts, as they prompt specific, concise responses. These questions allow the negotiator to confirm details without ambiguity, which is crucial for clarity in negotiation settings, as highlighted in CIPS's guidelines on questioning techniques.
Question 1424
Which type of negotiation strategy should be adopted when the relationship is important and both parties want to help each other achieve their goals?
Answer : A
The collaborative strategy (win-win, integrative) focuses on joint problem-solving, transparency, and trust. It is best when long-term relationships are critical, and both parties see value in mutual success. By contrast, competitive (win-lose) is adversarial, accommodative sacrifices one party's interests, and avoidance seeks disengagement. Collaborative strategies are common in partnerships, innovation projects, and sustainable procurement. They require sharing information, identifying tradeables, and aligning objectives beyond price to long-term outcomes.
Question 1425
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?
Answer : A
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 1426
According to Fiona Dent and Mike Brent, which of the following are characteristics of Push approach? Select TWO that apply.
Answer : B, E
According to the book 'Influencing: Skills and techniques for business success' by Fiona Dent and Mike Brent, there are two major influencing styles. Push tends to be directive. It tells, and is clear and resolute, but needs to be employed in situations where firmness is required because of difficulties that exist or weakness is evident. Pull is more participatory and collaborative. It seeks to incorporate everyone's perspective. It can appear wishy-washy if not skilfully employed. Thatapproach should be followed which is most likely to secure commitment and not mere compliance.
The two divisions can be further divided into four style categories: directive; persuasive reasoning; collaborative -- team oriented, people oriented to inspire them with a vision. The directive style relies on your expertise and reputation being respected by others, and where there really does seem to be one answer. It is 'I' driven whereas persuasive reasoning is more 'we' and issue driven. Directive styles can make the user appear as 'a bull in a china shop'; persuasive reasoning can be portrayed as tough guy.
Collaborative influencing takes the 'we' element further and seeks to mobilise everyone's ideas in a journey of discovery. It may have the flavour of 'I'm your best friend', which may not go down too well. Visioning style is concerned to stir people's emotions in support of achieving an objective. This last one has been used by demagogues to stir people's hearts and minds for evil purposes as well as good.
A useful table offers the benefits, problems, words and body language associated with each style along with advice on when to use and when to avoid each. Cases and exercises illustrate these styles.
Empathy comes in for extended treatment with the definition of 'standing in the other's shoes'. This does not necessarily happen just intuitively, and therefore before a specific influencing effort there should be an intense effort to think about the other person or persons and to sense what it might feel like to be them -- their hopes, fears, concerns, what turns them on, what turns them off, where are they coming from.
Influencing by Fiona Elsa Dent and Mike Brent, 2006 (bd-cons.com)
CIPS study guide page 163-165
Question 1427
Which of the following are types of questions that are useful in opening and testing phases of a negotiation? Select the TWO that apply.
Answer : C, E
In the opening phase, parties should confirm understanding and get the issues on the table.
The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.
Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.
Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening and testing stages.
Question 1428
Which of the following are factors that might shift the demand curve for a consumer good to the right?
1. Prices of complementary goods decrease
2. Price of the consumer good decreases
3. Customers' expectation of higher prices in the future
4. Consumer tastes shift toward substitute products
Answer : C
A shift in demand occurs when an influencing factor other than price changes. Those factors are:
- The income of buyers
- The tastes and preferences of buyers
- The prices of other goods and services, especially substitutes and complements
- Expectations of buyer about the future
In this question:
- 'Prices of complementary goods decrease' will lead to quantity demanded for that complements rising, then demand for consumer good will increase accordingly.
- 'Price of the consumer good decreases' will increase the quantity demanded for that good, but it will not shift the demand curve
- 'Customers' expectation of higher prices in the future': in this scenario, customers tend to buy more to store in present, which leads to demand curve shifting to the right
- 'Consumer tastes shift toward substitute products': Demand for substitutes will rise, so demand for that consumer good will decrease and the demand curve shifts to the left.
LO 2, AC 2.2
Question 1429
At which stage in a negotiation would questions be asked to obtain missing information?
Answer : D
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 1430
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should ...
Answer : A
Sally's objective is to achieve a 5% saving. If the supplier offers this saving in a different form (aftercare package), and the total value meets her goal, then accepting this alternative shows flexibility and supports a collaborative,win-winoutcome.
Question 1431
Which of the following are sources of power in organisational relationships?
Coercive power
Intruded power
Referent power
Tactical power
Answer : C
Coercive powerstems from the ability to apply pressure or sanctions, whilereferent powercomes from reputation, charisma, or respect. These are both recognised power sources in negotiations. ''Intruded'' and ''tactical'' power are not classified within the standard power framework used in CIPS materials.
''Sources of power include coercive (based on threats or penalties), referent (based on personal appeal or influence), and others such as reward, expert, and legitimate power.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Power in Negotiation)
Question 1432
What are the potential sources of conflict between buyer and supplier? Select TWO.
Answer : B, C
Conflicts arise in procurement when risks, costs, or gains are not fairly shared, creating perceptions of exploitation. Another frequent source is late payment of supplier invoices, which damages trust and supplier cash flow. Scheduling or early involvement, by contrast, usually supports collaboration unless poorly managed. Conflict is natural in negotiations due to divergent interests, but recognising sources allows proactive management. Skilled negotiators use integrative approaches to turn potential conflict into opportunity, aligning incentives and ensuring fairness.
Question 1433
Which of the following are most likely to be fundamentals of Fisher & Ury's principled negotiation?
1. Depersonalise the argument
2. Focus on positions
3. Generate creative options
4. Using subjective criteria
Answer : C
Principled negotiation is based on four fundamentals: people, interest, options and criteria:
1st Principle: separate the people from the problem: Negotiator should depersonalise the situation and accepting that the subject matter of the negotiation. This can be difficult for untrained negotiators, but this is a key skill to develop
2nd principle: focus on interests, not positions: It is important in principled negotiations not to focus on their parties' positions (what are expressed during negotiations), but on the interests (underlying needs) behind them
3rd principle: invent options for mutual gains: this principle aims to help the parties find a solution that both would benefit from. The more options - or tradeables - that can be brought to the table the better.
4th principle: insist on using objective criteria: is about making sure that the negotiation stays focused on outcomes based on objective criteria and that it is productive.
LO 1, AC 1.2
Question 1434
The buyer's bargaining power tends to be relatively higher than supplier's bargaining power in which of the following circumstances?
Answer : D
Buyer power gives customers/consumers (buyers) the ability to squeeze industry margins by pressuring firms (the suppliers) to reduce prices or increase the quality of services or products offered.
There are four major factors to consider when determining the bargaining power of buyers:
1. Number of buyers relative to suppliers: If the number of buyers is small relative to that of suppliers, the buyer's power will be stronger.
2. Dependence of a buyer's purchase on a particular supplier: If a buyer is able to get similar products/services from other suppliers, buyers depend less on a particular supplier. Therefore, the power of the buyer would be greater.
3. Switching costs: If there are not many alternative suppliers available, the cost of switching is high. Therefore, buyer power would be low.
4. Backward Integration: If the buyer is able to integrate or merge suppliers, the buyer has greater bargaining power over the existing suppliers.
When is Bargaining Power of Buyers High/Strong?
There are fewer buyers relative to that of suppliers
The switching costs of the buyer are low
If the buyer is able to backward integrate
The buyer purchases product in bulk (high volume)
The buyer is able to get similar product/services from other suppliers
The buyer purchases the majority of the seller's products
Several substitutes are available on the market
Product is not differentiated
CIPS study guide page 54-56
What is the Bargaining Power of Buyers?
Question 1435
Where there are high levels of commitment to relationships between both the buyer and supplier, this is seen as collaborative and beneficial to negotiations. Is this statement correct?
Answer : A
Question 1436
Which of the following statements about oligopoly is incorrect?
Answer : D
An oligopoly exists when there are small number of producers that exert a significant influence in the market. Oligopoly's main characteristics are discussed as follows:
- Interdependence
The most important feature of oligopoly is the interdependence in decision-making of the few firms which comprise the industry. This is because when the number of competitors is few, any change in price, output, product etc. by a firm will have a direct effect on the fortune of its rivals, which will then retaliate in changing their own prices, output or products as the case may be.
- Importance of advertising and selling costs
A direct effect of interdependence of oligopolists is that the various firms have to employ various aggressive and defensive marketing weapons to gain a greater share in the market or to prevent a fall in their market share. For this various firms have to incur a good deal of costs on advertising and on other measures of sales promotion. Therefore, there is a great importance of advertising and selling costs under conditions of market situation characterised by oligopoly
- Group behaviour
Another important feature of oligopoly is that for the proper solution to the problem of determination of price and output under, it analysis of group behaviour is impor-tant.
- Indeterminateness of demand curve facing an oligopolist
In this question, 'Prices in oligopoly are predicted to fluctuate widely and frequently' is an incorrect statement as producers in oligopoly often try to set up price. Prices fluctuate more frequently in perfect competition.
LO 2, AC 2.2
Question 1437
A procurement manager (PM) is preparing for a negotiation with a supplier. The PM is keen to find a way to reach an agreement with the supplier. The PM is exploring variables that they might be able to trade with the supplier, to encourage them to reduce their price. In particular, the PM is focusing on any variables that are of low value to their own organisation but could be of interest to the supplier. Their preparation focus is on which of the following aspects?
Answer : D
The correct answer is Bargaining mix. The bargaining mix refers to the full range of variables that can be negotiated, such as price, delivery schedules, payment terms, volumes, warranties, contract length, or service levels. According to CIPS guidance, effective negotiators identify elements that are of low value to themselves but high value to the other party, as these can be traded to gain concessions on priority issues like price. This approach supports value creation rather than positional bargaining and is central to both distributive and integrative negotiation preparation. The PM's focus is therefore not on objections, opening statements, or closing techniques, but on structuring tradeables in advance to enable flexible and constructive bargaining.
Question 1438
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
Answer : A, C, E
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 conditionthat would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
Question 1439
An oil refinery plant imports much of its crude oil from overseas. A procurement manager in the refinery suggests that fixing the crude oil contract price for 36 months would be beneficial for the company. Would this be a right thing to do?
Answer : C
Fixed price contract is the contract in which the price is static throughout the contract period. A fixed-price contract may give certainty to budget and simplify contract management. However, it may lead to other problems since it requires bidders to estimate and bear the financial risks associated with price escalations. If the estimates are too high or events do not materialize, the buyer will pay a steep price that may affect the economy and efficiency of the contract. In the worst case, it may mean that the bid price is then above budget and may lead to a reduction in the requirements or rebidding. If the estimates are too low, it may appear as an abnormally low bid and disrupt contract execution.
On the other hand, price adjustment provisions include formulas designed to address problems, and can protect both the borrower and contractors from price fluctuations. Price adjustment formulas allow contractors to offer more realistic prices at the time of bidding. Despite concerns that they may lead to budget uncertainties, price adjustment formulas will estimate the actual cost implications that will be encountered. They use indexes that can be used for cost projection.
According to Asia Development Bank (ADB), any contract with a delivery or completion period beyond 18 months should contain an appropriate price adjustment clause.
In the scenario, the crude oil contract is planned to last 36 months. This period is pretty long with a fluctuating commodity. Therefore, the company should use price adjustment agreement.
- CIPS study guide page 113-117
- Guidance Note on Procurement: Price Adjustment (adb.org)
LO 2, AC 2.2
Question 1440
Buying organisation may increase its leverage with suppliers by concentrating spend. Which of the following are most likely to be forms of supplier spend consolidation? Select THREE that apply.
Answer : A, B, E
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
Volume redistribution: making recommendations following spend analysis to move from one supplier to another
Volume consolidation across categories: certain purchase requirements may be common across a number of categories
Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
Question 1441
Can a party gain huge advantages in negotiation from setting room layout?
Answer : B
Essentially, for trained negotiators under most circumstances, the physical locations of negotiations and the room layout should not make much difference to the outcomes of the meeting. It is reasonable to assume that most commercial negotiations are based at least initially on a principled- or pragmatic-type approach. It is arguable also that any advantage gained through intentionally creating an uncomfortable environment to put short-term pressure on TOP is likely to be short-lived as TOP will likely reflect on this later and seek means to get even.
Question 1442
Commercial negotiations on price cover various aspects, including pricing arrangements. A buyer may negotiate a fixed-price agreement. Why is a fixed-price agreement advantageous to the buyer?
Answer : B
In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier's internal cost build-up (unlike cost-plus).
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Question 1443
Which of the following is a challenge when calculating absorption costing?
Answer : A
Absorption costing allocates indirect overheads to units, which is inherently judgemental; selecting allocation bases that ''fairly'' load overhead to products is the well-known difficulty. (By contrast, option B describes activity-based costing concepts---cost pools and drivers.)
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Question 1444
Which of the following are most likely to be indirect costs of a garment manufacturer? Select THREE that apply.
Answer : D, E, F
Indirect costs are those cost that are not directly attributable to production. Examples of indirect costs including the following:
Indirect labour: This covers every person in the factory who does not directly perform a production operation such as managers, supervisors, engineers, store personnel, clerks, maintenance staff, porters, canteen staff, security and cleaners etc.
Expenses: Included in this element is every fixed and variable expenses incurred in operating the factory, such as rent, rates, utilities, insurance, depreciation, maintenance, air conditioning and the various types of energy generation required by a clothing factory.
Indirect materials: Also known as consumables, this element contains all the materials not directly connected to the makeup of a garment. Some of the typical items involved are office materials, spare parts, marker paper, maintenance materials, chalk & pins.
Direct costs are those costs of a product/service directly attributable/traceable to its production. Examples of direct costs including the following:
Direct Materials: Direct materials are all the materials and trimmings which go into the construction and finish of the garment. Typically, these materials would include cloth, lining, fusible, zips pads, tapes, labels, tickets, hangers and packaging materials.
Direct Labour: This cover the cost of all the labor directly involved in producing the garment and could include cutting, fusing, regular sewing, special machine operations, pressing, finishing, inspection and packing. Labor of all types and grade has a direct overhead which include holiday pay, sick pay, fringe benefits etc and the statutory payments made by the employer for each employee. This is usually expressed as a percentage of salary and when this percentage is added to the employee's wage, it becomes the basis for calculating direct labor costs.
Question 1445
The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : C
For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.
Question 1446
Ranjit is a facilities category buyer for a hospital in the UK and is managing an overseas sourcing project for security guard clothing and personal protective equipment. Ranjit is aware that foreign exchange fluctuations can create risk for his organisation and would like to remove this risk. Ranjit has asked the international suppliers to quote in GBP sterling. Will Ranjit's approach remove the fluctuation risk for the hospital?
Answer : C
Question 1447
Telephone is most likely to be used for which of the following negotiations?
Answer : C
Many commercial negotiations could be considered routine or just not worth the investment for buyers, and using the phone can make more sense and can be more immediate.
LO 2, AC 2.4
Question 1448
Apart from negotiation, which other approaches are available to a buyer to ''reach an agreement''? Select THREE approaches that apply.
Answer : A, B, D
CIPS recognises that agreement can be reached without formal negotiation by using alternative influence-based approaches. Accommodating involves one party yielding to preserve relationships or progress. Persuasion uses communication, reasoning, and influence to shape the other party's views and decisions. Problem solving focuses on jointly identifying solutions that address both parties' needs. These approaches are particularly useful where relationships are important or power is balanced. Team management, psychodynamic management, and validation of reporting are not recognised CIPS agreement-reaching approaches within commercial negotiation theory. The ability to choose the correct approach enhances negotiation effectiveness and relationship outcomes.
Question 1449
According to Dr. Mari Sako, which of the following is potentially the weakest trust to be built?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Otherwise, trust also has legal meaning. A trust is a legal document that can be created during a person's lifetime and survive the person's death. A trust can also be created by a will and formed after death. Charitable trusts are trusts which benefit a particular charity or the public in general.
Question 1450
Which of the following are stages of a win-win approach to negotiations?
Find out where the interests of both parties align
Design new options, where everyone gets more of what they need
Limit the resources to a fixed number
Insist that the agreement includes subjective regulatory standards
Answer : A
A win-win (integrative) negotiation focuses on shared interests and joint value creation. The first step is identifying where both parties' interests align, followed by designing creative options that allow both sides to gain more of what they need. Limiting resources and imposing subjective standards are characteristics of distributive or adversarial approaches and restrict value creation. CIPS clearly distinguishes integrative negotiation as collaborative, interest-based, and solution-focused, particularly suitable for long-term and strategic supplier relationships.
Question 1451
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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:
Text Description automatically generated with low confidence
Question 1452
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 1453
Why is the use of power important for integrative commercial negotiations?
Moving negotiations forward when they get stuck on certain issues
Maximising the share of value gains for the negotiator's side
Coercion of the other party into a submissive agreement
Breaking through negotiation barriers related to attitude
Answer : C
In integrative (win--win) negotiations, power is not used to dominate or coerce but to enable progress and overcome barriers. Power can help move negotiations forward when discussions stall on specific issues and can help address behavioural or attitudinal barriers that prevent collaboration. Maximising one side's share of gains and coercion are characteristics of distributive or adversarial negotiations, not integrative ones. CIPS clearly differentiates the constructive use of power in integrative negotiations as a means to facilitate dialogue, encourage engagement, and unlock joint value, rather than to force submission or extract disproportionate gains.
Question 1454
Which of the following are variable costs?
Answer : D
Packaging is considered a variable cost because it fluctuates with the level of production or sales activity. Variable costs change directly in relation to the volume of output or service. In contrast:
Rent (A), Loan repayments (B), and Insurance (C) are fixed costs, as they generally do not vary with production levels within a certain range. These are recurring costs that remain constant over time, aligning with CIPS's cost classification in procurement.
Question 1455
A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?
Answer : B
To answer this question, you should know The seller's perspective as in 'How to Negotiate Professionally':
In the scenario, the buyer's spend is low, while they seem unattractive to seller (as they tend to pay late). So the buyer is classified as Nuisance in seller's perspective.
Question 1456
Can a party gain huge advantages in negotiation from setting room layout?
Answer : B
Essentially, for trained negotiators under most circumstances, the physical locations of negotiations and the room layout should not make much difference to the outcomes of the meeting. It is reasonable to assume that most commercial negotiations are based at least initially on a principled- or pragmatic-type approach. It is arguable also that any advantage gained through intentionally creating an uncomfortable environment to put short-term pressure on TOP is likely to be short-lived as TOP will likely reflect on this later and seek means to get even.
Question 1457
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Question 1458
Which of the following types of questions are likely to be the most effective to check facts in negotiations?
Answer : D
Closed questions are useful for verifying facts, as they prompt specific, concise responses. These questions allow the negotiator to confirm details without ambiguity, which is crucial for clarity in negotiation settings, as highlighted in CIPS's guidelines on questioning techniques.
Question 1459
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?
Answer : A
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 1460
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 1461
IHL has been supplying to XYZ Ltd for months. XYZ Ltd procurement manager Diana realises that the IHL's input prices are dropping and this is a good time to re-negotiate the price of the contract. She invites IHL representative to XYZ headquarter to make a bargain on the current price. At the opening stage of the negotiation, Diana requests a 10% reduction in price with an increase in volume purchased.
Is Diana's action appropriate in the opening phase?
Answer : D
The opening stage of the negotiation covers the very first few minutes when the parties meet and greet each other and are seated in the negotiation room in preparation for the main event.
Typical behaviours at the opening stage: 'dos' and 'don'ts'
Do's
Be punctual and well presented (welcome their arrival)
Break the ice with small talks
Start the conditioning process
Check authority
Check agenda
Consider using visual aid to set out key objectives or make key points
Don'ts
Use strong, pushy, cold or tough style at the opening
Put down marker at this stage
Criticise other organisations/TOP's previous contacts/third parties.
In this scenario, Diana has made her proposal right at the opening stage. This is an example of 'don'ts'. Good negotiators are very careful about 'red lines'. If she puts such barrier up too early, the supplier may not try to look for more creative solutions later in the negotiation.
Question 1462
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 1463
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
Answer : D
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Question 1464
The activity of listening in a negotiation includes which of the following processes?
Hearing
Interpreting
Rapport
Influencing
Answer : A
Listening involves both hearing (1) and interpreting (2) the information shared by the other party. Effective listening is an active process that goes beyond simply hearing words; it involvesinterpreting meaning, understanding the speaker's intent, and responding accordingly. CIPS emphasizes these steps as part of effective communication in negotiations.
Question 1465
Which of the following should be done when undertaking a reflection activity on negotiation? Select TWO that apply.
Answer : A, E
Giving positive group and individual feedback is easy, as is self-congratulation and, in many cases, it is hoped, this will be an accurate reflection on actual performance. When it comes to developmental or difficult feedback, it is only natural to want to move on and not reflect on the negative or developmental points, or why a negotiation did not achieve its objectives. But this is a mistake. The best learning opportunities come from reflection on what could be done better, and this can be achieved without blame, threat or condemnation. Everyone and every team will make mistakes and/or have areas where they could have improved. Clearly, if every reflection session concludes that an individual or team keeps making the same mistake, then there is a case to change roles or consider alternative approaches.
About Dos and Don'ts of reflection, you can refer here: https://offices.depaul.edu/human-resources/employee-relations/Documents/Self%20Assesement.pdf
Question 1466
In a commercial negotiation, a procurement professional negotiates on his company's behalf. The power of buying organisation is the only factor that influences the behaviours of the other party. Is this assumption true?
Answer : B
The assumption is false, because when a procurement professional negotiates on behalf of his employer, he brings the power of his organisation (its brand, reputation and purchasing spend) as well his own personal power (that which is embedded within him) to the negotiation.
From a negotiation perspective, both organisational and personal power have the ability to influence the behaviours of other or the cause of event. This power is clearly core to negotiation, and of enormous important in seeking to achieve the objectives.
Question 1467
Which of the following is categorised as fixed cost?
Answer : B
An organisation's expense can be categorised into three groups:
Fixed Costs -- costs that do not change with output.
Variable Costs -- costs that vary in direct proportion to output.
Semi-variable costs -- 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.
CIPS study guide page 79-84
Study tips: Fixed variable and semi-variable costs - AAT Comment
Question 1468
Which of the following types of questions should be used most often in the proposing phase?
Answer : A
At the proposing phase either side may start making tentative proposals regarding their offering. In the case of negotiation where TOP has already submitted a tender or proposal, this stage may provide an opportunity for them to make proposals to improve on their initial offers in general or in areas highlighted by the buying side in advance.
The word 'if' is very useful at this stage and allows you to test tentative proposals without committing yourself. Skilled negotiators use language very carefully. The questions with 'if' are hypothetical ones.
LO 3, AC 3.1
Question 1469
John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?
Answer : C
While stakeholder feedback is crucial, meetings are not always the most effective review method. Reviews may be better conducted through reports, surveys, or individual debriefs, depending on context. The key is to capture lessons learned, successes, and areas for improvement, and to record them for future negotiations. Forcing all stakeholders into one meeting risks inefficiency or unproductive blame games. CIPS stresses structured reflection and documentation as best practice, ensuring organisational learning and preparation improvements.
Question 1470
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : D
An adversarial style is appropriate when issues are non-negotiable, such as health and safety commitments (D). In these scenarios, compliance is required without compromise, and a firm stance may be necessary. This aligns with CIPS guidance, where adversarial tactics are used in non-negotiable contexts to enforce strict standards.
Question 1471
A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?
Answer : C
Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values. A smile, a 'yes' and the type of hospitality received, (in the business context), can mean very different things in different international business cultures.
Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide towhat TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.
Question 1472
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
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.
Question 1473
One of the most important steps in preparing for negotiations is to appraise the relative power of the parties. The buying organisation must assess its bargaining power against that of the supplier it intends to negotiate with. This information is necessary in facilitating the preparation, the negotiation team and the negotiation strategy.
In what situation is the bargaining power of buyers likely to be high relative to suppliers?
Answer : B
Whenmany supplierscompete forfew buyers, buyers gain leverage. This competition can drive prices down and increase the buyer's ability to negotiate favorable terms. Conversely, if the buyer is dependent on a supplier (as in A), the buyer's power diminishes.
''Buyer power increases when there are many suppliers and few buyers. The buyer has multiple options and can negotiate from a position of strength.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Relative Bargaining Power and Market Dynamics)
Question 1474
A procurement manager considers using an integrative negotiation approach with shortlisted suppliers. Which factor favours such an approach?
Answer : C
Integrative negotiation requires shared motivation to collaborate and focus on joint benefits. When parties are motivated to work together, they can share data, explore tradeables, and align on long-term value creation. Conversely, lack of trust, unwillingness to share, or absence of joint goals make integrative approaches unworkable, forcing adversarial or distributive methods instead. CIPS highlights that motivation and willingness to cooperate are preconditions for collaboration.
Question 1475
Which of the following is the true statement?
Answer : B
Internal stakeholder support will be important not just at the initial negotiation of the contract, but potentially throughout the life of the contract right through to exit.
As a general rule, connected stakeholders (with the exception of suppliers) have a low level of influence on procurement negotiations.
Suppliers are connected stakeholders who have contractual relationships with the organisation.
Commercial negotiation objective should be driven by the business needs of the organisation, and not just the instinct of procurement.
Question 1476
Commercial negotiations on price cover various aspects, including pricing arrangements. A buyer may negotiate a fixed-price agreement. Why is a fixed-price agreement advantageous to the buyer?
Answer : B
In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier's internal cost build-up (unlike cost-plus).
===========
Question 1477
The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : C
For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.
Question 1478
How can having a best alternative to a negotiated agreement (BATNA) support the buyer in a negotiation? Select THREE options that apply.
Answer : A, B, F
Having a BATNA:
Increases assertiveness (A): Knowing the fallback position empowers the buyer to negotiate more confidently.
Reduces the chance of a poor agreement (B): A BATNA ensures the buyer does not feel pressured to accept suboptimal terms.
Identifies walk-away points (F): It sets a clear boundary, allowing the buyer to exit negotiations if terms don't meet minimum requirements.
These align with CIPS's guidance on using BATNA to strengthen negotiation strategies.
Question 1479
Are tactical ploys only used in distributive approach?
Answer : D
There are many tactics and ploys that can be used to persuade others, particularly those not trained in negotiation. But in general these tactics should be used with care, as they can backfire; and in situations where a long-term relationship is desired, they can be, if detected, become an irritant to TOP.
Tactics are particularly effective if and when you are dealing with untrained negotiators, in consumer's buying situation and in once-off encounter.
Question 1480
According French and Raven's base model, which of the following are sources of personal power that can be used in commercial negotiation? Select THREE that apply.
Answer : B, E, F
A useful model of personal power that has survived the test of time and provide a simple way to analyse negotiation in French and Raven's Power Base Model, which describes six bases of power:
Question 1481
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 1482
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?
Answer : A
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 1483
Which of the following are most likely to turn buying organisation into an unattractive customer in supplier's perspective? Select TWO that apply.
Answer : A, D
Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation. Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:
Simple procurement processes: Using SRM technology may help to simplify the process
Simple contracting processes
Clear and concise documentation: Reduced paperwork helps both supplier and buyer save their time and resources.
Absence of onerous supplier terms and conditions
On-time payment
Transparent processes: Unclear tender award criteria can be seen as opaque. Suppliers who attended the tendering processes cannot know the reasons why their bids are rejected and hesitate to attend other tendering.
Ethical behaviour: Suppliers may prefer a buyer who adopts CSR policy because they can predict potential customer's behaviour. Demands for kickback are unethical behaviours.
Question 1484
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
Answer : A, D
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
Question 1485
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier takes steps to make their closing statements, they are most likely to be doing which of the following?
Answer : A
As a negotiation nears theclosure stage, experienced negotiators look forbuying signals--- both verbal (e.g., positive affirmations) and non-verbal (e.g., nodding, leaning in). These cues indicate readiness to agree and allow the negotiator to move confidently into closing the deal.
''At the closing stage, negotiators should observe both verbal and non-verbal buying signals. These cues can indicate readiness to commit, helping to time the final proposal or acceptance effectively.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Closing the Negotiation)
Question 1486
Which of the following are hardball tactics in negotiations? Select TWO that apply.
Answer : B, C
In difficult negotiations and disputes, hardball tactics like punishment and threats often seem like the only way to win concessions. Some negotiators seem to believe that hardball tactics are the key to success in any negotiation. They resort to extreme demands and even unethical behaviour to try to get the upper hand in a negotiation.
The following are 8 typical hardball tactics:
1. Good cop / Bad cop
2. Low ball / High ball
3. Bogey
4. The Nibble
5. Chicken
6. Intimidation
7. Aggressive Behaviour
8. Snow Job
You can read the details of each tactic here.
In the contrary to hardball tactics, negotiators can adopt integrative approach to the negotiation. Some of integrative tactics are:
1. Expand the Pie
2. Bridging
3. Post Settlement --Settlement
Et cetera
Question 1487
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?
Answer : D
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 right strategy.
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 1488
Which of the following is a challenge when calculating absorption costing?
Answer : A
Absorption costing allocates indirect overheads to units, which is inherently judgemental; selecting allocation bases that ''fairly'' load overhead to products is the well-known difficulty. (By contrast, option B describes activity-based costing concepts---cost pools and drivers.)
===========
Question 1489
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way ofanalysing costs is to classify them into direct and indirect costs. Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Question 1490
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
Answer : D
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Question 1491
What is a benefit to the buyer of having a BATNA (best alternative to a negotiated agreement) in a negotiation?
Answer : C
A BATNA provides the buyer with the confidence to walk away if terms are not favorable, ensuring they don't settle for a suboptimal agreement. Knowing the best alternative enables buyers to negotiate from a position of strength, as per CIPS's guidance on negotiation strategies.
Question 1492
Which of the following is the definition of safety margin?
Answer : A
As a financial metric, the margin of safety (safety margin) is equal to the difference between current or forecasted sales and sales at the break-even point. The margin of safety is sometimes reported as a ratio, in which the aforementioned formula is divided by current or forecasted sales to yield a percentage value. The figure is used in both break-even analysis and forecasting to inform a firm's management of the existing cushion in actual sales or budgeted sales before the firm would incur a loss.
This is a question that a student met in her actual exam. The margin of safety is not even mentioned in the CIPS study guide.
Question 1493
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier, Top Teds. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Bargaining is the negotiation stage where tradeables are typically introduced and discussed. During this phase, both parties exchange offers and concessions, using tradeables such as lead times and order quantities to find a mutually acceptable agreement. This aligns with CIPS's guidance on the stages of negotiation.
Question 1494
Neville is a senior procurement specialist in a automaker. He has good relationship with his team mates and other departments because of his amazing purchasing skills and kindness. Which of the following sources of power is Neville likely to possess?
Answer : B
In 1959, French and Raven described five bases of power:
1. Legitimate -- This comes from the belief that a person has the formal right to make demands, and to expect others to be compliant and obedient.
2. Reward -- This results from one person's ability to compensate another for compliance.
3. Expert -- This is based on a person's high levels of skill and knowledge.
4. Referent -- This is the result of a person's perceived attractiveness, worthiness and right to others' respect.
5. Coercive -- This comes from the belief that a person can punish others for noncompliance.
Six years later, Raven added an extra power base:
6. Informational -- This results from a person's ability to control the information that others need to accomplish something.
In the scenario, Neville attracts and keeps good relationship with his colleagues not because of neither position nor reward nor coercion. He has good skills and kindness, which increase his charisma. His source of power is referent power.
CIPS study guide page 47-50
French and Raven's Five Forms of Power
Question 1495
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
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.
Question 1496
Which characteristics are likely to feature within an integrative negotiation?
Maximising the other party's outcome to enhance relationships
Maximising joint outcomes
Short-term focus
Pursuit of goals held jointly with the other party
Answer : D
Integrative negotiation emphasises maximising joint outcomes and pursuing shared goals, moving beyond narrow self-interest. Unlike distributive negotiations, it does not focus on short-term wins or zero-sum positions. Instead, integrative strategies build sustainable value and strengthen partnerships. Maximising the other party's outcome alone is more accommodative than integrative. Therefore, true integrative practice balances both parties' interests for long-term gain.
Question 1497
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Question 1498
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?
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.
Question 1499
It may be more difficult to buy on a credit from supplier who locates in a country with a hyperinflation? Is this assumption true?
Answer : B
If the inflation rate is running high, then obtaining credit as a buyer is normally more difficult or expensive as money in the future will be worth less than money today.
Question 1500
Can a party gain huge advantages in negotiation from setting room layout?
Answer : B
Essentially, for trained negotiators under most circumstances, the physical locations of negotiations and the room layout should not make much difference to the outcomes of the meeting. It is reasonable to assume that most commercial negotiations are based at least initially on a principled- or pragmatic-type approach. It is arguable also that any advantage gained through intentionally creating an uncomfortable environment to put short-term pressure on TOP is likely to be short-lived as TOP will likely reflect on this later and seek means to get even.
Question 1501
Which of the following are stages within the negotiation process?
Planning and preparation
Arguing and persuasion
Accepting hospitality
Testing and proposing
Answer : C
The formal negotiation process includes planning and preparation (objectives, BATNA, MIL) and testing/proposing (exchanging offers). Hospitality is not a stage---it may support relationships but is not part of structured negotiation. Arguing/persuasion occurs within bargaining but is not defined as a stage in itself. Understanding the stages ensures structured progress and prevents disorganised discussions, which often result in suboptimal agreements.
Question 1502
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latest meeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : C
Question 1503
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 1504
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
===========
Question 1505
Maria is a professional services category buyer within the National Health Service. Due to severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
Question 1506
Commercial negotiation ends at the award of a contract. Is this statement true?
Answer : C
Negotiation doesn't end after the contract is awarded. The needs for negotiation can arise in any post-award stages. For example, at supplier development and relationship management stage,improvement in supplier capability, capacity, and product/service range can be negotiated. Negotiations with long-term strategic critical suppliers should be carried out in a partnering style, with a win-win starting point assumed.
In some sectors such as transport, utilities and infrastructure, tenderers may 'bid low' or even make a loss to win major contracts with a view to negotiating lucrative changes, variations and 'add-ons' over the life of the contract when the supplier is bedded in and the buyer is in the weaker position to push back or challenge. Even in less complex contract, it is very likely that there will be a need to negotiate with that supplier again after the awarding of the contract.
LO 1, AC 1.1
Question 1507
Which of the following should be adopted to minimise the conflict between parties in commercial negotiation?
Answer : D
Ground rules are the basic rules for doing something (Cambridge Dictionary). A negotiation goes more smoothly if ground rules are adopted. Then if something goes awry at a later time, you can point out the ground rule that has been violated. Procurement professional should seek to minimise conflict over process through agreeing 'ground rules' and approach as far as possible with the other party in advance of any negotiation meetings.
There should be two sets of ground rules: 1) ground rules for the negotiations between the two parties and 2) ground rules for the negotiating team itself. This article is about the negotiating team ground rules.
The rule of law is the condition in which all members of society, including its political leaders, accept the authority of the law.
Ground zero describes the point on the Earth's surface closest to a nuclear detonation. In the case of an explosion above the ground, ground zero refers to the point on the ground directly below the nuclear detonation.
The Ground Beam is the beam which is provided usually at the foundation level to support building walls, joists, etc.
Question 1508
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 1509
According French and Raven's base model, which of the following are sources of personal power that can be used in commercial negotiation? Select THREE that apply.
Answer : B, E, F
A useful model of personal power that has survived the test of time and provide a simple way to analyse negotiation in French and Raven's Power Base Model, which describes six bases of power:
Question 1510
The activity of listening in a negotiation includes which of the following processes?
Hearing
Interpreting
Rapport
Influencing
Answer : A
Listening involves both hearing (1) and interpreting (2) the information shared by the other party. Effective listening is an active process that goes beyond simply hearing words; it involvesinterpreting meaning, understanding the speaker's intent, and responding accordingly. CIPS emphasizes these steps as part of effective communication in negotiations.
Question 1511
In what circumstances is the bargaining power of suppliers likely to be high, in relation to buyer power? Select THREE that apply.
Answer : A, D, E
Supplier bargaining power is stronger when there arefew suppliers,low volume requirementsfrom buyers, and when suppliers possessunique capabilities or technology(like specialized machinery). These conditions reduce buyer leverage and increase supplier influence.
Question 1512
A procurement manager withholds important information to strengthen negotiating power. Is this appropriate when using an integrative negotiation style?
Answer : B
Integrative negotiation relies on openness and trust, aiming to identify underlying interests, not just positions. Withholding information is typical of distributive (win-lose) bargaining, where each side protects its bottom line. In an integrative context, hiding key details prevents mutual understanding, reduces creative option-building, and damages relationship trust. Instead, transparency enables value creation---such as joint cost reduction or innovation. CIPS emphasises that power must be balanced with openness when integrative outcomes are desired.
Question 1513
Logibox Ltd sets prices based on what consumers are prepared to pay. Which pricing strategy is this?
Answer : C
Market pricing sets prices according to consumer demand and willingness to pay, ensuring competitiveness. Skimming sets high prices at launch to maximise early profit, penetration uses low prices to enter markets, and premium pricing positions products as luxury with high margins. Market pricing balances supplier costs with customer value perception, making it a common approach in competitive industries.
Question 1514
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
''Expanding the pie'' is a strategy used in integrative negotiations where both parties collaborate to increase the total value available before dividing it. This leads to mutual gains and supports long-term, strategic relationships.
Question 1515
Can a party gain huge advantages in negotiation from setting room layout?
Answer : B
Essentially, for trained negotiators under most circumstances, the physical locations of negotiations and the room layout should not make much difference to the outcomes of the meeting. It is reasonable to assume that most commercial negotiations are based at least initially on a principled- or pragmatic-type approach. It is arguable also that any advantage gained through intentionally creating an uncomfortable environment to put short-term pressure on TOP is likely to be short-lived as TOP will likely reflect on this later and seek means to get even.
Question 1516
During a negotiation, Jos Gmez (salesperson for a strategic supplier) says his sales director will not approve discounts on initial purchases. However, he offers a 5% discount on the aftercare package, which gives the same monetary saving. Sally Pampas needs both the product and the aftercare package and aims for a 5% discount off the purchase price. To achieve a win-win (integrative) outcome, Sally should:
Answer : B
Integrative (win-win) negotiation looks for value-equivalent tradeables across the bargaining mix (price, service, warranty, aftercare, etc.). If the same total saving is achieved via aftercare---and the buyer needs it---accepting the tradeable meets objectives without forcing a distributive fight on unit price.
===========
Question 1517
John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?
Answer : C
While stakeholder feedback is crucial, meetings are not always the most effective review method. Reviews may be better conducted through reports, surveys, or individual debriefs, depending on context. The key is to capture lessons learned, successes, and areas for improvement, and to record them for future negotiations. Forcing all stakeholders into one meeting risks inefficiency or unproductive blame games. CIPS stresses structured reflection and documentation as best practice, ensuring organisational learning and preparation improvements.
Question 1518
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Consolidate the expenditure from across the organisation to increase the size and value of the requirement
Understand the supplier's costs and margins prior to the negotiation to demonstrate that you know what it costs to produce the product
Take a distributive approach to the negotiation and refuse to make concessions
Limit communication and information sharing with the supplier so as not to give anything away
Answer : A
When buyer power is low, leverage must be created rather than assumed. Consolidating organisational spend increases volume and commercial importance to the supplier, directly strengthening buyer power. Understanding supplier costs and margins reduces information asymmetry and demonstrates commercial competence, which improves credibility and influence during negotiations. Refusing concessions and limiting communication are typical of adversarial tactics and often weaken relationships when power is already limited. CIPS clearly advises buyers to use aggregation of demand and market intelligence as ethical and effective methods to rebalance power without damaging long-term supplier relationships.
Question 1519
Jane is planning for a forthcoming negotiation with a key supplier. She has learned what are important to the supplier and what are important to her company from previous contracts between them. In order to avoid negotiation deadlocks, she has set up several concession plans. But Jane has little experience in dealing with suppliers and doesn't know when to trade these concessions. When is the best time in a negotiation to trade concessions?
Answer : C
The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.
LO 3, AC 3.1
Question 1520
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Question 1521
Which of the following are features of a single-sourced type of relationship on the relationship spectrum?
Exclusivity granted in relation to a particular product
The supplier is an oligopoly market structure
The supplier is trusted and collaborative
Framework contracts are used to identify the supplier
Answer : B
Single-sourced relationships often involve exclusivity for a specific product (1) and a high level of trust and collaboration (3) between buyer and supplier. This type of relationship is selected forstrategic procurement purposes, often involving long-term partnerships, which align with CIPS's relationship spectrum guidelines.
Question 1522
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 1523
Which of the following can help both parties to break the vicious cycle of blame when a relationship needs repairing? Select TWO that apply.
Answer : A, C
In order to break vicious cycle of blame, procurement will need to use their negotiation and conflict management skills, adopting a collaborative and integrative approach. Your first action should be to establish the facts that led to the situation where the relationship broke down. Most day-to-day relationship between buying organisations and suppliers do not of course involve procurement staff, so you will need to consult with your business partners internally to establish their point of view of where the issue and sources of conflict are. You should also contact the supplier and get their side of the story - this is particularly to when you have previously identified the supplier as critical or otherwise important to your operations. Ideally you will be able to apply principled negotiation here, separating the people from the issue, focusing on interests and not positions, and then looking for options of mutual benefits.
Question 1524
Should a buyer use closed questions in a negotiation?
Answer : A
Asking questions the right way is both an art and a science. Ask the question the wrong way, and the other negotiator might act like a turtle, becoming defensive and withdrawing into their shell. Ask the question the right way, and the other negotiator might ''spill the beans.''.
Closed Questions: How and when to use them?
Closed questions are those that require a short and focused answer, and are especially helpful in the beginning stages of the negotiation to encourage interaction. They can be used to clarify a point, or to reconfirm certain facts. For example, you can use a closed question to confirm the amount of units the company can produce in a week, or to clarify that what they are really saying is that they don't feel comfortable outsourcing their accounts to India. Most closed questions only require a simple ''yes'' or ''no'' response, so there really isn't much room for misinterpretation -- great for finding out where both you and they stand.
CIPS study guide page 169
What Questions Can We Ask In Negotiations?
Question 1525
A building firm has been awarded a contract to construct an office block. Which is a direct cost?
Answer : A
Direct costs are attributable to a specific project --- in construction, this includes materials and on-site labour. Legal fees, insurance, and office space are indirect costs, as they support the business overall but are not tied to one project. For buyers, distinguishing direct from indirect costs ensures pricing transparency and helps challenge excessive overhead allocations. This knowledge strengthens cost breakdown negotiations in project contracts.
Question 1526
Effective listening is important in integrative negotiations. Is this statement correct?
Answer : A
Effective listening is crucial in integrative negotiations because it promotes understanding and collaboration. By actively listening, parties can identify shared interests and address concerns, which supports the goal of reaching mutually beneficial solutions. This is a key component in CIPS guidelines on successful integrative negotiation practices.
Question 1527
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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:
Text Description automatically generated with low confidence
Question 1528
A procurement professional is negotiating with a supplier on cleaning service. She realises that there are huge cost-saving opportunities if the supplier agrees to reduce its mark-up and unnecessary employee benefits. Supplier's mark-up and employee benefits are examples of which of the following?
Answer : D
A key consideration when seeking to negotiate prices is to establish what proportion of the spend is addressable by procurement action such as negotiation. Addressability of spend is influenceable through negotiations or application of other saving effort or leverage with suppliers.
LO 2, AC 2.1
Question 1529
Which of the following is the purpose of using stakeholder support level scale?
Answer : C
In order to estimate the gap and the progress towards desired level of support, a stakeholder support scale can be used by the procurement internally. The support level scale measures stakeholder commitment. Current support level for the procurement/negotiation objectives should be gained from engagement with key stakeholders. The following is an example of stakeholder support level scale:
LO 1, AC 1.1
Question 1530
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Question 1531
When planning a negotiation for sourcing internationally, which of the following divergent positions, and therefore potential conflict areas, should be prepared for? Select TWO that apply:
Answer : A, C, D
Question 1532
Which of the following are examples of non-verbal negotiation? Select THREE that apply.
Answer : B, D, F
Nonverbal communication is important because it gives us valuable information about a situation including how a person might be feeling, how someone receives information and how to approach a person or group of people.
There are several types of nonverbal communications you should be aware of, including:
1. Body language
Body language is the way someone situates their body naturally depending on the situation, the environment and how they are feeling.
Example: Someone might cross their arms if they are feeling angry or nervous.
2. Movement
The way you move your arms and legs such as walking quickly or slowly, standing, sitting or fidgeting, can all convey different messages to onlookers.
Example: Sitting still and paying attention in a meeting conveys respect and attention.
3. Posture
The way you sit or stand can also communicate your comfort level, professionalism and general disposition towards a person or conversation.
Example: Someone might slouch their shoulders if they feel tired, frustrated or disappointed.
4. Gestures
While gestures vary widely across communities, they are generally used both intentionally and unintentionally to convey information to others.
Example: Someone in the United States might display a ''thumbs up'' to communicate confirmation or that they feel positively about something.
5. Space
Creating or closing distance between yourself and the people around you can also convey messages about your comfort level, the importance of the conversation, your desire to support or connect with others and more.
Example: You might stand two to three feet away from a new contact to respect their boundaries.
6. Paralanguage:
Paralanguage includes the non-language elements of speech, such as your talking speed, pitch, intonation, volume and more.
Example: You might speak quickly if you are excited about something.
7. Facial expressions
One of the most common forms of nonverbal communication is facial expressions. Using the eyebrows, mouth, eyes and facial muscles to convey can be very effective when communicating both emotion and information.
Example: Someone might raise their eyebrows and open their eyes widely if they feel surprised.
8. Eye contact
Strategically using eye content (or lack of eye contact) is an extremely effective way to communicate your attention and interest.
Example: Looking away from someone and at the ground or your phone may convey disinterest or disrespect.
9. Touch
Some people also use touch as a form of communication. Most commonly, it is used to communicate support or comfort. This form of communication should be used sparingly and only when you know the receiving party is okay with it. It should never be used to convey anger, frustration or any other negative emotions.
Example: Placing your hand on a friend's shoulder may convey support or empathy.
- CIPS study guide page 174-175
- Nonverbal Communication Skills: Definition and Examples
LO 3, AC 3.3
Question 1533
Ranjit is a facilities category buyer for a hospital in the UK and is managing an overseas sourcing project for security guard clothing and personal protective equipment. Ranjit is aware that foreign exchange fluctuations can create risk for his organisation and would like to remove this risk. Ranjit has asked the international suppliers to quote in GBP sterling. Will Ranjit's approach remove the fluctuation risk for the hospital?
Answer : C
Question 1534
Which of the following are most likely to be fundamentals of Fisher & Ury's principled negotiation?
1. Depersonalise the argument
2. Focus on positions
3. Generate creative options
4. Using subjective criteria
Answer : C
Principled negotiation is based on four fundamentals: people, interest, options and criteria:
1st Principle: separate the people from the problem: Negotiator should depersonalise the situation and accepting that the subject matter of the negotiation. This can be difficult for untrained negotiators, but this is a key skill to develop
2nd principle: focus on interests, not positions: It is important in principled negotiations not to focus on their parties' positions (what are expressed during negotiations), but on the interests (underlying needs) behind them
3rd principle: invent options for mutual gains: this principle aims to help the parties find a solution that both would benefit from. The more options - or tradeables - that can be brought to the table the better.
4th principle: insist on using objective criteria: is about making sure that the negotiation stays focused on outcomes based on objective criteria and that it is productive.
LO 1, AC 1.2
Question 1535
A supplier's mark-up on all products is 25%. Supplier's profit margin is...?
Answer : A
LO 2, AC 2.1
Question 1536
According to Professor Gavin Kennedy, in which of the following forms of dispute resolution, both parties will voluntarily exchange their ideas and beliefs?
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.
Question 1537
Which of the following types of relationship would possibly lead to a distributive negotiation?
Answer : D
Question 1538
A procurement team has discussed, in advance of a negotiation, what they will do if there is no agreement with the current supplier. They have decided that they will perform the services themselves in-house on a trial basis if no deal is made. Which of the following describes what they have prepared here?
Answer : A
Question 1539
Which best describes features of the recovery phase in a business cycle? Select TWO.
Answer : B, D
In the recovery phase, economies move out of recession: consumer spending rises, demand grows, and prices begin to stabilise or increase. Confidence improves, investment starts picking up, and spare capacity is gradually absorbed. Low confidence and falling investment are features of recession, while full capacity is linked to boom phases. For negotiators, recovery phases may mean suppliers regain confidence to raise prices, requiring careful market analysis.
Question 1540
Commercial negotiation ends at the award of a contract. Is this statement true?
Answer : C
Negotiation doesn't end after the contract is awarded. The needs for negotiation can arise in any post-award stages. For example, at supplier development and relationship management stage,improvement in supplier capability, capacity, and product/service range can be negotiated. Negotiations with long-term strategic critical suppliers should be carried out in a partnering style, with a win-win starting point assumed.
In some sectors such as transport, utilities and infrastructure, tenderers may 'bid low' or even make a loss to win major contracts with a view to negotiating lucrative changes, variations and 'add-ons' over the life of the contract when the supplier is bedded in and the buyer is in the weaker position to push back or challenge. Even in less complex contract, it is very likely that there will be a need to negotiate with that supplier again after the awarding of the contract.
LO 1, AC 1.1
Question 1541
Which of the following are examples of variable costs?
Building and site rent
Annual insurance premium
Raw materials expenditure
Delivery costs for materials
Answer : D
Variable costsare expenses that change in proportion to business activity or production volume.Raw materialsanddelivery costsdirectly increase as more products are produced. In contrast,rentandinsuranceare fixed costs that remain constant regardless of output levels.
''Variable costs are directly linked to production output. Raw materials and logistics (e.g., delivery) scale with order volume, impacting supplier pricing and buyer negotiations.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Direct and Variable Cost Classifications)
Question 1542
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
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
Question 1543
Which of the following are most likely to turn buying organisation into an unattractive customer in supplier's perspective? Select TWO that apply.
Answer : A, D
Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation. Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:
Simple procurement processes: Using SRM technology may help to simplify the process
Simple contracting processes
Clear and concise documentation: Reduced paperwork helps both supplier and buyer save their time and resources.
Absence of onerous supplier terms and conditions
On-time payment
Transparent processes: Unclear tender award criteria can be seen as opaque. Suppliers who attended the tendering processes cannot know the reasons why their bids are rejected and hesitate to attend other tendering.
Ethical behaviour: Suppliers may prefer a buyer who adopts CSR policy because they can predict potential customer's behaviour. Demands for kickback are unethical behaviours.
Question 1544
Where a market consists of a large producer with high power, it is known as ...
Answer : B
A monopoly occurs when a single supplier dominates a market, giving them high bargaining power over buyers. By contrast, monopsony is where a single buyer dominates, oligopoly involves a few large suppliers, and monopolistic competition refers to many suppliers with differentiated products. Monopoly power in negotiations means buyers have reduced leverage and may need to rely on regulatory frameworks or collaborative strategies to balance outcomes.
Question 1545
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 1546
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Answer : C
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Question 1547
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : A, B
Persistent late payment of the supplier's invoices (A) and Unequal sharing of gains, risks, and costs with the supplier (B) are potential sources of conflict as they create dissatisfaction and imbalance in the relationship. According to CIPS materials:
Late payments (A) can strain the supplier's cash flow, affecting their operational stability and leading to mistrust in the buyer.
Unequal sharing of gains, risks, and costs (B) can result in one party feeling exploited or unfairly treated, which undermines the collaborative spirit essential for long-term partnerships.
In contrast, requesting early supplier involvement, planning visits, or setting delivery dates are typically part of constructive relationship management practices and do not inherently lead to conflict.
Question 1548
Which of the following types of relationship would possibly lead to a distributive negotiation?
Answer : D
Question 1549
Which of the following may help the procurement professional increase expert power in commercial negotiation? Select TWO that apply.
Answer : C, E
Expert power is based on a person's high levels of skill and knowledge, formal training, qualifications and experience in a particular procurement category would give someone expert status and mean that in negotiation their voice is listened to as a more objective, informed knowledge leader. Expert power is based on facts, knowledge, research, insight and study.
Legitimate power comes from rules, formal authority, organisation rank, staff rate or official position held.
Reward power comes from one person's ability to compensate or reward another for compliance.
Referent power stems from their personality, way of engaging with others and habit of acting in a way that is in line with a strong set of values and principles.
Question 1550
A buyer requests a 2,000 reduction in price at the end of negotiations. The supplier nods and smiles, shakes hands, and leaves. Should the buyer believe the reduced price is agreed?
Answer : C
CIPS stresses that clear verbal confirmation is required for agreements. Non-verbal signals (smiles, nods, handshakes) can indicate politeness or ambiguity but do not constitute binding agreement. Assuming agreement risks later disputes or misunderstandings. Skilled negotiators ensure closure by explicitly summarising agreed terms and documenting them. Non-verbal communication is supportive, not decisive, in contract negotiation contexts.
Question 1551
Which of the following are stages of a win-win approach to negotiations?
Find out where the interests of both parties align
Design new options, where everyone gets more of what they need
Limit the resources to a fixed number
Insist that the agreement includes subjective regulatory standards
Answer : A
A win-win (integrative) negotiation focuses on shared interests and joint value creation. The first step is identifying where both parties' interests align, followed by designing creative options that allow both sides to gain more of what they need. Limiting resources and imposing subjective standards are characteristics of distributive or adversarial approaches and restrict value creation. CIPS clearly distinguishes integrative negotiation as collaborative, interest-based, and solution-focused, particularly suitable for long-term and strategic supplier relationships.
Question 1552
John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?
Answer : C
While stakeholder feedback is crucial, meetings are not always the most effective review method. Reviews may be better conducted through reports, surveys, or individual debriefs, depending on context. The key is to capture lessons learned, successes, and areas for improvement, and to record them for future negotiations. Forcing all stakeholders into one meeting risks inefficiency or unproductive blame games. CIPS stresses structured reflection and documentation as best practice, ensuring organisational learning and preparation improvements.
Question 1553
A negotiation process ends once the negotiating meeting has finished. Is this statement true?
Answer : C
Question 1554
Langham Industries is seeking to expand its operations globally. The CEO has asked the procurement department to engage in a macroeconomic analysis for its potential new supply chain to meet organisational objectives and outcomes. Which of the following would be a source of macroeconomic data?
Answer : C
Published market indices are a source of macroeconomic data, as they reflect broader economic trends and provide insights into the overall market environment, which is essential for globalexpansion planning. Macroeconomic analysis focuses on high-level economic indicators, as recommended in CIPS's guidelines on sourcing macroeconomic data.
Question 1555
Which of the following is the definition of safety margin?
Answer : A
As a financial metric, the margin of safety (safety margin) is equal to the difference between current or forecasted sales and sales at the break-even point. The margin of safety is sometimes reported as a ratio, in which the aforementioned formula is divided by current or forecasted sales to yield a percentage value. The figure is used in both break-even analysis and forecasting to inform a firm's management of the existing cushion in actual sales or budgeted sales before the firm would incur a loss.
This is a question that a student met in her actual exam. The margin of safety is not even mentioned in the CIPS study guide.
Question 1556
What letter R in the acronym SMART stands for?
Answer : C
SMART is an acronym that you can use to guide your goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound
A student met this question in the L4M5 exam. SMART is mentioned primarily in L4M3 Commercial Contracting.
LO: Unknown, AC: Unknown
Question 1557
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : A
Question 1558
A buyer is preparing for an upcoming negotiation with a large supplier on a contract renewal price. The buyer has undertaken some analysis and is concerned that changes in the organisation's macro-environment over the last year will result in a price increase. The buyer's analysis has identified changes in which of the following?
Answer : A
Question 1559
A breakeven analysis uses which of the following aspects as part of the analysis?
Answer : A, D
Question 1560
Professional buyer is planning for the next negotiation of a simple one-off contract. This negotiation is typified by which of the following? Select TWO that apply.
Answer : D, E
Professional buyers, when planning or engaging in negotiation with suppliers, should always be aware of where the intended and actual relationship with this supplier is positioned on the 'spectrum' or 'continuum' of commercial relationships. The relationship spectrum describes the range of commercial relationships between a buyer and supplier based on richness of communication, longevity and mutual dependence.
In the question, the contract is simple one-off (or spot buy), which means the relationship will likely to be more transactional. In such relationship, price is the most important criteria and buyer may adopt arm's-length approach.
Question 1561
Which of the following is an advantage of a fixed-price agreement?
Answer : C
Fixed-price agreements give buyers financial certainty, reducing exposure to supplier inefficiencies, cost increases, or inflation. The supplier bears the risk of cost overruns. While it doesn't automatically improve quality or payment terms, it allows buyers to forecast budgets and manage risk effectively. This makes fixed-price contracts especially useful for projects with defined scopes, where costs are predictable. In contrast, cost-plus contracts keep the risk with the buyer and require constant monitoring of supplier costs, making them less attractive in terms of risk management.
Question 1562
Which of the following is the internal factor that is taken into price of a product?
Answer : A
In order to answer this question, you should better consider each option:
'Exchange rate' is the value of one nation's currency versus the currency of another nation or economic zone. This is a macroeconomic factor.
'Elasticity' refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. This is a microeconomic factor
Consumer tastes refer to the products and services that consumers consciously choose over others. Consumer tastes are so powerful that they can change how businesses conduct their activity. Like elasticity, this is also a microeconomic factor.
Among 4 options, only risk management is the internal factor. Risk pricing is a strategy applied by many companies in the world. To learn how to price the risk, you can read an article from McKinsey: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-to-price-risk-to-win-and-profit
This is a question that a student met in her actual exam. The knowledge section is unknown.
LO: Unknown, AC: Unknown
Question 1563
Active listening in negotiation includes which of the following activities?
1. Hearing
2. Interpreting
3. Rapport
4. Influence
Answer : C
Listening is a hugely important skill in the world of work. It's a key part of effective communication [...].
Regarding active listening, there is a model called 'The SIER Hierarchy of Active Listening'. It details four key stages required for effective listening. As with all models associated with active listening, its purpose is to help the listener be a better, more effective listener who really hears what is being said, connects with the individual with whom they are communicating and builds effective relationships.
The model is a hierarchical model meaning that each stage builds on the stage before it. While the model is sometimes used for training in the sales arena, it is helpful in all walks of life. The stages of the model are: Sensing (including hearing and watching body language), Interpreting, Evaluating and Responding.
- CIPS study guide page 171-173
- The SIER Hierarchy of Active Listening: Become a Better Listener
LO 3, AC 3.3
Question 1564
Lina Rawlins is a senior buyer working for a medical equipment company. Lina is in charge of the company's largest supplier account, Great Barrington Gas (GBG), a medical equipment supplier. Recently, GBG's performance has declined, leading to an increasing number of rejected items. Lina is aware of the seriousness of this and has asked GBG to attend an urgent meeting. In the meeting, Lina asked the GBG representative, ''Can you tell me exactly what you are doing to ensure quality?" What type of question is Lina asking?
Answer : A
Lina is asking a probing question to gather more detailed information on the actions GBG is taking to address quality issues. Probing questions are intended to delve deeper into a topic and elicit specific details, making them suitable for understanding underlying issues, as per CIPS's negotiation question types.
Question 1565
Which of the following are sources of legitimate (personal) power? Select THREE.
Answer : A, B, C
Legitimate power in negotiation can arise from different sources:
Position power (authority from role/position in the organisation).
Referent power (influence from respect, charisma, or relationships).
Question 1566
There are no commitments in hypothetical questions. Is this statement true?
Answer : D
There are four types of questions that can be used in a commercial negotiation:
Hypothetical questions, where you ask about a possible situation or abstract concept, are very useful at the testing and proposal phases. Hypothetical question does not state any commitment as it is only about 'if something happens, then ...'. This type of question can be useful at giving suggestion.
LO 3, AC 3.3
Question 1567
In general, which of the following is the consequence of a flatter demand curve?
Answer : B
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor.
In microeconomic graphs, elasticity and inelasticity can be shown by the slope of the demand curve. If a demand curve is almost horizontal, then the product pricing can be described as very elastic. If a demand curve is almost vertical, then the product pricing can be described as very inelastic.
The formulae of elasticity:
Text Description automatically generated with low confidence
Table Description automatically generated with medium confidence
LO 2, AC 2.2
Question 1568
Procurement gets involved in negotiating purchase requisitions only when there is a value analysis to ensure that only value-adding aspects are included. Is this statement true?
Answer : A
Procurement can negotiate various aspects of a purchase requisition even without a formal value analysis. While value analysis can enhance cost-effectiveness, procurement professionals often negotiate on pricing, terms, and conditions to add value independently of value analysis, as per CIPS's guidelines on procurement flexibility in negotiations.
Question 1569
Jessica Taylor, a senior buyer, is reflecting on her most recent negotiation. She has been asked by her manager to create a written record of performance.
Which of the following should Jessica include in this negotiation performance report? Select THREE that apply.
Answer : A, C, F
Post-negotiation analysis should include performance evaluation, learning outcomes, and a comparison of achieved results versus original objectives. These elements contribute to continuous improvement and future strategy development.
Question 1570
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should ...
Answer : A
Sally's objective is to achieve a 5% saving. If the supplier offers this saving in a different form (aftercare package), and the total value meets her goal, then accepting this alternative shows flexibility and supports a collaborative,win-winoutcome.
Question 1571
A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?
Answer : C
Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values. A smile, a 'yes' and the type of hospitality received, (in the business context), can mean very different things in different international business cultures.
Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide towhat TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.
Question 1572
Which of the following is an attribute of a distributive negotiation approach?
Answer : C
Distributive negotiation is often described as a 'win-lose' approach, where each party aims to maximize their own gain, often at the expense of the other. The focus is onachieving personal success, not collaboration.
Question 1573
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
Answer : A, C, E
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 conditionthat would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
Question 1574
Which of the following types of questions should be used most often in the proposing phase?
Answer : A
At the proposing phase either side may start making tentative proposals regarding their offering. In the case of negotiation where TOP has already submitted a tender or proposal, this stage may provide an opportunity for them to make proposals to improve on their initial offers in general or in areas highlighted by the buying side in advance.
The word 'if' is very useful at this stage and allows you to test tentative proposals without committing yourself. Skilled negotiators use language very carefully. The questions with 'if' are hypothetical ones.
LO 3, AC 3.1
Question 1575
Which factors give rise to conflict within the procurement negotiation context? Select THREE that apply.
Answer : A, C, F
Conflict can arise in procurement negotiations due to a power imbalance, which occurs when one party has more influence than the other, leading to potential exploitation or dissatisfaction. Differences in goals between parties---such as cost minimization for buyers and profit maximization for suppliers---also contribute to tension. Surprisingly, similar motives can lead to conflict as well, particularly when both parties are competing for limited benefits or market share.
Question 1576
Which type of question style is a negotiator using if they ask the other party
''Can you deliver our items by Friday 17th?''
Answer : B
This is a closed question because it requires a definite, factual response such as ''yes'' or ''no''. Closed questions are particularly useful in negotiations for confirming specific commitments, including delivery dates, prices, quantities, or contractual terms. They reduce ambiguity and are commonly used during the later stages of negotiation to confirm agreement and progress toward closure. Probing questions seek deeper explanation, leading questions influence the answer, and multiple questions combine several issues at once. CIPS highlights the importance of choosing question styles appropriately depending on the negotiation objective and stage.
Question 1577
Which of the following are typical characteristics of activity-based costing (ABC) method? Select TWO that apply.
Answer : A, E
Activity-based costing is an alternative approach to traditional absorption costing. The characteristics of these two methods are illustrated in the graph below:
Question 1578
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
Answer : B, C
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
Question 1579
Which of the following are most likely to be direct costs of a steel manufacturer? Select THREE that apply.
Answer : B, E, F
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
Question 1580
Which of the following may help the procurement professional increase expert power in commercial negotiation? Select TWO that apply.
Answer : C, E
Expert power is based on a person's high levels of skill and knowledge, formal training, qualifications and experience in a particular procurement category would give someone expert status and mean that in negotiation their voice is listened to as a more objective, informed knowledge leader. Expert power is based on facts, knowledge, research, insight and study.
Legitimate power comes from rules, formal authority, organisation rank, staff rate or official position held.
Reward power comes from one person's ability to compensate or reward another for compliance.
Referent power stems from their personality, way of engaging with others and habit of acting in a way that is in line with a strong set of values and principles.
Question 1581
Which of the following is active listening?
Answer : C
Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS's guidelines for effective negotiation communication.
Question 1582
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
Answer : A, D
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
Question 1583
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier takes steps to make their closing statements, they are most likely to be doing which of the following?
Answer : A
As a negotiation nears theclosure stage, experienced negotiators look forbuying signals--- both verbal (e.g., positive affirmations) and non-verbal (e.g., nodding, leaning in). These cues indicate readiness to agree and allow the negotiator to move confidently into closing the deal.
''At the closing stage, negotiators should observe both verbal and non-verbal buying signals. These cues can indicate readiness to commit, helping to time the final proposal or acceptance effectively.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Closing the Negotiation)
Question 1584
Collaborative approach in negotiation not only can fully satisfies the concerns of both, but also ensure that neither party will seek to be opportunistic in later time during the life of the contract. Is this statement true?
Answer : B
Integrative, interest-based negotiation can facilitate constructive, positive relationship and establish contracts between parties on a foundation of goodwill. It is important to note it can only facilitate these positive outcomes, it does not guarantee that the other party will not seek to be opportunistic at a later time during the life of the contract. Previous knowledge of the behaviours of the other party regarding honouring contractual and other commitments will be useful here in predicting long-term outcomes, not ensuring that they will not leverage their advantages.
Question 1585
Which of the following is a source of information on microeconomic factors?
Answer : D
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Question 1586
A supplier's mark-up on all products is 25%. Supplier's profit margin is...?
Answer : A
LO 2, AC 2.1
Question 1587
Which of the following are the most typical characteristics of integrative approach to negotiation? Select TWO that apply.
Answer : C, E
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 the pie' 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.
LO 1, AC 1.2
Question 1588
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
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
Question 1589
If the price of a good is above the equilibrium price, which of the following will happen?
Answer : D
In microeconomics, equilibrium price is determined when the quantity demanded is equal to the quantity supplied at equilibrium price in a market, there will be no shortages and no surpluses. If we combine our supply and demand curves on one graph, the point at which they converge determines the equilibrium price. If the price is set above this price and you read across the graph you will see the supply excess demand and there will be a surplus. In order to reduce this surplus, the price will need to fall. The scenario is illustrated in the graph below:
Question 1590
Which of the following are most likely to be abilities of a person with high emotional intelligence? Select TWO that apply.
Answer : B, C
Emotional Quotient is the set of skills that enables us to make our way in a complex world - the personal, social and survival aspects of overall intelligence, the elusive common sense and sensitivity that are essential to effective daily functioning. It has to do with the ability to read the political and social environment, and landscape them; to intuitively grasp what others want and need; what strengths and weaknesses are; to remain unruffled by stress; and to be engaging. The kind of person others want to be around and follow.
EQ seeks to measure emotional intelligence and is centred on abilities such as the following:
- Identifying emotions
- Evaluating how others feel
- Controlling one's own emotions
- Perceiving how others feel
- Using emotions to facilitate social communication
- Relating to others
On the other hand, cognitive ability is defined as a general mental capability involving reasoning, problem solving, planning, abstract thinking, complex idea comprehension, and learning from experience (Gottfredson, 1997).
LO 3, AC 3.3
Question 1591
Which of the following are examples of variable costs?
Answer : D
Question 1592
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 1593
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?
Answer : D
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 right strategy.
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 1594
Power is used only in adversarial negotiation situations to secure a 'win' outcome against the other side. Is this statement correct?
Answer : C
Question 1595
Which of the following would help build trust in a relationship?
Mediation attendance
Regular meetings
Keep promises
Coercion
Answer : B
Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.
Question 1596
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 1597
A buyer requests a 2,000 reduction in price at the end of negotiations. The supplier nods and smiles, shakes hands, and leaves. Should the buyer believe the reduced price is agreed?
Answer : C
CIPS stresses that clear verbal confirmation is required for agreements. Non-verbal signals (smiles, nods, handshakes) can indicate politeness or ambiguity but do not constitute binding agreement. Assuming agreement risks later disputes or misunderstandings. Skilled negotiators ensure closure by explicitly summarising agreed terms and documenting them. Non-verbal communication is supportive, not decisive, in contract negotiation contexts.
Question 1598
There are no commitments in hypothetical questions. Is this statement true?
Answer : D
There are four types of questions that can be used in a commercial negotiation:
Hypothetical questions, where you ask about a possible situation or abstract concept, are very useful at the testing and proposal phases. Hypothetical question does not state any commitment as it is only about 'if something happens, then ...'. This type of question can be useful at giving suggestion.
LO 3, AC 3.3
Question 1599
Which of the following is a challenge when calculating absorption costing?
Answer : A
Absorption costing allocates indirect overheads to units, which is inherently judgemental; selecting allocation bases that ''fairly'' load overhead to products is the well-known difficulty. (By contrast, option B describes activity-based costing concepts---cost pools and drivers.)
===========
Question 1600
Which of the following occur in the planning and preparation stage of negotiation? Select THREE.
Answer : B, C, D
Planning and preparation involve analysing bargaining power, understanding the counterpart's needs, and defining the constituents (parties involved). Questioning and concessions come later during bargaining. Narrowing solutions occurs during closure. Proper planning ensures negotiators enter with clear objectives, strategies, and knowledge, reducing surprises. CIPS highlights preparation as the most critical determinant of negotiation success, aligning with the saying: ''Failing to prepare is preparing to fail.''
Question 1601
Which type of negotiation strategy should be adopted when the relationship is important and both parties want to help each other achieve their goals?
Answer : A
The collaborative strategy (win-win, integrative) focuses on joint problem-solving, transparency, and trust. It is best when long-term relationships are critical, and both parties see value in mutual success. By contrast, competitive (win-lose) is adversarial, accommodative sacrifices one party's interests, and avoidance seeks disengagement. Collaborative strategies are common in partnerships, innovation projects, and sustainable procurement. They require sharing information, identifying tradeables, and aligning objectives beyond price to long-term outcomes.
Question 1602
Which of the following is active listening?
Answer : C
Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS's guidelines for effective negotiation communication.
Question 1603
A procurement professional is preparing for a negotiation with supplier. She is setting targets for price which her company is seeking to achieve. Which of the following acronyms can help her identify limits before engaging in the negotiation?
Answer : A
MIL criteria indicate 3 limits that negotiator should establish:
M - Must achieve: minimum target/maximum you can concede on this point; the mandatory requirement or fall back position
I - Intend to achieve: realistic target you are aiming for on this point
L -- Like to achieve: stretch target to achieve on this point.
PPCA is purchase cost analysis
TIMWOOD indicates 7 types of waste in Lean principles
The RAQSCI model is a mnemonic summary of a business model used to define and structure business requirements
Question 1604
XYZ Ltd decides to go to market for a cleaning contract to service a number of offices. It knows that it will get a price which may, or may not, be better than the one it is currently paying. To gain leverage in the marketplace, the organisation decides to add other related services to the scope, such as gardening, security and maintenance, which increase the value of the contract. This is an example of which forms of spend consolidation?
Answer : B
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
- Vendor base reduction: straightforward reduction of number of suppliers in any category
- Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
- Volume redistribution: making recommendations following spend analysis to move from one supplier to another
- Volume consolidation across categories: certain purchase requirements may be common across a number of categories. In the scenario, XYZ has combined different categories but closely related to office services into a larger contract so that they can increase their leverage.
- Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
- Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
LO 1, AC 1.3
Question 1605
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 1606
When considering a new supply source for a product, a procurement professional will review the suppliers' quotations before a supplier negotiation. Which of the following is a direct cost associated with the product within a potential supplier's quotation?
Answer : A
Direct costs are those costs that can be directly attributed to the production of specific goods or services. They typically include raw materials and labor directly involved in production. Metal used in the product is a raw material that becomes part of the final product, making it a direct cost.
Question 1607
Freefields Housing Authority (FHA) is a housing provider that has outsourced a range of management services using fixed-price long-term contracts. FHA's regular supplier credit reviews have identified that some key outsourced service suppliers are at risk of insolvency due to high inflation rates observed in the macroeconomic climate. Which of the following actions would enable FHA to reduce this risk for the lifetime of the affected contracts?
Answer : B
Question 1608
Which of the following is a source of power in organisational relationships?
Answer : A
Question 1609
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost 24%. Which of the following represents the mark-up of that company?
Answer : B
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up (%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
Question 1610
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?
Answer : D
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 right strategy.
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 1611
A procurement manager (PM) is preparing for a negotiation with a supplier. The PM is keen to find a way to reach an agreement with the supplier. The PM is exploring variables that they might be able to trade with the supplier, to encourage them to reduce their price. In particular, the PM is focusing on any variables that are of low value to their own organisation but could be of interest to the supplier. Their preparation focus is on which of the following aspects?
Answer : D
The correct answer is Bargaining mix. The bargaining mix refers to the full range of variables that can be negotiated, such as price, delivery schedules, payment terms, volumes, warranties, contract length, or service levels. According to CIPS guidance, effective negotiators identify elements that are of low value to themselves but high value to the other party, as these can be traded to gain concessions on priority issues like price. This approach supports value creation rather than positional bargaining and is central to both distributive and integrative negotiation preparation. The PM's focus is therefore not on objections, opening statements, or closing techniques, but on structuring tradeables in advance to enable flexible and constructive bargaining.
Question 1612
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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:
Text Description automatically generated with low confidence
Question 1613
Langham Industries is seeking to expand its operations globally. The CEO has asked the procurement department to engage in a macroeconomic analysis for its potential new supply chain to meet organisational objectives and outcomes. Which of the following would be a source of macroeconomic data?
Answer : C
Published market indices are a source of macroeconomic data, as they reflect broader economic trends and provide insights into the overall market environment, which is essential for globalexpansion planning. Macroeconomic analysis focuses on high-level economic indicators, as recommended in CIPS's guidelines on sourcing macroeconomic data.
Question 1614
Economic growth can be measured by...?
Answer : B
Gross Domestic Product (GDP) is the monetary value of the goods and services manufactured or supplied in a financial period. In general terms, when the GDP rate falls or slows down, there will be a fall in demand for goods and services demanded in the economy, with a fall in firms' revenue and profit margins. When GDP is rising, there will be an increase in demand.
Consumer Price Index (CPI) is weighted measurement that evaluates the average cost of a basket of goods bought by a consumer.
Producer Price Index (PPI) is average changes in prices that a producer receives in return for its goods or services.
Small Business Lending Index (SBLI) is an indicator of small business lending trends.
Question 1615
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Tradeables---alternative offers or concessions---are typically introduced during thebargainingstage of the negotiation. This is when both parties discuss and exchange proposals to reach a mutually acceptable agreement.
Question 1616
Rose is a senior buyer from a skiing equipment retailer. Rose is concerned about the current ski boot shortage and the number of invoicing problems from a key supplier. She has decided to have a video conference with Victor, CEO of the supplier. Initially, she intends to threaten Victor with contract termination unless he can improve the situation. However, she is a little wary of doing this as the switching costs are high. Eventually, she decides to seek solutions by encouraging the other party to offer their views and ideas. Rose also prepares some ideas to discuss with Victor. Which of the following is the persuasion method that Rose intends to use in the forthcoming conference?
Answer : C
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 multiple variables to consider when choosing between 'push' and 'pull'. Professor Fiona Dent of Ashridge Business School proposes situations when each style might be most appropriate, breaking down push into 'directive' and 'reasoning' and 'pull' into 'collaborative' and 'visionary':
Table Description automatically generated
In the scenario, Rose intends to let both parties exchange their views and ideas so that solutions to current problems can be found. This is the typical characteristic of collaborative (pull) method.
Question 1617
Under EU public procurement directives, which of the following are procedures in which there is no commercial negotiation allowed?
Answer : B, C
Under the European Union public procurement directives, all public sector bodies must abide by certain rules when they procure goods and services over a threshold value. These rules are codified under 5 procurement procedures:
1. Open Procedure
2. Restricted Procedure
3. Competitive Dialogue
4. Competitive Procedure with Negotiation
5. Innovation Partnerships.
Under normal circumstances, there is no commercial negotiation allowed under the two most commonly used procedure, Open and Restricted. Under these procedures, the prices and terms and conditions of contract should be decided via reference only to the tenderers' responses to the buyer's requests for tenders, and not through 'post-tender negotiation'. Under the other procedure, negotiation within the rules is permitted. Interested learners can read more about these procedures here.
LO 1, AC 1.1
Question 1618
Which of the following may help the procurement professional increase expert power in commercial negotiation? Select TWO that apply.
Answer : C, E
Expert power is based on a person's high levels of skill and knowledge, formal training, qualifications and experience in a particular procurement category would give someone expert status and mean that in negotiation their voice is listened to as a more objective, informed knowledge leader. Expert power is based on facts, knowledge, research, insight and study.
Legitimate power comes from rules, formal authority, organisation rank, staff rate or official position held.
Reward power comes from one person's ability to compensate or reward another for compliance.
Referent power stems from their personality, way of engaging with others and habit of acting in a way that is in line with a strong set of values and principles.
Question 1619
A buyer continually states during negotiation that budget constraints limit their concessions. What tactic is being used?
Answer : C
The broken record tactic involves repeating the same point to reinforce a position, making it difficult for the other party to ignore. Here, the buyer keeps citing budget constraints to avoid moving away from their position, hoping repetition will wear down the supplier's resistance. This tactic is common in distributive bargaining and aims to anchor discussions around a fixed limitation. While effective, overuse risks damaging relationships, so skilled negotiators balance it with genuine reasoning and integrative approaches when appropriate.
Question 1620
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier takes steps to make their closing statements, they are most likely to be doing which of the following?
Answer : A
As a negotiation nears theclosure stage, experienced negotiators look forbuying signals--- both verbal (e.g., positive affirmations) and non-verbal (e.g., nodding, leaning in). These cues indicate readiness to agree and allow the negotiator to move confidently into closing the deal.
''At the closing stage, negotiators should observe both verbal and non-verbal buying signals. These cues can indicate readiness to commit, helping to time the final proposal or acceptance effectively.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Closing the Negotiation)
Question 1621
Which type of question style is a negotiator using if they ask the other party
''Can you deliver our items by Friday 17th?''
Answer : B
This is a closed question because it requires a definite, factual response such as ''yes'' or ''no''. Closed questions are particularly useful in negotiations for confirming specific commitments, including delivery dates, prices, quantities, or contractual terms. They reduce ambiguity and are commonly used during the later stages of negotiation to confirm agreement and progress toward closure. Probing questions seek deeper explanation, leading questions influence the answer, and multiple questions combine several issues at once. CIPS highlights the importance of choosing question styles appropriately depending on the negotiation objective and stage.
Question 1622
Which of the following is considered a strength of a 'logical' style negotiator?
Answer : B
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of logical style are described below:
Question 1623
Should a buyer use closed questions in a negotiation?
Answer : A
Asking questions the right way is both an art and a science. Ask the question the wrong way, and the other negotiator might act like a turtle, becoming defensive and withdrawing into their shell. Ask the question the right way, and the other negotiator might ''spill the beans.''.
Closed Questions: How and when to use them?
Closed questions are those that require a short and focused answer, and are especially helpful in the beginning stages of the negotiation to encourage interaction. They can be used to clarify a point, or to reconfirm certain facts. For example, you can use a closed question to confirm the amount of units the company can produce in a week, or to clarify that what they are really saying is that they don't feel comfortable outsourcing their accounts to India. Most closed questions only require a simple ''yes'' or ''no'' response, so there really isn't much room for misinterpretation -- great for finding out where both you and they stand.
CIPS study guide page 169
What Questions Can We Ask In Negotiations?
Question 1624
Which of the following is NOT a barrier to entry in a monopolized market?
Answer : B
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 1625
Which of the following is a source of power in organisational relationships?
Answer : A
Question 1626
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?
Answer : A
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 1627
A breakeven analysis uses which of the following aspects as part of the analysis?
Answer : A, D
Question 1628
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 1629
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
Answer : A, D
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
Question 1630
A garden furniture supplier currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating in the supplier's environment (their site) can unintentionally shift the power dynamic. The supplier may gain apsychological edgedue to the comfort and control of their surroundings. Best practice recommends holding negotiations in aneutral settingto ensure balance and reduce any influence based on physical context. While site visits are beneficial for supplier evaluation, they should beseparate from the negotiationto maintain objectivity.
Question 1631
Which of the following are most likely to turn buying organisation into an unattractive customer in supplier's perspective? Select TWO that apply.
Answer : A, D
Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation. Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:
Simple procurement processes: Using SRM technology may help to simplify the process
Simple contracting processes
Clear and concise documentation: Reduced paperwork helps both supplier and buyer save their time and resources.
Absence of onerous supplier terms and conditions
On-time payment
Transparent processes: Unclear tender award criteria can be seen as opaque. Suppliers who attended the tendering processes cannot know the reasons why their bids are rejected and hesitate to attend other tendering.
Ethical behaviour: Suppliers may prefer a buyer who adopts CSR policy because they can predict potential customer's behaviour. Demands for kickback are unethical behaviours.
Question 1632
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as ...
Answer : C
In the MIL framework, ''Must have'' refers to non-negotiable elements. For Colin's organisation,ethical and sustainable procurementis a core, uncompromisable value, making it a ''Must have'' in negotiations.
Question 1633
Lina Rawlins, a senior buyer, asks a supplier: ''Can you tell me exactly what you are doing to ensure quality?'' What type of question is this?
Answer : C
A probing question seeks deeper information, clarifying specifics beyond surface-level responses. Lina's question is factual, detailed, and investigative --- designed to uncover processes and commitments. Hypothetical questions test options (''what if...''), reflective restate or summarise to confirm understanding, and leading steer the respondent toward a desired answer. Probing is essential in negotiations to validate claims, identify risks, and build persuasive arguments.
Question 1634
When a supplier tells a buyer they have a margin of 20%, what does this mean?
Answer : A
Margin is defined as profit expressed as a percentage of the selling price, not the cost. This is a critical distinction from mark-up, which expresses profit as a percentage of cost. For example, a 20% margin means that 20% of the price charged to the buyer represents profit, while 80% represents cost. CIPS emphasises that buyers must clearly understand this difference to avoid being misled during pricing discussions. Confusing margin with mark-up can significantly weaken negotiation effectiveness.
Question 1635
When implementing value analysis or value engineering, which of the following acronyms reminds both buyer and supplier of ideas on removal, substitution and design-out of cost elements?
Answer : B
Ray Carter coined the mnemonic STOPS WASTE to remind buyers of 10 cost-reduction ideas they can ask for themselves and their suppliers in any situation when considering a key purchase input. Stop Waste by:
Standardisation - is there a standard specification?
Transportation - is the inbound transport classification appropriate
Over-engineered - is the specification too tight?
Packaging - can packaging be reduced or eliminated?
Substitutes - is there a cheaper substitute material
Weight - is there opportunity to reduce weight of the product?
Any unnecessary processing - is there any unnecessary design or feature?
Supplier's input - are suppliers able to assist with the cost reduction
To make - is it more economical to make or buy?
Eliminate - if no one uses the feature, can it be eliminated?
SAMOA is a useful acronym for checking and testing the information gathered from the Internet:
Source
Audience
Methodology
Objectivity
Accuracy
OWN-IT is acronym for 5 steps in the process of collecting and analysing the data and information needed in any field:
Outline
Wide search
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A SMART goal is used to help guide goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Realistic, and Time-bound.
Question 1636
Where a negotiator uses numerical reasoning with facts as part of their negotiation approach, which of the following techniques will they be adopting?
Answer : B
Using logic involves applying numerical data and factual evidence to support arguments in a negotiation. Logical reasoning appeals to objective analysis rather than emotional or coercive tactics and is effective in convincing the other party through structured, fact-based arguments, aligning with CIPS's guidance on logical negotiation techniques.
Question 1637
What letter R in the acronym SMART stands for?
Answer : C
SMART is an acronym that you can use to guide your goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound
A student met this question in the L4M5 exam. SMART is mentioned primarily in L4M3 Commercial Contracting.
LO: Unknown, AC: Unknown
Question 1638
Finding the middle ground between buyer and supplier by moving towards each other's position is a satisfactory way to complete contract negotiations and maintain ongoing relations for future negotiations. Is this statement correct?
Answer : A
Finding a middle ground, also known ascompromise or convergence, is a hallmark of collaborative or integrative negotiation. It allows both parties to secure partial wins, supports longer-term relationships, and promotes ongoing goodwill for future dealings.
''Negotiators must balance assertiveness with cooperation. Meeting halfway can lead to agreements that meet minimum needs of both parties while preserving the relationship.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Collaborative Approaches to Negotiation)
Question 1639
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier, Top Teds. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Bargaining is the negotiation stage where tradeables are typically introduced and discussed. During this phase, both parties exchange offers and concessions, using tradeables such as lead times and order quantities to find a mutually acceptable agreement. This aligns with CIPS's guidance on the stages of negotiation.
Question 1640
Absorption costing is when the total cost per each unit of output:
Answer : B
Question 1641
A senior buyer analyses the supply market and he realises that his organisation is treated as Exploit according to supplier's perspective model. What does he need to do?
Answer : D
The supplier's perspective model has two axes: Spend value and Attractiveness:
Exploit is the quadrant where the buyer has high spend but low attractiveness. Overarching supplier objective would be: 'Milk this customer and charge a high price to compensate for all the pain they put us through'.
The buyer should increase its attractiveness to raise the position to Core customer. To do this, a buyer may:
- Simplify procurement processes
- Simplify contracting processes
- Use clear and concise documentation
- Eliminate onerous supplier terms and conditions
- Make the payment on time
- Use transparent processes
- Promote ethical behaviours
LO 1, AC 1.4
Question 1642
Ranjit is a facilities category buyer for a hospital in the UK and is managing an overseas sourcing project for security guard clothing and personal protective equipment. Ranjit is aware that foreign exchange fluctuations can create risk for his organisation and would like to remove this risk. Ranjit has asked the international suppliers to quote in GBP sterling. Will Ranjit's approach remove the fluctuation risk for the hospital?
Answer : C
Question 1643
Champion Toys (CT) is negotiating a large order with Top Teds. CT has identified lead times, order quantities, and delivery locations as tradeables. At which negotiation stage should CT introduce these tradeables?
Answer : A
Tradeables---variables such as price, delivery, quality, and payment terms---are introduced in the bargaining stage of negotiations. This is the phase where both parties test positions, make concessions, and trade issues to create acceptable packages. Proposing and opening are earlier stages focused on setting out agendas and clarifying needs, while closure comes after tradeables are resolved. Introducing tradeables too early can weaken leverage, and leaving them too late risks deadlock. Bargaining ensures the structured exchange of concessions while protecting the overall bargaining mix.
Question 1644
In preparation for holding negotiation meetings with existing suppliers, category manager Stephen would like to appraise the bargaining strength of his organisation. Which of the following are examples of buyer power? Select TWO that apply:
Answer : A, D
Question 1645
Distributive approach in negotiation is typified by which of the following?
Answer : C
Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Commercial situations often demand a distributive bargaining approach, if the 'pie' is inherently of a fixed size. In this case, any conflicts must be resolved by sharing it.
In win-lose approach, a negotiator wants to maximise the value obtained in a single deal, the relationship with the other party is not important. Therefore, a strong party may win more than 50% of the metaphorical 'pie'.
It should not be assumed that win-win can be applied to all commercial negotiations, or that win-lose approaches are inherently inferior.
Question 1646
What is the most likely outcome when two organisations with adversarial relationship negotiate with each other?
Answer : C
An adversarial relationship in purchasing and supply arises when identical or equivalent good or services are available from competing suppliers and buyers/sellers are trying to gain an advantage over each other. Low levels of trust are characteristic of adversarial relationships. The outcome when two organisations with adversarial negotiate is most likely to be win-lose.
Adversarial purchasing - Wikipedia
CIPS study guide page 32-35
Question 1647
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
''Expanding the pie'' is a strategy used in integrative negotiations where both parties collaborate to increase the total value available before dividing it. This leads to mutual gains and supports long-term, strategic relationships.
Question 1648
To buying organisation, savings can be achieved from different saving levers or tactics. Which of the following are means that deliver savings through optimising specifications?
Answer : A, B
If driving greater value and efficiency from your supply base is your end, you should remember that there are many ways to do this without seeking to negotiate lower prices. Below are 7 types of saving levers:
Question 1649
Macroeconomics can have an impact on commercial negotiations. Is this statement correct?
Answer : A
Macroeconomic factors like inflation, interest rates, and currency fluctuations can significantly affect pricing and contractual terms. Buyers and suppliers must account for these factors during negotiations, particularly in long-term or high-value contracts.
Question 1650
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 1651
The bargaining power of buyers is likely to be high in relation to suppliers in which of the following situations?
Answer : D
The bargaining power of buyers increases when the buyer is large relative to the supplier. A large buyer can leverage its size to negotiate more favorable terms due to its significant impact on the supplier's business. CIPS notes that a buyer's size and purchasing volume are key factors that enhance its negotiating power in buyer-supplier relationships.
Question 1652
Ranjit is sourcing security clothing and PPE from overseas suppliers. He wants to remove foreign-exchange fluctuation risk and has asked suppliers to quote in GBP. Will this remove the fluctuation risk for the hospital?
Answer : B
Setting the contract currency to the buyer's currency transfers FX exposure to the supplier. The buyer gains price certainty in GBP, although the supplier may price in a risk premium---a common application decision when negotiating internationally.
===========
Question 1653
A buyer is preparing for an upcoming negotiation with a large supplier on a contract renewal price. The buyer has undertaken some analysis and is concerned that changes in the organisation's macro-environment over the last year will result in a price increase. The buyer's analysis has identified changes in which of the following?
Answer : A
Question 1654
Which of the following are most likely to be macro factors that may influence the balance of power in commercial negotiation? Select THREE that apply.
Answer : A, B, D
All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forces which both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
LO 1, AC 1.3
Question 1655
A buyer continually states during negotiation that budget constraints limit their concessions. What tactic is being used?
Answer : C
The broken record tactic involves repeating the same point to reinforce a position, making it difficult for the other party to ignore. Here, the buyer keeps citing budget constraints to avoid moving away from their position, hoping repetition will wear down the supplier's resistance. This tactic is common in distributive bargaining and aims to anchor discussions around a fixed limitation. While effective, overuse risks damaging relationships, so skilled negotiators balance it with genuine reasoning and integrative approaches when appropriate.
Question 1656
Which of the following are types of questions that are useful in opening and testing phases of a negotiation? Select the TWO that apply.
Answer : C, E
In the opening phase, parties should confirm understanding and get the issues on the table.
The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.
Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.
Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening and testing stages.
Question 1657
Which of the following is a disadvantage of absorption costing method?
Answer : D
Absorption costing is an approach to allocating overheads in which indirect costs are loaded or absorbed into direct costs related to specific jobs, processes or outputs, using an estimated basis of allocation.
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Question 1658
A purchasing organisation wants a Win-Win (integrative) solution in negotiations with a key supplier. Which TWO approaches would be appropriate?
Answer : A, B
Integrative negotiation seeks joint value creation. Collaboration builds trust and open exchange, while problem solving identifies creative tradeables that satisfy both sides. Coercion and risk transfer belong to adversarial, distributive strategies, where one side gains at the expense of the other. Persuasion can play a role, but without collaboration, it leans toward manipulation rather than true win-win. In practice, integrative approaches require willingness to share data, listen actively, and seek long-term alignment.
Question 1659
At which stage in a negotiation would questions be asked to obtain missing information?
Answer : D
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 1660
Commercial negotiations on prices cover a range of aspects including pricing arrangements. A buyer may negotiate for a 'fixed price agreement'. Why is a fixed price agreement advantageous to the buyer?
Answer : B
Afixed price agreementprovides the buyer withcost predictability. Once the price is agreed upon, the buyer is insulated from any cost increases on the supplier's side. The supplier bears the risk of fluctuating input prices, which simplifies cost control and contract administration for the buyer.
''With a fixed price arrangement, the buyer is protected from future price increases and does not need to monitor the supplier's ongoing costs. This is particularly useful for budgeting and forecasting.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Fixed Price Agreements)
Question 1661
A procurement professional is preparing for a negotiation with supplier. She is setting targets for price which her company is seeking to achieve. Which of the following acronyms can help her identify limits before engaging in the negotiation?
Answer : A
MIL criteria indicate 3 limits that negotiator should establish:
M - Must achieve: minimum target/maximum you can concede on this point; the mandatory requirement or fall back position
I - Intend to achieve: realistic target you are aiming for on this point
L -- Like to achieve: stretch target to achieve on this point.
PPCA is purchase cost analysis
TIMWOOD indicates 7 types of waste in Lean principles
The RAQSCI model is a mnemonic summary of a business model used to define and structure business requirements
Question 1662
Which of the following should be done when undertaking a reflection activity on negotiation? Select TWO that apply.
Answer : A, E
Giving positive group and individual feedback is easy, as is self-congratulation and, in many cases, it is hoped, this will be an accurate reflection on actual performance. When it comes to developmental or difficult feedback, it is only natural to want to move on and not reflect on the negative or developmental points, or why a negotiation did not achieve its objectives. But this is a mistake. The best learning opportunities come from reflection on what could be done better, and this can be achieved without blame, threat or condemnation. Everyone and every team will make mistakes and/or have areas where they could have improved. Clearly, if every reflection session concludes that an individual or team keeps making the same mistake, then there is a case to change roles or consider alternative approaches.
About Dos and Don'ts of reflection, you can refer here: https://offices.depaul.edu/human-resources/employee-relations/Documents/Self%20Assesement.pdf
Question 1663
Which of the following are external factors in supplier pricing decisions? Select TWO.
Answer : A, D
Suppliers' pricing decisions are influenced by both internal and external factors. Internal include cost of production, overheads, and lifecycle stage. External include competition (market dynamics, alternatives available) and customer perception of value (willingness to pay, brand image). These external elements are beyond supplier control but crucial in determining market price levels. Recognising these allows buyers to assess supplier pricing flexibility and to negotiate based on market realities rather than supplier cost claims.
Question 1664
During a negotiation, a procurement manager suggests that the two companies should split the difference which would benefit both the supplier and buyer. Which persuasion method is she using?
Answer : A
In the scenario, the manager propose to 'split the difference', which means each party will accept some of their demands and concede some. This is known as 'Compromise'.
Question 1665
Which of the following are factors that might shift the demand curve for a consumer good to the right?
1. Prices of complementary goods decrease
2. Price of the consumer good decreases
3. Customers' expectation of higher prices in the future
4. Consumer tastes shift toward substitute products
Answer : C
A shift in demand occurs when an influencing factor other than price changes. Those factors are:
- The income of buyers
- The tastes and preferences of buyers
- The prices of other goods and services, especially substitutes and complements
- Expectations of buyer about the future
In this question:
- 'Prices of complementary goods decrease' will lead to quantity demanded for that complements rising, then demand for consumer good will increase accordingly.
- 'Price of the consumer good decreases' will increase the quantity demanded for that good, but it will not shift the demand curve
- 'Customers' expectation of higher prices in the future': in this scenario, customers tend to buy more to store in present, which leads to demand curve shifting to the right
- 'Consumer tastes shift toward substitute products': Demand for substitutes will rise, so demand for that consumer good will decrease and the demand curve shifts to the left.
LO 2, AC 2.2
Question 1666
Which of the following are most likely to harm trust between buyer and supplier in a commercial relationship? Select TWO that apply.
Answer : A, D
Trust-destroying behaviours:
- Rumours of partnership or relationship breaking down
- Emotion-based assessment of performance
- Avoiding accountability, passing the blame to others
- General mood -- resentment, distrust, frustration, etc
LO 1, AC 1.4
Question 1667
John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?
Answer : C
While stakeholder feedback is crucial, meetings are not always the most effective review method. Reviews may be better conducted through reports, surveys, or individual debriefs, depending on context. The key is to capture lessons learned, successes, and areas for improvement, and to record them for future negotiations. Forcing all stakeholders into one meeting risks inefficiency or unproductive blame games. CIPS stresses structured reflection and documentation as best practice, ensuring organisational learning and preparation improvements.
Question 1668
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
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
Question 1669
Freefields Housing Authority (FHA) is a housing provider that has outsourced a range of management services using fixed-price long-term contracts. FHA's regular supplier credit reviews have identified that some key outsourced service suppliers are at risk of insolvency due to high inflation rates observed in the macroeconomic climate. Which of the following actions would enable FHA to reduce this risk for the lifetime of the affected contracts?
Answer : B
Question 1670
The purpose of ongoing supplier relationship management following a negotiation and contract award is that it:
Answer : B
Question 1671
Commercial negotiations on price cover various aspects, including pricing arrangements. A buyer may negotiate a fixed-price agreement. Why is a fixed-price agreement advantageous to the buyer?
Answer : B
In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier's internal cost build-up (unlike cost-plus).
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Question 1672
Hammad Alsuwaidi is a procurement professional leading a negotiation for a vehicle rental contract. Hammad has a clear goal to negotiate a two-year contract in exchange for a minimum of a 20% discount. During the negotiation, Hammad presents to the supplier the facts, figures, and justification for a 20% discount. Which of the persuasion methods below has Hammad chosen?
Answer : A
Hammad's approach of presenting facts, figures, and justifications aligns with the Push persuasion method. The Push strategy involves directly presenting information, data, and logical arguments to convince the other party of a certain outcome. In this scenario, Hammad is using objective evidence to influence the supplier towards agreeing to a discount, which is characteristic of the Push method, as per CIPS guidance on negotiation tactics.
Question 1673
Any commercial negotiation process has only three stakeholders: procurement, budget holders, and users. Is this TRUE?
Answer : D
Commercial negotiations involve a wider set of stakeholders than procurement, budget holders, and users. Depending on context, directors, IT specialists, legal teams, regulators, or external partners may all be impacted. Ignoring them risks resistance or missed requirements. CIPS stresses stakeholder mapping tools (such as Mendelow's Matrix) to identify influence and interest levels, ensuring all relevant parties are managed appropriately in negotiation preparation and execution. Narrow stakeholder identification can undermine outcomes.
Question 1674
Telephone is most likely to be used for which of the following negotiations?
Answer : C
Many commercial negotiations could be considered routine or just not worth the investment for buyers, and using the phone can make more sense and can be more immediate.
LO 2, AC 2.4
Question 1675
Which TWO strategies are recognised for achieving a win--lose outcome?
Making the other party lower its resistance point
Making the other party believe this settlement is the best it can achieve
Employing empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
Win--lose strategies focus on gaining advantage at the other party's expense. Forcing them to lower their resistance point or persuading them the deal is their best option are classic distributive tactics. Empathy, compromise, and creativity belong to integrative approaches aimed at mutual benefit. Recognising these distinctions ensures negotiators adopt the right strategy for the relationship type and context.
Question 1676
Procurement team is required to improve leverage with their suppliers through spend consolidation. To check whether there is any opportunity to consolidate spend, which of the following should be priority of procurement team?
Answer : A
In order to identify opportunities where you can increase your leverage with supplier, you need to understand your spend. Undertaking spend analysis of your accounts payable (AP) data is an essential first step here.
Question 1677
Logibox Ltd sets prices based on what consumers are prepared to pay. Which pricing strategy is this?
Answer : C
Market pricing sets prices according to consumer demand and willingness to pay, ensuring competitiveness. Skimming sets high prices at launch to maximise early profit, penetration uses low prices to enter markets, and premium pricing positions products as luxury with high margins. Market pricing balances supplier costs with customer value perception, making it a common approach in competitive industries.
Question 1678
Which of the following are most likely to be the potential cultural differences that can make transactions with an international supplier more problematic that with local suppliers? Select TWO that apply.
Answer : B, D
The question requires student to detect factors of cultural differences. Problems may occur on the international scene with such things as the importance of extending courtesy between cultures, the importance of timescales, the use of negotiating ploys, the sense of 'fair play', the use and interpretation of body language, the role of women in negotiations (or indeed, in business in general), the importance of status, the role of conflict, standards of dress and deportment and the readiness to ignore or uphold contract terms and conditions.
LO 3, AC 3.3
Question 1679
Jane is planning for a forthcoming negotiation with a key supplier. She has learned what are important to the supplier and what are important to her company from previous contracts between them. In order to avoid negotiation deadlocks, she has set up several concession plans. But Jane has little experience in dealing with suppliers and doesn't know when to trade these concessions. When is the best time in a negotiation to trade concessions?
Answer : C
The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.
LO 3, AC 3.1
Question 1680
In which of the following scenarios could you adopt a distributive-based negotiation approach?
Answer : D
Question 1681
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
Answer : A
Question 1682
The procurement manager of a private healthcare provider is running an IT project. Who would be the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : D
In the context of aninternal IT project, the relevant stakeholders would be thosedirectly involved in decision-making and implementation.Senior managementoversees funding and strategic fit, whilesoftware developersensure technical support. The general public and pharmaceutical suppliers are external and not primary stakeholders in this scenario.
''Stakeholder identification must focus on individuals or groups directly involved or affected by the procurement. This includes internal sponsors, end-users, and technical staff responsible for delivery.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Internal and External Stakeholders)
Question 1683
Which of the following is the definition of safety margin?
Answer : A
As a financial metric, the margin of safety (safety margin) is equal to the difference between current or forecasted sales and sales at the break-even point. The margin of safety is sometimes reported as a ratio, in which the aforementioned formula is divided by current or forecasted sales to yield a percentage value. The figure is used in both break-even analysis and forecasting to inform a firm's management of the existing cushion in actual sales or budgeted sales before the firm would incur a loss.
This is a question that a student met in her actual exam. The margin of safety is not even mentioned in the CIPS study guide.
Question 1684
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should ...
Answer : A
Sally's objective is to achieve a 5% saving. If the supplier offers this saving in a different form (aftercare package), and the total value meets her goal, then accepting this alternative shows flexibility and supports a collaborative,win-winoutcome.
Question 1685
Which of the following is the true statement?
Answer : B
Internal stakeholder support will be important not just at the initial negotiation of the contract, but potentially throughout the life of the contract right through to exit.
As a general rule, connected stakeholders (with the exception of suppliers) have a low level of influence on procurement negotiations.
Suppliers are connected stakeholders who have contractual relationships with the organisation.
Commercial negotiation objective should be driven by the business needs of the organisation, and not just the instinct of procurement.
Question 1686
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 1687
After studying Thomas-Kilmann conflict resolution model and considering different approaches carefully, the procurement team of XYZ Ltd. decides to adopt an avoiding approach to the upcoming negotiation with one of their suppliers. Which of the following will be the objective of XYZ procurement team in this negotiation?
Answer : B
Avoiding is unassertive and uncooperative. When avoiding, an individual does not immediately pursue his or her own concerns or those of the other person. He or she does not address the conflict. Avoiding might take the form of diplomatically sidestepping an issue, postponing an issue until a better time, or simply withdrawing from a threatening situation.
LO 1, AC 1.1
Question 1688
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship style can be characterised by which of the following? Select the TWO that apply.
Answer : A, D
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question 1689
A garden furniture supplier currently in negotiations for a high-value contract has offered the procurement manager a visit to their site. The supplier suggests that during this visit, they can undertake the contract negotiation. What would be an appropriate response from the procurement manager?
Answer : D
Negotiating in the supplier's environment (their site) can unintentionally shift the power dynamic. The supplier may gain apsychological edgedue to the comfort and control of their surroundings. Best practice recommends holding negotiations in aneutral settingto ensure balance and reduce any influence based on physical context. While site visits are beneficial for supplier evaluation, they should beseparate from the negotiationto maintain objectivity.
Question 1690
Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers
Answer : D
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 1691
IHL has been supplying to XYZ Ltd for months. XYZ Ltd procurement manager Diana realises that the IHL's input prices are dropping and this is a good time to re-negotiate the price of the contract. She invites IHL representative to XYZ headquarter to make a bargain on the current price. At the opening stage of the negotiation, Diana requests a 10% reduction in price with an increase in volume purchased.
Is Diana's action appropriate in the opening phase?
Answer : D
The opening stage of the negotiation covers the very first few minutes when the parties meet and greet each other and are seated in the negotiation room in preparation for the main event.
Typical behaviours at the opening stage: 'dos' and 'don'ts'
Do's
Be punctual and well presented (welcome their arrival)
Break the ice with small talks
Start the conditioning process
Check authority
Check agenda
Consider using visual aid to set out key objectives or make key points
Don'ts
Use strong, pushy, cold or tough style at the opening
Put down marker at this stage
Criticise other organisations/TOP's previous contacts/third parties.
In this scenario, Diana has made her proposal right at the opening stage. This is an example of 'don'ts'. Good negotiators are very careful about 'red lines'. If she puts such barrier up too early, the supplier may not try to look for more creative solutions later in the negotiation.
Question 1692
Which of the following are most likely to harm trust between buyer and supplier in a commercial relationship? Select TWO that apply.
Answer : A, D
Trust-destroying behaviours:
- Rumours of partnership or relationship breaking down
- Emotion-based assessment of performance
- Avoiding accountability, passing the blame to others
- General mood -- resentment, distrust, frustration, etc
LO 1, AC 1.4
Question 1693
Which of the following are features of a single-sourced type of relationship on the relationship spectrum?
Exclusivity granted in relation to a particular product
The supplier is an oligopoly market structure
The supplier is trusted and collaborative
Framework contracts are used to identify the supplier
Answer : B
Single-sourced relationships often involve exclusivity for a specific product (1) and a high level of trust and collaboration (3) between buyer and supplier. This type of relationship is selected forstrategic procurement purposes, often involving long-term partnerships, which align with CIPS's relationship spectrum guidelines.
Question 1694
When is an adversarial style of negotiation appropriate?
Answer : A
An adversarial negotiation style is appropriate when one party has high bargaining power and is focused on maximizing its benefit rather than maintaining a long-term relationship. This approach often involves competitive tactics that leverage power disparities, aligning with CIPS guidance on when adversarial tactics may be strategically used in negotiations.
Question 1695
Which of the following are sources of power in organisational relationships?
Coercive power
Intruded power
Referent power
Tactical power
Answer : C
Coercive powerstems from the ability to apply pressure or sanctions, whilereferent powercomes from reputation, charisma, or respect. These are both recognised power sources in negotiations. ''Intruded'' and ''tactical'' power are not classified within the standard power framework used in CIPS materials.
''Sources of power include coercive (based on threats or penalties), referent (based on personal appeal or influence), and others such as reward, expert, and legitimate power.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Power in Negotiation)
Question 1696
In a negotiation for a new contract, the supplier suggests the buyer to shorten payment period from 45 days to 15 days because they are investing in new facilities to expand the supply capacity. The buyer replies that she can only sign off the deal if the payment period is 30 days ormore since it often takes at least 30 days for her company to collect the payment from customers. A permission from senior management is required for this suggestion. In order to ensure that supplier understands the matter, she reiterates it throughout the meeting. Which tactics is she using?
1. Outrageous initial demand
2. Salami slicing
3. Lack of authority
4. Broken record
Answer : C
In the scenario, the buyer states that permission from senior management is required to shorten payment period and she only has authority to sign off a deal in which the payment period lasts at least 30 days. The buyer is using lack of authority. The buyer also repeats the matter again throughout the negotiation. This is a common tactic known as broken record.
Question 1697
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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:
Text Description automatically generated with low confidence
Question 1698
Which of the following are signs indicating that the trust between buyer and supplier has improved? Select TWO that apply.
Answer : B, C
Signs of trust in business relationships
* Mutually agreed and managed objectives
* Sharing information
* Managing conflict through joint problem solving
* On time delivery of products and services
* High-performance teams that feel empowered to get the job done
* Supplier welcomes opportunity to innovate
* Both parties share ideas and insight
* Clear criteria for decision making
LO 1, AC 1.4
Question 1699
A supplier's mark-up on all products is 25%. Supplier's profit margin is...?
Answer : A
LO 2, AC 2.1
Question 1700
Sunita's supplier states: ''Meeting your needs is meeting my needs because we are in this together.'' What type of negotiation is being undertaken?
Answer : D
This statement reflects shared goals and mutual benefit, hallmarks of integrative negotiation. Unlike adversarial or distributive (win-lose) strategies, integrative approaches seek joint value and collaboration. The language of partnership (''we are in this together'') signals alignment and cooperative intent. Lose-lose outcomes, by contrast, occur when both sides compromise excessively or fail to reach creative solutions. Integrative strategies foster long-term partnerships where value is maximised for both.
Question 1701
A procurement manager withholds important information to strengthen negotiating power. Is this appropriate when using an integrative negotiation style?
Answer : B
Integrative negotiation relies on openness and trust, aiming to identify underlying interests, not just positions. Withholding information is typical of distributive (win-lose) bargaining, where each side protects its bottom line. In an integrative context, hiding key details prevents mutual understanding, reduces creative option-building, and damages relationship trust. Instead, transparency enables value creation---such as joint cost reduction or innovation. CIPS emphasises that power must be balanced with openness when integrative outcomes are desired.
Question 1702
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 1703
Upper Woodborough Council is a government organisation that is seeking to reduce regular expenditure on facilities management services. Which of the following charges is an example of a fixed cost, that the council could renegotiate with the facilities management contractor to achieve savings?
Answer : D
Fixed costs are regular, predictable charges that do not vary directly with usage or demand. Monthly cleaning services are typically charged at a fixed, recurring rate, making them a clear example of a fixed cost that can be renegotiated to achieve savings. Fuel costs and reactive maintenance vary with activity levels, while inflation indexation is a pricing mechanism rather than a cost itself. CIPS advises buyers to focus on fixed-cost elements when seeking sustainable cost reductions, as changes deliver predictable and ongoing savings.
Question 1704
Where a negotiator uses numerical reasoning with facts as part of their negotiation approach, which of the following techniques will they be adopting?
Answer : B
Using logic involves applying numerical data and factual evidence to support arguments in a negotiation. Logical reasoning appeals to objective analysis rather than emotional or coercive tactics and is effective in convincing the other party through structured, fact-based arguments, aligning with CIPS's guidance on logical negotiation techniques.
Question 1705
Which of the following is important during the proposing stage of a negotiation?
Answer : D
Question 1706
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship style can be characterised by which of the following? Select the TWO that apply.
Answer : A, D
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question 1707
What is the most likely outcome when two organisations with adversarial relationship negotiate with each other?
Answer : C
An adversarial relationship in purchasing and supply arises when identical or equivalent good or services are available from competing suppliers and buyers/sellers are trying to gain an advantage over each other. Low levels of trust are characteristic of adversarial relationships. The outcome when two organisations with adversarial negotiate is most likely to be win-lose.
Adversarial purchasing - Wikipedia
CIPS study guide page 32-35
Question 1708
The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : C
For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.
Question 1709
Which of the following is the true statement?
Answer : B
Internal stakeholder support will be important not just at the initial negotiation of the contract, but potentially throughout the life of the contract right through to exit.
As a general rule, connected stakeholders (with the exception of suppliers) have a low level of influence on procurement negotiations.
Suppliers are connected stakeholders who have contractual relationships with the organisation.
Commercial negotiation objective should be driven by the business needs of the organisation, and not just the instinct of procurement.
Question 1710
Ben Dunne is a procurement manager and is responsible for a contract that supplies translation services to his organisation. Ben has the authorisation to extend the contract for a further two years, but has aimed for a further 2% discount. Ben is aware that the supplier's previous performance has been inconsistent, but during the negotiation Ben asks the supplier to present their performance to date on this contract. Which stage of the negotiation cycle is this?
Answer : D
The testing stage of the negotiation cycle is where each party explores and validates information provided by the other side. By asking the supplier to present their performance to date, Ben is testing claims, checking credibility, and assessing whether the supplier's performance supports or undermines their position in the negotiation. This is distinct from preparation (which happens before the meeting), bargaining (where concessions and tradeables are exchanged), and agreement (where final terms are confirmed). CIPS highlights that testing allows negotiators to challenge assumptions, clarify evidence, and strengthen their position before moving into bargaining or closure.
Question 1711
Which of the following is NOT a barrier to entry in a monopolized market?
Answer : B
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 1712
In what circumstances is the bargaining power of suppliers likely to be high, in relation to buyer power? Select THREE that apply.
Answer : A, D, E
Supplier bargaining power is stronger when there arefew suppliers,low volume requirementsfrom buyers, and when suppliers possessunique capabilities or technology(like specialized machinery). These conditions reduce buyer leverage and increase supplier influence.
Question 1713
An integrative negotiation style involves ...
Answer : C
Integrative negotiation focuses on collaboration, transparency, and the pursuit of shared benefits. It emphasizes mutual problem-solving and long-term value creation rather than short-term wins.
Question 1714
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 1715
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 1716
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should:
Answer : D
Question 1717
Maria fears her proposed pricing may be rejected by the supplier. To mitigate this risk, she is preparing a BATNA. Is this the correct approach?
Answer : B
BATNA (Best Alternative to a Negotiated Agreement) gives negotiators a fallback plan if discussions fail. It ensures they never accept worse terms than their minimum acceptable alternative. For Maria, developing a BATNA mitigates rejection risk, strengthens her bargaining power, and provides confidence. Without a BATNA, negotiators risk over-conceding or being locked into unfavourable deals. CIPS emphasises that BATNAs must be realistic, actionable, and aligned to organisational objectives---not merely theoretical alternatives.
Question 1718
A buyer is preparing for an upcoming negotiation with a large supplier on a contract renewal price. The buyer has undertaken some analysis and is concerned that changes in the organisation's macro-environment over the last year will result in a price increase. The buyer's analysis has identified changes in which of the following?
Answer : A
Question 1719
A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?
Answer : C
Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values. A smile, a 'yes' and the type of hospitality received, (in the business context), can mean very different things in different international business cultures.
Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide towhat TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.
Question 1720
Which of the following is most likely a consequence of falling interest rate?
Answer : A
If interest rate are too low and credit is too, cheap rates can fund a spending boom with consumers and businesses buying (investment) more than they can afford to pay back.
Question 1721
Where there are high levels of commitment to relationships between both the buyer and supplier, this is seen as collaborative and beneficial to negotiations. Is this statement correct?
Answer : A
Question 1722
Open questions can be a useful communication tool in negotiations. Is this statement correct?
Answer : C
Open questions (''how/why/what...'') encourage the other party to share information, interests, and constraints, supporting rapport, listening, and exploration---key to persuasive dialogue and integrative outcomes. Closed questions check facts; open ones surface interests.
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Question 1723
Which type of negotiation strategy should be adopted when the relationship is important and both parties want to help each other achieve their goals?
Answer : A
The collaborative strategy (win-win, integrative) focuses on joint problem-solving, transparency, and trust. It is best when long-term relationships are critical, and both parties see value in mutual success. By contrast, competitive (win-lose) is adversarial, accommodative sacrifices one party's interests, and avoidance seeks disengagement. Collaborative strategies are common in partnerships, innovation projects, and sustainable procurement. They require sharing information, identifying tradeables, and aligning objectives beyond price to long-term outcomes.
Question 1724
John Browne, a junior buyer for a corporation, is analyzing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : C
Foreign exchange rates impact import costs, profit margins, and overall turnover when transactions are conducted in foreign currencies. Understanding these fluctuations allows buyersto anticipate changes in purchasing costs, supporting informed decision-making, as highlighted in CIPS guidance on global procurement considerations.
Question 1725
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?
Answer : C
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.
CIPS study guide page 164-165
What Is a Coalition Anyway?
Question 1726
John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?
Answer : C
While stakeholder feedback is crucial, meetings are not always the most effective review method. Reviews may be better conducted through reports, surveys, or individual debriefs, depending on context. The key is to capture lessons learned, successes, and areas for improvement, and to record them for future negotiations. Forcing all stakeholders into one meeting risks inefficiency or unproductive blame games. CIPS stresses structured reflection and documentation as best practice, ensuring organisational learning and preparation improvements.
Question 1727
A public agency opens a tendering process for a road building project that lasts approximately 1 year. They post their requirements on public journal and receive some interests. After conducting due diligence process and selecting the lowest bidder, the project commences. However, the supplier complains that price of material increases because of a shortage of supply, then they demands an 5% uptick in contract value. The agency investigates the increment and sees that there is indeed a fluctuation in prices of supplier's input. They are likely to accept the proposal, but they are also concerned that supplier may demand more. To avoid making another concession with the supplier, which of the following should be a priority action of the agency?
Answer : C
The agency (buyer) has made a concession about the price. Possibly the supplier will request another concession (the salami tactics). To avoid this to be happened, the agency should only allow a concession as an exception, make sure that the concession is documented and only permitted against some exceptional circumstances, and seek agreement to this from the supplier.
LO 3, AC 3.2
Question 1728
The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : C
For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.
Question 1729
When considering a new supply source for a product, a procurement professional will review the suppliers' quotations before a supplier negotiation. Which of the following is a direct cost associated with the product within a potential supplier's quotation?
Answer : A
Direct costs are those costs that can be directly attributed to the production of specific goods or services. They typically include raw materials and labor directly involved in production. Metal used in the product is a raw material that becomes part of the final product, making it a direct cost.
Question 1730
In general, which of the following is the consequence of a flatter demand curve?
Answer : B
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor.
In microeconomic graphs, elasticity and inelasticity can be shown by the slope of the demand curve. If a demand curve is almost horizontal, then the product pricing can be described as very elastic. If a demand curve is almost vertical, then the product pricing can be described as very inelastic.
The formulae of elasticity:
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Table Description automatically generated with medium confidence
LO 2, AC 2.2
Question 1731
Jasmine and the IHL sales team have a negotiation scheduled with one of AB's lead buyers, Samuel, at AB's premises. This is one of the biggest negotiations that Jasmine has been involved in and is eager not to make any mistakes. Jasmine has heard from a colleague that Samuel tends to adopt an integrative negotiation style. IHL senior management decides to send a team of three members to the negotiation. Jasmine is among the team and she is assigned to check body language, reactions, feeds insight to her leader and to record important comments and information from the meeting for minutes. Which of the following are roles of Jasmine in the forthcoming negotiation? Select TWO that apply.
Answer : A, E
A negotiating team can be as few as two people, and one person can play one or more of these roles:
As from the scenario, Jasmine will act as an observer and a scribe (or secretary).
Question 1732
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way ofanalysing costs is to classify them into direct and indirect costs. Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Question 1733
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?
Answer : C
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 1734
Which of the following will help to indicate personality preferences in four dimensions?
Answer : D
The Myers--Briggs Type Indicator (MBTI) is an introspective self-report questionnaire indicating differing psychological preferences in how people perceive the world and make decisions. MBTI indicates personality preferences in four dimensions.
The Thomas--Kilmann Conflict Mode Instrument (TKI) is a conflict style inventory, which is a tool developed to measure an individual's response to conflict situations.
Mill's RESPECT mnemonic is set out by Harry A. Mills which describes seven steps to agreements
An intelligence quotient (IQ) is a total score derived from a set of standardized tests designed to assess human intelligence.
Question 1735
A break-even analysis uses which aspects as part of the calculation?
Fixed cost
Buying cost minus variable cost per unit
Variable cost
Selling price minus variable cost per unit
Answer : A
Break-even analysis identifies the sales volume required to cover fixed costs. It relies on:
Fixed costs (constant regardless of output).
Question 1736
Which of the following would cause a demand curve for a good to be price inelastic?
Answer : D
Essential goods and services such as electricity, fuel, basic food stuffs, commuter transport and habitual products such as tobacco, alcohol and sugar-based drinks are often sited as facing a relatively inelastic demand curve. This means when the price goes up, the quantity demanded does not decrease very much and so they are often the target of government taxation.
LO2, AC 2.2
Question 1737
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : A, B
Persistent late payment of the supplier's invoices (A) and Unequal sharing of gains, risks, and costs with the supplier (B) are potential sources of conflict as they create dissatisfaction and imbalance in the relationship. According to CIPS materials:
Late payments (A) can strain the supplier's cash flow, affecting their operational stability and leading to mistrust in the buyer.
Unequal sharing of gains, risks, and costs (B) can result in one party feeling exploited or unfairly treated, which undermines the collaborative spirit essential for long-term partnerships.
In contrast, requesting early supplier involvement, planning visits, or setting delivery dates are typically part of constructive relationship management practices and do not inherently lead to conflict.
Question 1738
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?
Answer : C
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.
CIPS study guide page 164-165
What Is a Coalition Anyway?
Question 1739
According to Professor Gavin Kennedy, in which of the following forms of dispute resolution, both parties will voluntarily exchange their ideas and beliefs?
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.
Question 1740
Before engaging in a negotiation with a supplier of rechargeable lights, procurement team tries to visualise the breakdown of supplier's costs to calculate its break-even point. They estimate that total fixed expenses related to rechargeable electric light are $270,000 per month and variable expenses involved in manufacturing this product are $126 per unit. The supplier charges its customer $180 per unit. Within its current capacity, this supplier will make a profit at which of the following?
Answer : A
The analysis of cost into fixed and variable enables organisations to determine their break-even point (BE) - the point where total revenue from sales and total cost exactly balance. All costs need to be covered by sale revenue in order for a company to make a profit. If you know your fixed costs and your variable costs then you can work out the minimum quantity of goods or services you need to sell to break even. Break even point is measured in volume and can be worked out graphically or via formulae:
Price - Variable costs = Contribution
Break even point (volume) = Fixed expenses/Contribution margin per unit
In this scenario, the break even point (Q) is: 270,000/(180-126) = 5,000
To make a profit, the supplier needs to sell more than 5,000 units per month.
The BE point is thus an important determinant of flexibility of pricing for suppliers. Before BE is achieved there will be much greater reluctance to offer price concessions to customers than after BE is achieved.
LO 2, AC 2.1
Question 1741
A procurement manager is considering accepting a fixed price agreement for 12 months with an IT supplier. What are the advantages of fixed price agreements? Select TWO that apply.
Answer : B, D
Afixed price agreementprovides stability and predictability. The supplier bears the risk of cost fluctuations, which is especially advantageous in volatile markets. Moreover, it simplifies administrative processes for the buyer over the contract duration.
''Fixed price agreements transfer cost risk to the supplier and enable simplified contract management. This can reduce overhead for buyers and support budgeting accuracy.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Pricing Models in Negotiation)
Question 1742
Maria is a professional services category buyer within the National Health Service. Due to severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
Question 1743
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : B, C
Late paymentsdamage trust and strain supplier cash flow, becoming a direct source of conflict. Similarly, when gains, risks, or costs arenot equitably shared, perceptions of unfairness can destabilize the relationship.
''Persistent late payments not only threaten supplier cash flows but can significantly erode trust. Additionally, disproportionate sharing of risks or benefits can create resentment and hinder collaboration.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.3 - Causes and Management of Conflict in Procurement)
Question 1744
Maria fears her proposed pricing may be rejected by the supplier. To mitigate this risk, she is preparing a BATNA. Is this the correct approach?
Answer : B
BATNA (Best Alternative to a Negotiated Agreement) gives negotiators a fallback plan if discussions fail. It ensures they never accept worse terms than their minimum acceptable alternative. For Maria, developing a BATNA mitigates rejection risk, strengthens her bargaining power, and provides confidence. Without a BATNA, negotiators risk over-conceding or being locked into unfavourable deals. CIPS emphasises that BATNAs must be realistic, actionable, and aligned to organisational objectives---not merely theoretical alternatives.
Question 1745
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost 24%. Which of the following represents the mark-up of that company?
Answer : B
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up (%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
Question 1746
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier makes their closing statements, they are most likely to be doing which of the following?
Answer : B
As negotiations near closure, skilled negotiators carefully observe for buying signals---verbal cues (''That sounds reasonable...'') and non-verbal cues (nodding, smiling, leaning forward). These indicate readiness to agree and confirm whether it is the right time to close. At this stage, both sides usually stop gathering data or building rapport, as the focus is on confirming alignment and avoiding last-minute derailments. Closing too early may risk missing concessions, but delaying risks cooling momentum. Recognising buying signals ensures closure occurs at the optimal point, aligning with preparation and tactical awareness.
Question 1747
Different types of relationships impact commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate power derives from formal authority or position, giving the buyer leverage in negotiations. This power type is more effective in establishing credibility and enforcing terms, as highlighted in CIPS's framework for negotiation power sources, unlike informal sources like personality or friendship.
Question 1748
Which of the following can be prepared before a negotiation with a supplier to achieve an agreement to benefit both parties?
Zone of potential agreement
Attendee list for the negotiation talks
Walk-away point
Venue for the negotiation talks
Answer : B
Zone of Potential Agreement (1) and Walk-away point (3) are key elements in negotiation planning. Establishing a Zone of Potential Agreement helps identify where interests align, whilethe Walk-away point sets the limit of acceptable terms. Both are essential to preparing a negotiation framework that benefits both parties, as per CIPS best practices.
Question 1749
Ranjit is sourcing security clothing and PPE from overseas suppliers. He wants to remove foreign-exchange fluctuation risk and has asked suppliers to quote in GBP. Will this remove the fluctuation risk for the hospital?
Answer : B
Setting the contract currency to the buyer's currency transfers FX exposure to the supplier. The buyer gains price certainty in GBP, although the supplier may price in a risk premium---a common application decision when negotiating internationally.
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Question 1750
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?
Answer : D
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be 'Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status'
LO 2, AC 2.3
Question 1751
Which of the following is categorised as fixed cost?
Answer : B
An organisation's expense can be categorised into three groups:
Fixed Costs -- costs that do not change with output.
Variable Costs -- costs that vary in direct proportion to output.
Semi-variable costs -- 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.
CIPS study guide page 79-84
Study tips: Fixed variable and semi-variable costs - AAT Comment
Question 1752
Jasmine and the IHL sales team have a negotiation scheduled with one of AB's lead buyers, Samuel, at AB's premises. This is one of the biggest negotiations that Jasmine has been involved in and is eager not to make any mistakes. Jasmine has heard from a colleague that Samuel tends to adopt an integrative negotiation style. IHL senior management decides to send a team of three members to the negotiation. Jasmine is among the team and she is assigned to check body language, reactions, feeds insight to her leader and to record important comments and information from the meeting for minutes. Which of the following are roles of Jasmine in the forthcoming negotiation? Select TWO that apply.
Answer : A, E
A negotiating team can be as few as two people, and one person can play one or more of these roles:
As from the scenario, Jasmine will act as an observer and a scribe (or secretary).
Question 1753
A procurement team has discussed, in advance of a negotiation, what they will do if there is no agreement with the current supplier. They have decided that they will perform the services themselves in-house on a trial basis if no deal is made. Which of the following describes what they have prepared here?
Answer : A
Question 1754
Procurement team is required to improve leverage with their suppliers through spend consolidation. To check whether there is any opportunity to consolidate spend, which of the following should be priority of procurement team?
Answer : A
In order to identify opportunities where you can increase your leverage with supplier, you need to understand your spend. Undertaking spend analysis of your accounts payable (AP) data is an essential first step here.
Question 1755
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 1756
Which of the following are recognised techniques in contract negotiation? Select THREE that apply.
Answer : A, C, F
The question asks about negotiation techniques which are not present in the book. In this question, there are only 3 recognised techniques:
- Framing and reframing: A frame is an assumption, or set of assumptions, that guides our attention and behavior. Reframing is the ability to identify and significantly change assumptions or perspectives. Framing has a significant impact on the effectiveness of negotiation outcomes and negotiator working relationships. You can read more on framing and reframing here.
- Anchoring: Anchoring bias is well-known cognitive bias in negotiation and in other contexts. The anchoring bias describes the common tendency to give too much weight to the first number put forth in a discussion and then inadequately adjust from that starting point, or the ''anchor.'' We even fixate on anchors when we know they are irrelevant to the discussion at hand. You can read more on anchoring here.
- Pacing and leading: Pacing and leading is a two-step lever of persuasion. First -- You ''match your pace'' to the person you want to influence in as many ways as possible. You can do this by mimicking the way the person talks, stands, their appearance, etc. You can also mimic less tangible aspects like the way they act, or their emotional state. Second -- Once you've set your pace with someone, lead them to whatever decision or behavior you want them to take! You can read more on pacing and leading here.
LO 3, AC 3.2
Question 1757
Absorption costing is when the total cost per each unit of output:
Answer : B
Question 1758
Which of the following are examples of variable costs?
Building and site rent
Annual insurance premium
Raw materials expenditure
Delivery costs for materials
Answer : D
Variable costs fluctuate with production volume --- e.g., raw materials and delivery costs. Fixed costs such as rent and insurance remain constant regardless of output. In negotiations, suppliers may inflate fixed cost allocations to justify pricing; buyers should differentiate between fixed and variable costs to challenge pricing more effectively. Recognising true variable costs also allows negotiating for volume-related discounts.
Question 1759
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?
Answer : A
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 and any 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 1760
For a commercial negotiation to be effective, the organisation has to identify resources required for negotiation. Which one of the following could help?
Answer : B
Involving an appropriate cross-functional team is beneficial for effective commercial negotiation because it brings together diverse perspectives and expertise relevant to the negotiation context. According to CIPS, a cross-functional team ensures that all aspects, such as technical, financial, and operational inputs, are considered, leading to more balanced and informed decision-making. This approach also helps in addressing complex negotiation elements effectively.
Question 1761
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 1762
A procurement professional is preparing for a negotiation with supplier. She is setting targets for price which her company is seeking to achieve. Which of the following acronyms can help her identify limits before engaging in the negotiation?
Answer : A
MIL criteria indicate 3 limits that negotiator should establish:
M - Must achieve: minimum target/maximum you can concede on this point; the mandatory requirement or fall back position
I - Intend to achieve: realistic target you are aiming for on this point
L -- Like to achieve: stretch target to achieve on this point.
PPCA is purchase cost analysis
TIMWOOD indicates 7 types of waste in Lean principles
The RAQSCI model is a mnemonic summary of a business model used to define and structure business requirements
Question 1763
A buyer has lost trust in a supplier but wishes to repair the relationship. What is the appropriate first step?
Answer : A
Rebuilding trust requires acknowledgement of the issue and supplier commitment to improvement. Cosmetic gestures such as hospitality or price reductions do not address the core problem. Nor should KPIs be artificially lowered, as this masks underperformance. Trust is restored when accountability is accepted and corrective actions are implemented transparently. This aligns with CIPS' emphasis on trust-building behaviours: honesty, responsibility, and consistent performance.
Question 1764
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
Answer : A, D
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
Question 1765
John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?
Answer : C
While stakeholder feedback is crucial, meetings are not always the most effective review method. Reviews may be better conducted through reports, surveys, or individual debriefs, depending on context. The key is to capture lessons learned, successes, and areas for improvement, and to record them for future negotiations. Forcing all stakeholders into one meeting risks inefficiency or unproductive blame games. CIPS stresses structured reflection and documentation as best practice, ensuring organisational learning and preparation improvements.
Question 1766
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way ofanalysing costs is to classify them into direct and indirect costs. Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Question 1767
Which of the following is a source of information on microeconomic factors?
Answer : D
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Question 1768
An adversarial style of negotiation is appropriate where the buyer has greater bargaining power over the supplier. In what other situations may the buyer adopt this style of negotiation?
Answer : B
An adversarial negotiation style is more suitable in a market with many alternative sources and substitutes (B). When there are multiple suppliers, buyers have the upper hand and can adopt a competitive stance without risking supply continuity. This aligns with CIPS guidance on the use of adversarial styles in competitive markets with numerous alternatives.
Question 1769
A procurement professional is preparing for a negotiation of purchasing non-critical commodity products. He knows that the product can be easily replaced by other substitutes in the market. The negotiation for these products is typified by which of the following?
Answer : C
With non-critical commodity products, the relationship will be transactional. Buyer should not spend too much time and effort into the negotiation.
LO 1, AC 1.4
Question 1770
In which of the following scenarios could you adopt a distributive-based negotiation approach?
Answer : D
Question 1771
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction. What is the mark-up profit percentage earned by the supplier on this transaction?
Answer : C
The mark-up percentage is calculated as the profit divided by the cost of production, then multiplied by 100 to convert it into a percentage.
Calculation:
(
80
/
160
)
100
=
50
%
(80/160)100=50%
Thus, the supplier's mark-up percentage is 50%, as per standard pricing calculations used in procurement.
Question 1772
Which of the following are recognised techniques in contract negotiation? Select THREE that apply.
Answer : A, C, F
The question asks about negotiation techniques which are not present in the book. In this question, there are only 3 recognised techniques:
- Framing and reframing: A frame is an assumption, or set of assumptions, that guides our attention and behavior. Reframing is the ability to identify and significantly change assumptions or perspectives. Framing has a significant impact on the effectiveness of negotiation outcomes and negotiator working relationships. You can read more on framing and reframing here.
- Anchoring: Anchoring bias is well-known cognitive bias in negotiation and in other contexts. The anchoring bias describes the common tendency to give too much weight to the first number put forth in a discussion and then inadequately adjust from that starting point, or the ''anchor.'' We even fixate on anchors when we know they are irrelevant to the discussion at hand. You can read more on anchoring here.
- Pacing and leading: Pacing and leading is a two-step lever of persuasion. First -- You ''match your pace'' to the person you want to influence in as many ways as possible. You can do this by mimicking the way the person talks, stands, their appearance, etc. You can also mimic less tangible aspects like the way they act, or their emotional state. Second -- Once you've set your pace with someone, lead them to whatever decision or behavior you want them to take! You can read more on pacing and leading here.
LO 3, AC 3.2
Question 1773
Which of the following are behaviours that builds trust between the buyer and the supplier in business relationship? Select TWO that apply.
Answer : A, C
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 1774
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Tradeables---alternative offers or concessions---are typically introduced during thebargainingstage of the negotiation. This is when both parties discuss and exchange proposals to reach a mutually acceptable agreement.
Question 1775
Power is used only in adversarial negotiation situations to secure a 'win' outcome against the other side. Is this statement correct?
Answer : C
Question 1776
Which of the following is the definition of safety margin?
Answer : A
As a financial metric, the margin of safety (safety margin) is equal to the difference between current or forecasted sales and sales at the break-even point. The margin of safety is sometimes reported as a ratio, in which the aforementioned formula is divided by current or forecasted sales to yield a percentage value. The figure is used in both break-even analysis and forecasting to inform a firm's management of the existing cushion in actual sales or budgeted sales before the firm would incur a loss.
This is a question that a student met in her actual exam. The margin of safety is not even mentioned in the CIPS study guide.
Question 1777
Which of the following is active listening?
Answer : C
Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS's guidelines for effective negotiation communication.
Question 1778
An organisation should develop different relationships appropriate to each supply situation. Which ONE of the following analysis methods could help identify these?
Answer : B
CIPS describes a relationship spectrum from arm's-length/transactional through collaborative/partnership, matched to spend criticality, risk, and strategic importance; analysis helps select the appropriate relationship style before and during negotiation.
===========
Question 1779
Where a market consists of a large producer of a product with high market power, it is known as:
Answer : C
Question 1780
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Answer : C
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Question 1781
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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:
Text Description automatically generated with low confidence
Question 1782
Which of the following is the true statement?
Answer : B
Internal stakeholder support will be important not just at the initial negotiation of the contract, but potentially throughout the life of the contract right through to exit.
As a general rule, connected stakeholders (with the exception of suppliers) have a low level of influence on procurement negotiations.
Suppliers are connected stakeholders who have contractual relationships with the organisation.
Commercial negotiation objective should be driven by the business needs of the organisation, and not just the instinct of procurement.
Question 1783
Where there are high levels of commitment to relationships between both the buyer and supplier, this is seen as collaborative and beneficial to negotiations. Is this statement correct?
Answer : A
Question 1784
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
''Expanding the pie'' is a strategy used in integrative negotiations where both parties collaborate to increase the total value available before dividing it. This leads to mutual gains and supports long-term, strategic relationships.
Question 1785
Maria is a professional services category buyer within the National Health Service. Due to the severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
The Win-Win approach is the most appropriate negotiation strategy in situations where collaboration and ongoing relationships are prioritized. In this case:
Achieving cost savings: The NHS aims to reduce expenses in order to reallocate funds to critical areas, making it essential that both parties work together to find cost-effective solutions.
Collaborative supplier relationship: Since Maria is working with a collaborative supplier, maintaining a positive relationship through mutual benefit is essential for continued cooperation.
Alignment with public service objectives: A Win-Win outcome aligns with the NHS's broader objectives of maximizing resources for patient care, as it ensures that savings are achieved without undermining the supplier's commitment to quality service.
This approach aligns with CIPS guidelines for maintaining productive, ethical partnerships in procurement, especially in critical sectors like healthcare.
Question 1786
Macroeconomics can have an impact on commercial negotiations. Is this statement correct?
Answer : A
Macroeconomic factors like inflation, interest rates, and currency fluctuations can significantly affect pricing and contractual terms. Buyers and suppliers must account for these factors during negotiations, particularly in long-term or high-value contracts.
Question 1787
Commercial negotiations on price cover various aspects, including pricing arrangements. A buyer may negotiate a fixed-price agreement. Why is a fixed-price agreement advantageous to the buyer?
Answer : B
In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier's internal cost build-up (unlike cost-plus).
===========
Question 1788
Jane is planning for a forthcoming negotiation with a key supplier. She has learned what are important to the supplier and what are important to her company from previous contracts between them. In order to avoid negotiation deadlocks, she has set up several concession plans. But Jane has little experience in dealing with suppliers and doesn't know when to trade these concessions. When is the best time in a negotiation to trade concessions?
Answer : C
The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.
LO 3, AC 3.1
Question 1789
When is the best time for buyer to propose the negotiation agenda to potential supplier?
Answer : D
A business negotiation agenda is a formal agreed upon list of goals to be achieved or items to be discussed in a particular order during a meeting or negotiation. Agendas can be formal and obvious, or informal and subtle in negotiations.
The agenda is one of the main structural elements of negotiation, in addition to such questions as site, identification of participants, and elements of timing. Together, they answer the who, what, when, and where questions. As with other aspects of negotiation, the agenda can be used either manipulatively to enhance leverage or to improve the prospects for agreement and the possibilities for mutual gain. In most cases, it will be used both ways, reflecting the nature of negotiation as a ''mixed-motive'' situation.
Although it can be instrumental to [research] volunteer as a sole source to write the agenda, in most cases it becomes a joint activity to construct a consensual basis for subsequent negotiation. In these situations, agenda-building becomes one of the pre-negotiation activities that set the tone for the relationship (Saunders, 1985). In other situations, the parties may engage in actual negotiation without a formal or written agenda. When this occurs, the risks and uncertainties may be high but the party who appreciates the importance of the informal agenda has a tremendous advantage.
Whether one plans it or not, during the course of negotiation the parties will discuss a finite set of issues in some sequence and from a particular perceptual framework. Consciousness of the universality and centrality of the agenda is prerequisite to guiding negotiation to a successful conclusion.
CIPS study guide page 146-150
Managing the negotiation agenda | SpringerLink
What is Negotiations Agenda - Negotiation Coaching (brightfocusconsult.com)
Question 1790
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?
Answer : C
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.
CIPS study guide page 164-165
What Is a Coalition Anyway?
Question 1791
An adversarial style of negotiation is appropriate where the buyer has greater bargaining power over the supplier. In what other situations may the buyer adopt this style of negotiation?
Answer : B
An adversarial negotiation style is more suitable in a market with many alternative sources and substitutes (B). When there are multiple suppliers, buyers have the upper hand and can adopt a competitive stance without risking supply continuity. This aligns with CIPS guidance on the use of adversarial styles in competitive markets with numerous alternatives.
Question 1792
Ben Dunne is a procurement manager and is responsible for a contract that supplies translation services to his organisation. Ben has the authorisation to extend the contract for a further two years, but has aimed for a further 2% discount. Ben is aware that the supplier's previous performance has been inconsistent, but during the negotiation Ben asks the supplier to present their performance to date on this contract. Which stage of the negotiation cycle is this?
Answer : D
The testing stage of the negotiation cycle is where each party explores and validates information provided by the other side. By asking the supplier to present their performance to date, Ben is testing claims, checking credibility, and assessing whether the supplier's performance supports or undermines their position in the negotiation. This is distinct from preparation (which happens before the meeting), bargaining (where concessions and tradeables are exchanged), and agreement (where final terms are confirmed). CIPS highlights that testing allows negotiators to challenge assumptions, clarify evidence, and strengthen their position before moving into bargaining or closure.
Question 1793
Which of the following are microeconomic factors? Select THREE that apply.
Answer : B, D, F
Microeconomic factors refer to elements that affect individual businesses or sectors rather than the economy as a whole. In this case:
Availability of investors (B): Access to investors impacts capital availability for businesses.
Distribution channels (D): Distribution methods directly influence a business's ability to get products to market.
Levels of competition (F): Competition affects pricing and strategic decisions within specific industries.
Taxation rates, unemployment levels, and inflation rates are considered macroeconomic factors, affecting the economy on a broader scale, as per CIPS's definitions of microeconomic vs. macroeconomic influences.
Question 1794
Different types of relationships impact commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate power derives from formal authority or position, giving the buyer leverage in negotiations. This power type is more effective in establishing credibility and enforcing terms, as highlighted in CIPS's framework for negotiation power sources, unlike informal sources like personality or friendship.
Question 1795
The activity of listening in a negotiation includes which of the following processes?
Hearing
Interpreting
Rapport
Influencing
Answer : A
Listening involves both hearing (1) and interpreting (2) the information shared by the other party. Effective listening is an active process that goes beyond simply hearing words; it involvesinterpreting meaning, understanding the speaker's intent, and responding accordingly. CIPS emphasizes these steps as part of effective communication in negotiations.
Question 1796
Which of the following are elements of price negotiations? Select the TWO that apply.
Answer : A, C
Price negotiations extend beyond headline unit price and include elements that influence total commercial value. Pricing arrangements (such as fixed, variable, indexed, or cost-plus pricing) directly affect financial risk and cost certainty. Terms of payment influence cash flow, working capital, and overall cost of ownership, making them core price-related negotiation variables. Sales tax is typically regulated and not negotiable, while cash flow management and administration costs are internal organisational concerns rather than negotiated price elements. CIPS emphasises a holistic approach to price negotiations that considers structure and payment terms, not just price level.
Question 1797
In a commercial negotiation, a procurement professional negotiates on his company's behalf. The power of buying organisation is the only factor that influences the behaviours of the other party. Is this assumption true?
Answer : B
The assumption is false, because when a procurement professional negotiates on behalf of his employer, he brings the power of his organisation (its brand, reputation and purchasing spend) as well his own personal power (that which is embedded within him) to the negotiation.
From a negotiation perspective, both organisational and personal power have the ability to influence the behaviours of other or the cause of event. This power is clearly core to negotiation, and of enormous important in seeking to achieve the objectives.
Question 1798
How can having a best alternative to a negotiated agreement (BATNA) support the buyer in a negotiation? Select THREE options that apply.
Answer : A, B, F
Having a BATNA:
Increases assertiveness (A): Knowing the fallback position empowers the buyer to negotiate more confidently.
Reduces the chance of a poor agreement (B): A BATNA ensures the buyer does not feel pressured to accept suboptimal terms.
Identifies walk-away points (F): It sets a clear boundary, allowing the buyer to exit negotiations if terms don't meet minimum requirements.
These align with CIPS's guidance on using BATNA to strengthen negotiation strategies.
Question 1799
Which of the following types of relationship would possibly lead to a distributive negotiation?
Answer : D
Question 1800
AB Manufacturing seeks to buy a new materials resource planning (MRP) software system. At the 'defining the business need' stage of the procurement cycle, the procurement manager ensured that all the internal stakeholders involved had the power to contribute and sign off on requirements. For the MRP system, the procurement manager consulted the head of production planning of AB Manufacturing. The head of production contributed to demand levels, existing manufacturing planning, and existing staff levels. What type of power does the head of production demonstrate?
Answer : A
Question 1801
Procurement team is required to improve leverage with their suppliers through spend consolidation. To check whether there is any opportunity to consolidate spend, which of the following should be priority of procurement team?
Answer : A
In order to identify opportunities where you can increase your leverage with supplier, you need to understand your spend. Undertaking spend analysis of your accounts payable (AP) data is an essential first step here.
Question 1802
A procurement expert has been asked to ensure they consider emotional intelligence in their negotiation strategy. They have agreed to this and have started planning their approach. Which of the following describes emotional intelligence?
Answer : C
Emotional intelligence involves the ability to recognize and manage one's emotions and empathize with others. This skill allows negotiators to respond appropriately to both their own feelings and the emotional cues of the other party, fostering a more constructive and adaptive negotiation environment. CIPS highlights emotional intelligence as a valuable asset in understanding and influencing negotiation dynamics.
Question 1803
Rose is a senior buyer from a skiing equipment retailer. Rose is concerned about the current ski boot shortage and the number of invoicing problems from a key supplier. She has decided to have a video conference with Victor, CEO of the supplier. Initially, she intends to threaten Victor with contract termination unless he can improve the situation. However, she is a little wary of doing this as the switching costs are high. Eventually, she decides to seek solutions by encouraging the other party to offer their views and ideas. Rose also prepares some ideas to discuss with Victor. Which of the following is the persuasion method that Rose intends to use in the forthcoming conference?
Answer : C
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 multiple variables to consider when choosing between 'push' and 'pull'. Professor Fiona Dent of Ashridge Business School proposes situations when each style might be most appropriate, breaking down push into 'directive' and 'reasoning' and 'pull' into 'collaborative' and 'visionary':
Table Description automatically generated
In the scenario, Rose intends to let both parties exchange their views and ideas so that solutions to current problems can be found. This is the typical characteristic of collaborative (pull) method.
Question 1804
Which of the following is an advantage of consultation as an influencing tactic?
Answer : B
Consultation involves actively involving stakeholders or counterparties in decision-making. By seeking input, it fosters a sense of ownership, increasing commitment to negotiated outcomes. It is particularly effective when the negotiator has low positional power, as it shifts dynamics from authority to collaboration. Unlike coercion or compliance tactics, consultation builds engagement and long-term trust, which is critical in complex procurement where buy-in is essential for contract success. CIPS stresses its role in building influence where direct authority is limited.
Question 1805
Which of the following are most likely to harm trust between buyer and supplier in a commercial relationship? Select TWO that apply.
Answer : A, D
Trust-destroying behaviours:
- Rumours of partnership or relationship breaking down
- Emotion-based assessment of performance
- Avoiding accountability, passing the blame to others
- General mood -- resentment, distrust, frustration, etc
LO 1, AC 1.4
Question 1806
Maria is a professional services category buyer within the National Health Service. Due to the severe financial budget cutbacks the National Health Service is facing, the procurement team has been tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans to achieve savings with one of her collaborative suppliers. Which negotiation approach should she undertake?
Answer : D
The Win-Win approach is the most appropriate negotiation strategy in situations where collaboration and ongoing relationships are prioritized. In this case:
Achieving cost savings: The NHS aims to reduce expenses in order to reallocate funds to critical areas, making it essential that both parties work together to find cost-effective solutions.
Collaborative supplier relationship: Since Maria is working with a collaborative supplier, maintaining a positive relationship through mutual benefit is essential for continued cooperation.
Alignment with public service objectives: A Win-Win outcome aligns with the NHS's broader objectives of maximizing resources for patient care, as it ensures that savings are achieved without undermining the supplier's commitment to quality service.
This approach aligns with CIPS guidelines for maintaining productive, ethical partnerships in procurement, especially in critical sectors like healthcare.
Question 1807
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Answer : C
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Question 1808
Which of the following are typical characteristics of activity-based costing (ABC) method? Select TWO that apply.
Answer : A, E
Activity-based costing is an alternative approach to traditional absorption costing. The characteristics of these two methods are illustrated in the graph below:
Question 1809
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
Answer : A, C, E
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 conditionthat would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
Question 1810
When prices of input materials increase, supply curve shifts to the left while demand remains stable. The shift of supply will tend to cause which of the following?
Answer : D
The case in the question is illustrated as below:
The equilibrium price initially at P0 with quantity Q0, when supply curve shifts to the left, it will converge with demand curve at new equilibrium point with price P1 and quantity Q1. As you can see from the graph, P1 is greater than P0 and Q1 is smaller than Q0.
Question 1811
Where there are high levels of commitment to relationships between both the buyer and supplier, this is seen as collaborative and beneficial to negotiations. Is this statement correct?
Answer : A
A collaborative relationship is characterized by mutual commitment, which enhances risk management and strategic planning between buyer and supplier. High levels of trust and commitment enable both parties to work closely to achieve shared objectives, creating a beneficial negotiation environment. This approach aligns with CIPS's principles of collaborative procurement relationships.
Question 1812
XYZ Ltd decides to go to market for a cleaning contract to service a number of offices. It knows that it will get a price which may, or may not, be better than the one it is currently paying. To gain leverage in the marketplace, the organisation decides to add other related services to the scope, such as gardening, security and maintenance, which increase the value of the contract. This is an example of which forms of spend consolidation?
Answer : B
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
- Vendor base reduction: straightforward reduction of number of suppliers in any category
- Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
- Volume redistribution: making recommendations following spend analysis to move from one supplier to another
- Volume consolidation across categories: certain purchase requirements may be common across a number of categories. In the scenario, XYZ has combined different categories but closely related to office services into a larger contract so that they can increase their leverage.
- Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
- Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
LO 1, AC 1.3
Question 1813
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost 24%. Which of the following represents the mark-up of that company?
Answer : B
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up (%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
Question 1814
Which of the following may help the procurement professional increase expert power in commercial negotiation? Select TWO that apply.
Answer : C, E
Expert power is based on a person's high levels of skill and knowledge, formal training, qualifications and experience in a particular procurement category would give someone expert status and mean that in negotiation their voice is listened to as a more objective, informed knowledge leader. Expert power is based on facts, knowledge, research, insight and study.
Legitimate power comes from rules, formal authority, organisation rank, staff rate or official position held.
Reward power comes from one person's ability to compensate or reward another for compliance.
Referent power stems from their personality, way of engaging with others and habit of acting in a way that is in line with a strong set of values and principles.
Question 1815
Under EU public procurement directives, which of the following are procedures in which there is no commercial negotiation allowed?
Answer : B, C
Under the European Union public procurement directives, all public sector bodies must abide by certain rules when they procure goods and services over a threshold value. These rules are codified under 5 procurement procedures:
1. Open Procedure
2. Restricted Procedure
3. Competitive Dialogue
4. Competitive Procedure with Negotiation
5. Innovation Partnerships.
Under normal circumstances, there is no commercial negotiation allowed under the two most commonly used procedure, Open and Restricted. Under these procedures, the prices and terms and conditions of contract should be decided via reference only to the tenderers' responses to the buyer's requests for tenders, and not through 'post-tender negotiation'. Under the other procedure, negotiation within the rules is permitted. Interested learners can read more about these procedures here.
LO 1, AC 1.1
Question 1816
In what circumstances is the bargaining power of suppliers likely to be high, in relation to buyer power? Select THREE that apply.
Answer : A, D, E
Supplier bargaining power is stronger when there arefew suppliers,low volume requirementsfrom buyers, and when suppliers possessunique capabilities or technology(like specialized machinery). These conditions reduce buyer leverage and increase supplier influence.
Question 1817
When considering a new supply source for a product, a procurement professional will review the suppliers' quotations before a supplier negotiation. Which of the following is a direct cost associated with the product within a potential supplier's quotation?
Answer : A
Direct costs are those costs that can be directly attributed to the production of specific goods or services. They typically include raw materials and labor directly involved in production. Metal used in the product is a raw material that becomes part of the final product, making it a direct cost.
Question 1818
Which of the following are examples of connected stakeholders in a private organisation? Select TWO that apply.
Answer : A, E
Connected stakeholders are those who, by contractual or commercial relationships, have a significant stake in organisation activity. As a general rule, connected stakeholder (with the exception of suppliers) have a low level of influence on procurement negotiations.
Examples of connected stakeholders are: suppliers, customers, bank where the organisation opens its account, shareholders.
Question 1819
A procurement manager is about to lead an important negotiation with a new IT supplier and has insisted the first meeting takes place at the buying organisation's office. Will this give one party an advantage?
Answer : A
Contextual (environmental) power includes home-ground advantage, control of the venue, access to colleagues and data, and comfort with logistics---all of which can tilt confidence and leverage toward the host (the buyer).
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Question 1820
Economic growth can be measured by...?
Answer : B
Gross Domestic Product (GDP) is the monetary value of the goods and services manufactured or supplied in a financial period. In general terms, when the GDP rate falls or slows down, there will be a fall in demand for goods and services demanded in the economy, with a fall in firms' revenue and profit margins. When GDP is rising, there will be an increase in demand.
Consumer Price Index (CPI) is weighted measurement that evaluates the average cost of a basket of goods bought by a consumer.
Producer Price Index (PPI) is average changes in prices that a producer receives in return for its goods or services.
Small Business Lending Index (SBLI) is an indicator of small business lending trends.
Question 1821
IHL has been supplying to XYZ Ltd for months. XYZ Ltd procurement manager Diana realises that the IHL's input prices are dropping and this is a good time to re-negotiate the price of the contract. She invites IHL representative to XYZ headquarter to make a bargain on the current price. At the opening stage of the negotiation, Diana requests a 10% reduction in price with an increase in volume purchased.
Is Diana's action appropriate in the opening phase?
Answer : D
The opening stage of the negotiation covers the very first few minutes when the parties meet and greet each other and are seated in the negotiation room in preparation for the main event.
Typical behaviours at the opening stage: 'dos' and 'don'ts'
Do's
Be punctual and well presented (welcome their arrival)
Break the ice with small talks
Start the conditioning process
Check authority
Check agenda
Consider using visual aid to set out key objectives or make key points
Don'ts
Use strong, pushy, cold or tough style at the opening
Put down marker at this stage
Criticise other organisations/TOP's previous contacts/third parties.
In this scenario, Diana has made her proposal right at the opening stage. This is an example of 'don'ts'. Good negotiators are very careful about 'red lines'. If she puts such barrier up too early, the supplier may not try to look for more creative solutions later in the negotiation.
Question 1822
When is an adversarial style of negotiation appropriate?
Answer : A
An adversarial negotiation style is appropriate when one party has high bargaining power and is focused on maximizing its benefit rather than maintaining a long-term relationship. This approach often involves competitive tactics that leverage power disparities, aligning with CIPS guidance on when adversarial tactics may be strategically used in negotiations.
Question 1823
Which of the following is considered a weakness of a 'dealer' style negotiator?
Answer : A
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of dealer style are described below:
LO 2, AC 2.4
Question 1824
Different types of relationships impact commercial negotiations. At a negotiation, which one of the following sources would help to support leverage for the buyer?
Answer : A
Legitimate power derives from formal authority or position, giving the buyer leverage in negotiations. This power type is more effective in establishing credibility and enforcing terms, as highlighted in CIPS's framework for negotiation power sources, unlike informal sources like personality or friendship.
Question 1825
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?
Answer : A
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 and any 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 1826
In general, which of the following is the consequence of a flatter demand curve?
Answer : B
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor.
In microeconomic graphs, elasticity and inelasticity can be shown by the slope of the demand curve. If a demand curve is almost horizontal, then the product pricing can be described as very elastic. If a demand curve is almost vertical, then the product pricing can be described as very inelastic.
The formulae of elasticity:
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LO 2, AC 2.2
Question 1827
The buyer's bargaining power tends to be relatively higher than supplier's bargaining power in which of the following circumstances?
Answer : D
Buyer power gives customers/consumers (buyers) the ability to squeeze industry margins by pressuring firms (the suppliers) to reduce prices or increase the quality of services or products offered.
There are four major factors to consider when determining the bargaining power of buyers:
1. Number of buyers relative to suppliers: If the number of buyers is small relative to that of suppliers, the buyer's power will be stronger.
2. Dependence of a buyer's purchase on a particular supplier: If a buyer is able to get similar products/services from other suppliers, buyers depend less on a particular supplier. Therefore, the power of the buyer would be greater.
3. Switching costs: If there are not many alternative suppliers available, the cost of switching is high. Therefore, buyer power would be low.
4. Backward Integration: If the buyer is able to integrate or merge suppliers, the buyer has greater bargaining power over the existing suppliers.
When is Bargaining Power of Buyers High/Strong?
There are fewer buyers relative to that of suppliers
The switching costs of the buyer are low
If the buyer is able to backward integrate
The buyer purchases product in bulk (high volume)
The buyer is able to get similar product/services from other suppliers
The buyer purchases the majority of the seller's products
Several substitutes are available on the market
Product is not differentiated
CIPS study guide page 54-56
What is the Bargaining Power of Buyers?
Question 1828
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Answer : A
Question 1829
Which of the following are most likely to be fundamentals of Fisher & Ury's principled negotiation?
1. Depersonalise the argument
2. Focus on positions
3. Generate creative options
4. Using subjective criteria
Answer : C
Principled negotiation is based on four fundamentals: people, interest, options and criteria:
1st Principle: separate the people from the problem: Negotiator should depersonalise the situation and accepting that the subject matter of the negotiation. This can be difficult for untrained negotiators, but this is a key skill to develop
2nd principle: focus on interests, not positions: It is important in principled negotiations not to focus on their parties' positions (what are expressed during negotiations), but on the interests (underlying needs) behind them
3rd principle: invent options for mutual gains: this principle aims to help the parties find a solution that both would benefit from. The more options - or tradeables - that can be brought to the table the better.
4th principle: insist on using objective criteria: is about making sure that the negotiation stays focused on outcomes based on objective criteria and that it is productive.
LO 1, AC 1.2
Question 1830
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way ofanalysing costs is to classify them into direct and indirect costs. Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Question 1831
A negotiation meeting between a buyer and supplier has taken several hours. Both parties believe the negotiation is starting to reach a close. Before the supplier makes their closing statements, they are most likely to be doing which of the following?
Answer : B
As negotiations near closure, skilled negotiators carefully observe for buying signals---verbal cues (''That sounds reasonable...'') and non-verbal cues (nodding, smiling, leaning forward). These indicate readiness to agree and confirm whether it is the right time to close. At this stage, both sides usually stop gathering data or building rapport, as the focus is on confirming alignment and avoiding last-minute derailments. Closing too early may risk missing concessions, but delaying risks cooling momentum. Recognising buying signals ensures closure occurs at the optimal point, aligning with preparation and tactical awareness.
Question 1832
Which of the following are internal factors when a supplier is making its pricing decision?
Price elasticity of demand
Environmental legislation
Risk management
The stage in the product life cycle
Answer : D
Risk management (3) and the stage in the product life cycle (4) are internal factors within the supplier's control and directly influence pricing decisions. These internal factors guide strategicpricing policies. In contrast, price elasticity of demand and environmental legislation are external factors, as per CIPS's guidelines on pricing influences.
Question 1833
Logibox Ltd sets prices based on what consumers are prepared to pay. Which pricing strategy is this?
Answer : C
Market pricing sets prices according to consumer demand and willingness to pay, ensuring competitiveness. Skimming sets high prices at launch to maximise early profit, penetration uses low prices to enter markets, and premium pricing positions products as luxury with high margins. Market pricing balances supplier costs with customer value perception, making it a common approach in competitive industries.
Question 1834
Which of the following are sources of legitimate (personal) power? Select THREE.
Answer : A, B, C
Legitimate power in negotiation can arise from different sources:
Position power (authority from role/position in the organisation).
Referent power (influence from respect, charisma, or relationships).
Question 1835
According to Mendelow's Matrix, how should stakeholders with high interest but low power be managed?
Answer : C
Mendelow's Matrix categorises stakeholders by power and interest. High-interest, low-power stakeholders must be kept informed, as they care about outcomes but lack direct influence. Keeping them informed builds trust and reduces resistance. By contrast, high power/interest stakeholders are key players, while low power/low interest require minimal effort. This tool ensures negotiation strategies align with stakeholder dynamics, preventing overlooked risks or conflicts.
Question 1836
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 1837
Jayden works as a procurement manager for a large IT organisation. They are currently in their third round of negotiations with an increasingly frustrated software solutions provider. Ben is representing the supplier. Jayden has made eye contact in the latestmeeting to confirm his understanding of each of Ben's points. What communication technique is Jayden demonstrating?
Answer : A
Jayden's use ofeye contact to demonstrate understandingis a core element ofactive and effective listening. This technique includes not only listening to spoken words but also using non-verbal cues (e.g., nodding, eye contact) to confirm comprehension and engagement. Effective listening is essential to ensure that both parties feel heard and respected, which can de-escalate tension and improve outcomes.
''Effective listening involves verbal and non-verbal behaviours that show attentiveness. Maintaining eye contact, nodding, and reflecting key points show engagement and help in building rapport and trust.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Communication Techniques in Negotiation)
Question 1838
How can having a best alternative to a negotiated agreement (BATNA) support the buyer in a negotiation? Select THREE options that apply.
Answer : A, B, F
Having a BATNA:
Increases assertiveness (A): Knowing the fallback position empowers the buyer to negotiate more confidently.
Reduces the chance of a poor agreement (B): A BATNA ensures the buyer does not feel pressured to accept suboptimal terms.
Identifies walk-away points (F): It sets a clear boundary, allowing the buyer to exit negotiations if terms don't meet minimum requirements.
These align with CIPS's guidance on using BATNA to strengthen negotiation strategies.
Question 1839
Community Meal Partners (CMP) is a not-for-profit company that delivers cooked meals to older residents in their homes. CMP uses a fleet of bespoke vans with onboard ovens. In planning the future procurement of the fleet, CMP has conducted a review of the microeconomics of the van supply market and found that the vans are supplied by a monopoly supplier due to patented technology. Which of the following strategies could CMP utilise to optimise its bargaining position with the van supplier?
Answer : A
When facing a monopoly supplier, buyers must find creative ways to introduce leverage. Publicly exploring alternative solutions can create the perception of competition or a fallback plan, thus shifting bargaining power slightly toward the buyer.
Question 1840
A senior buyer analyses the supply market and he realises that his organisation is treated as Exploit according to supplier's perspective model. What does he need to do?
Answer : D
The supplier's perspective model has two axes: Spend value and Attractiveness:
Exploit is the quadrant where the buyer has high spend but low attractiveness. Overarching supplier objective would be: 'Milk this customer and charge a high price to compensate for all the pain they put us through'.
The buyer should increase its attractiveness to raise the position to Core customer. To do this, a buyer may:
- Simplify procurement processes
- Simplify contracting processes
- Use clear and concise documentation
- Eliminate onerous supplier terms and conditions
- Make the payment on time
- Use transparent processes
- Promote ethical behaviours
LO 1, AC 1.4
Question 1841
When is the best time to adopt accommodating style according to Thomas-Kilmann conflict mode instrument?
Answer : C
According to Thomas-Kilmann conflict model instrument, there are 5 conflict management styles:
Accommodating is an unassertive and cooperative approach to resolving the conflict. Accommodating means conceding to the other party with little debate or fight, not challenging or strongly putting forward your own point of view and generally giving and yielding to the other party's point of view. Accommodating is best used when:
1. When others can resolve the conflict more effectively
2. When the issue is much more important to the other person than to yourself - to satisfy the needs of others and to show you are reasonable
3. To build up social credit for later issues which are important to you
4. When continued competition would only damage your cause
5. When preserving harmony and avoiding disruption are especially important
6. To aid in the managerial development of subordinates by allowing them to experiment and learn from their own mistakes
LO 1, AC 1.1
Question 1842
A skilled negotiator will use a range of questioning techniques. If they wish to explore options with the other party without making any formal commitment, which style would they use?
Answer : B
Hypothetical (''What if...'') questions test possibilities and invite creative options without binding either side. They help probe interests and packages while keeping commitment provisional.
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Question 1843
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 1844
Which of the following occur within the planning and preparation stage in a negotiation process? Select THREE that apply.
Answer : A, B, F
In the planning and preparation stage of negotiation, it is essential to build a strong foundation by understanding various factors that influence the negotiation outcome. According to CIPS resources, critical aspects of preparation include:
Understanding the other party (A): This helps in anticipating their needs, objectives, and potential negotiation styles, leading to more strategic discussions.
Defining the constituents (B): This involves identifying all stakeholders or parties impacted by the negotiation, ensuring their interests are considered when planning the negotiation strategy.
Analyzing the bargaining power (F): Understanding the relative power each party brings to the negotiation helps in setting realistic goals and predicting possible negotiation dynamics.
These elements are foundational in ensuring a well-rounded approach and enabling both parties to enter negotiations with clarity and strategy, enhancing the potential for a positive outcome.
Question 1845
Which of the following are most likely to be macro factors that may influence the balance of power in commercial negotiation? Select THREE that apply.
Answer : A, B, D
All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forces which both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
LO 1, AC 1.3
Question 1846
A buyer continually states during negotiation that budget constraints limit their concessions. What tactic is being used?
Answer : C
The broken record tactic involves repeating the same point to reinforce a position, making it difficult for the other party to ignore. Here, the buyer keeps citing budget constraints to avoid moving away from their position, hoping repetition will wear down the supplier's resistance. This tactic is common in distributive bargaining and aims to anchor discussions around a fixed limitation. While effective, overuse risks damaging relationships, so skilled negotiators balance it with genuine reasoning and integrative approaches when appropriate.
Question 1847
Which of the following situations would increase a buyer's bargaining power?
Answer : A
When a buyer's purchase represents asignificant portion of a supplier's revenue, it increases the buyer's leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.
''Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer's ability to influence terms.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)
Question 1848
''A negotiation ends once the meeting finishes.'' Is this statement true?
Answer : D
Negotiations do not end at the meeting; they continue through reflection, documentation, and post-negotiation review. Best practice involves assessing whether objectives were met, capturing lessons learned, and ensuring written confirmation of terms. Without this, misunderstandings or missed improvements can occur. Reflection allows organisations to continuously strengthen negotiation strategies and build learning cycles.
Question 1849
A procurement team has discussed, in advance of a negotiation, what they will do if there is no agreement with the current supplier. They have decided that they will perform the services themselves in-house on a trial basis if no deal is made. Which of the following describes what they have prepared here?
Answer : A
Question 1850
Power is used only in adversarial negotiation situations to secure a 'win' outcome against the other side. Is this statement correct?
Answer : C
Question 1851
Which of the following are the most typical characteristics of integrative approach to negotiation? Select TWO that apply.
Answer : C, E
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 the pie' 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.
LO 1, AC 1.2
Question 1852
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should ...
Answer : A
Sally's objective is to achieve a 5% saving. If the supplier offers this saving in a different form (aftercare package), and the total value meets her goal, then accepting this alternative shows flexibility and supports a collaborative,win-winoutcome.
Question 1853
Which of the following is considered a weakness of a 'dealer' style negotiator?
Answer : A
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of dealer style are described below:
LO 2, AC 2.4
Question 1854
Freefields Housing Authority (FHA) is a housing provider that has outsourced a range of management services using fixed-price long-term contracts. FHA's regular supplier credit reviews have identified that some key outsourced service suppliers are at risk of insolvency due to high inflation rates observed in the macroeconomic climate. Which of the following actions would enable FHA to reduce this risk for the lifetime of the affected contracts?
Answer : B
Question 1855
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?
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
Question 1856
Which of the following would help build trust in a relationship?
Mediation attendance
Regular meetings
Keep promises
Coercion
Answer : B
Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.
Question 1857
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should:
Answer : D
Question 1858
Which of the following are types of questions that are useful in opening and testing phases of a negotiation? Select the TWO that apply.
Answer : C, E
In the opening phase, parties should confirm understanding and get the issues on the table.
The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.
Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.
Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening and testing stages.
Question 1859
Jessica Taylor, a senior buyer, is reflecting on her most recent negotiation. She has been asked by her manager to create a written record of performance. Which of the following should Jessica include in this negotiation performance report? Select THREE that apply:
Answer : C, E, F
Question 1860
How can having a best alternative to a negotiated agreement (BATNA) support the buyer in a negotiation? Select THREE options that apply.
Answer : A, B, F
Having a BATNA:
Increases assertiveness (A): Knowing the fallback position empowers the buyer to negotiate more confidently.
Reduces the chance of a poor agreement (B): A BATNA ensures the buyer does not feel pressured to accept suboptimal terms.
Identifies walk-away points (F): It sets a clear boundary, allowing the buyer to exit negotiations if terms don't meet minimum requirements.
These align with CIPS's guidance on using BATNA to strengthen negotiation strategies.
Question 1861
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 1862
Which of the following types of questions are likely to be the most effective to check facts in negotiations?
Answer : D
Closed questions are useful for verifying facts, as they prompt specific, concise responses. These questions allow the negotiator to confirm details without ambiguity, which is crucial for clarity in negotiation settings, as highlighted in CIPS's guidelines on questioning techniques.
Question 1863
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way ofanalysing costs is to classify them into direct and indirect costs. Which ONE of the following is an explanation of 'direct costs'?
Answer : B
Question 1864
Which of the following will help to indicate personality preferences in four dimensions?
Answer : D
The Myers--Briggs Type Indicator (MBTI) is an introspective self-report questionnaire indicating differing psychological preferences in how people perceive the world and make decisions. MBTI indicates personality preferences in four dimensions.
The Thomas--Kilmann Conflict Mode Instrument (TKI) is a conflict style inventory, which is a tool developed to measure an individual's response to conflict situations.
Mill's RESPECT mnemonic is set out by Harry A. Mills which describes seven steps to agreements
An intelligence quotient (IQ) is a total score derived from a set of standardized tests designed to assess human intelligence.
Question 1865
Commercial negotiations on prices cover a range of aspects including pricing arrangements. A buyer may negotiate for a 'fixed price agreement'. Why is a fixed price agreement advantageous to the buyer?
Answer : B
Afixed price agreementprovides the buyer withcost predictability. Once the price is agreed upon, the buyer is insulated from any cost increases on the supplier's side. The supplier bears the risk of fluctuating input prices, which simplifies cost control and contract administration for the buyer.
''With a fixed price arrangement, the buyer is protected from future price increases and does not need to monitor the supplier's ongoing costs. This is particularly useful for budgeting and forecasting.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Fixed Price Agreements)
Question 1866
When planning a negotiation for sourcing internationally, which of the following divergent positions, and therefore potential conflict areas, should be prepared for? Select TWO that apply:
Answer : A, C, D
Question 1867
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
Answer : A, B
Persistent late payment of the supplier's invoices (A) and Unequal sharing of gains, risks, and costs with the supplier (B) are potential sources of conflict as they create dissatisfaction and imbalance in the relationship. According to CIPS materials:
Late payments (A) can strain the supplier's cash flow, affecting their operational stability and leading to mistrust in the buyer.
Unequal sharing of gains, risks, and costs (B) can result in one party feeling exploited or unfairly treated, which undermines the collaborative spirit essential for long-term partnerships.
In contrast, requesting early supplier involvement, planning visits, or setting delivery dates are typically part of constructive relationship management practices and do not inherently lead to conflict.
Question 1868
A building firm has been awarded a contract to construct an office block. Which is a direct cost?
Answer : A
Direct costs are attributable to a specific project --- in construction, this includes materials and on-site labour. Legal fees, insurance, and office space are indirect costs, as they support the business overall but are not tied to one project. For buyers, distinguishing direct from indirect costs ensures pricing transparency and helps challenge excessive overhead allocations. This knowledge strengthens cost breakdown negotiations in project contracts.
Question 1869
To buying organisation, savings can be achieved from different saving levers or tactics. Which of the following are means that deliver savings through optimising specifications?
Answer : A, B
If driving greater value and efficiency from your supply base is your end, you should remember that there are many ways to do this without seeking to negotiate lower prices. Below are 7 types of saving levers:
Question 1870
The procurement manager of a private healthcare provider is running an IT project. Who would be the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : D
In the context of aninternal IT project, the relevant stakeholders would be thosedirectly involved in decision-making and implementation.Senior managementoversees funding and strategic fit, whilesoftware developersensure technical support. The general public and pharmaceutical suppliers are external and not primary stakeholders in this scenario.
''Stakeholder identification must focus on individuals or groups directly involved or affected by the procurement. This includes internal sponsors, end-users, and technical staff responsible for delivery.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Internal and External Stakeholders)
Question 1871
The stages of commercial negotiation involve which of the following characteristics?
Answer : C
The typical stages of commercial negotiation are Preparing, opening, bargaining, agreement, and closure. This sequence facilitates a structured approach where negotiators prepare strategies, initiate discussions, engage in bargaining, reach agreements, and formally close the negotiation. This structure is emphasized in CIPS materials as essential for achieving a balanced negotiation process.
Question 1872
Which of the following occur within the planning and preparation stage in a negotiation process? Select THREE that apply.
Answer : A, B, F
In the planning and preparation stage of negotiation, it is essential to build a strong foundation by understanding various factors that influence the negotiation outcome. According to CIPS resources, critical aspects of preparation include:
Understanding the other party (A): This helps in anticipating their needs, objectives, and potential negotiation styles, leading to more strategic discussions.
Defining the constituents (B): This involves identifying all stakeholders or parties impacted by the negotiation, ensuring their interests are considered when planning the negotiation strategy.
Analyzing the bargaining power (F): Understanding the relative power each party brings to the negotiation helps in setting realistic goals and predicting possible negotiation dynamics.
These elements are foundational in ensuring a well-rounded approach and enabling both parties to enter negotiations with clarity and strategy, enhancing the potential for a positive outcome.
Question 1873
Which of the following is an example of non-verbal communication?
Answer : C
Question 1874
A procurement professional is preparing for a negotiation with supplier. She is setting targets for price which her company is seeking to achieve. Which of the following acronyms can help her identify limits before engaging in the negotiation?
Answer : A
MIL criteria indicate 3 limits that negotiator should establish:
M - Must achieve: minimum target/maximum you can concede on this point; the mandatory requirement or fall back position
I - Intend to achieve: realistic target you are aiming for on this point
L -- Like to achieve: stretch target to achieve on this point.
PPCA is purchase cost analysis
TIMWOOD indicates 7 types of waste in Lean principles
The RAQSCI model is a mnemonic summary of a business model used to define and structure business requirements
Question 1875
Which characteristics are likely to feature in a partnership relationship in purchasing?
Close collaboration between supplier and buyer
Focus is on price and delivery only
Sharing of information
One-off commercial transactions
Answer : D
Partnership relationshipsare strategic and long-term. They emphasizetrust, collaboration, and information sharing. Unlike transactional relationships, they go beyond price and delivery to focus on joint value creation.
''Collaborative partnerships involve open information sharing and mutual support. These relationships are built on joint objectives, trust, and commitment to long-term success.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.2 - Types of Supplier Relationships)
Question 1876
Which factors give rise to conflict within the procurement negotiation context? Select THREE that apply.
Answer : A, C, F
Conflict can arise in procurement negotiations due to a power imbalance, which occurs when one party has more influence than the other, leading to potential exploitation or dissatisfaction. Differences in goals between parties---such as cost minimization for buyers and profit maximization for suppliers---also contribute to tension. Surprisingly, similar motives can lead to conflict as well, particularly when both parties are competing for limited benefits or market share.
Question 1877
Listening is a key activity in negotiation. Which of the following are characteristics of effective listeners?
Showing empathy
Persuading
Paraphrasing
Offering immediate solutions
Answer : B
Effective listeners demonstrate empathy and use paraphrasing to confirm understanding. These skills help build rapport, validate the speaker, and ensure accurate interpretation. Persuading and immediate solutions are active interventions, not listening behaviours. CIPS emphasises active listening as central to persuasion and relationship building in negotiation, enabling buyers to uncover underlying interests and respond appropriately.
Question 1878
A procurement officer for a manufacturing organisation is negotiating with a supplier over the provision of components. The supplier has indicated that they have to raise their prices due to their fixed costs increasing. Which TWO of the following are types of fixed costs?
Answer : A, B
Fixed costs are costs that do not vary directly with production volume. Staff salaries and building rents remain largely constant regardless of output levels and therefore meet the definition of fixed costs. Raw materials and temporary labour vary with production levels and are therefore variable costs. Warehouse logistics often fluctuate with throughput and activity, making them variable or semi-variable rather than fixed. Understanding fixed versus variable costs is essential for buyers when assessing supplier justifications for price increases, enabling more informed and credible cost-based negotiations.
Question 1879
Citywide Developments Ltd (CDL) is a construction programme management company that delivers high-value property development schemes. CDL uses named consultant design services in contracts. Recently, consultancy day rates have increased. Which of the following tradeable concessions could CDL offer when negotiating with suppliers to achieve lower rates, without lowering service quality?
Answer : D
By removing the requirement for named personnel, CDL could allow the supplier flexibility in allocating equally competent but possibly less expensive staff. This tradeable does not compromise on quality but helps control costs.
Question 1880
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?
Answer : D
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 right strategy.
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 1881
Which of the following situations would increase a buyer's bargaining power?
Answer : A
When a buyer's purchase represents asignificant portion of a supplier's revenue, it increases the buyer's leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.
''Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer's ability to influence terms.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)
Question 1882
Which of the following types of relationship would possibly lead to a distributive negotiation?
Answer : D
Question 1883
John Browne, a junior buyer for a corporation, is analysing the global supply market before undertaking negotiations and is wondering whether foreign exchange rates are important to factor into his research. Should John consider the foreign exchange rates?
Answer : C
Foreign exchange ratesdirectly influence thecost of imported goods and services. Currency fluctuations can affect total expenditure, supplier margins, and ultimately the buyer's profitability. Even if payment is in local currency, suppliers may adjust their pricing to mitigate foreign exchange risks.
''Foreign exchange volatility can significantly impact pricing in international procurement. Buyers must assess currency risks as part of their cost evaluation and strategic preparation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.2 - Macroeconomic Considerations in Pricing)
Question 1884
The buyer's bargaining power tends to be relatively higher than supplier's bargaining power in which of the following circumstances?
Answer : D
Buyer power gives customers/consumers (buyers) the ability to squeeze industry margins by pressuring firms (the suppliers) to reduce prices or increase the quality of services or products offered.
There are four major factors to consider when determining the bargaining power of buyers:
1. Number of buyers relative to suppliers: If the number of buyers is small relative to that of suppliers, the buyer's power will be stronger.
2. Dependence of a buyer's purchase on a particular supplier: If a buyer is able to get similar products/services from other suppliers, buyers depend less on a particular supplier. Therefore, the power of the buyer would be greater.
3. Switching costs: If there are not many alternative suppliers available, the cost of switching is high. Therefore, buyer power would be low.
4. Backward Integration: If the buyer is able to integrate or merge suppliers, the buyer has greater bargaining power over the existing suppliers.
When is Bargaining Power of Buyers High/Strong?
There are fewer buyers relative to that of suppliers
The switching costs of the buyer are low
If the buyer is able to backward integrate
The buyer purchases product in bulk (high volume)
The buyer is able to get similar product/services from other suppliers
The buyer purchases the majority of the seller's products
Several substitutes are available on the market
Product is not differentiated
CIPS study guide page 54-56
What is the Bargaining Power of Buyers?
Question 1885
Any commercial negotiation process has only three potential stakeholders: procurement, the budget holders, and the users. Is this TRUE?
Answer : D
Other stakeholders, including directors, IT, and finance departments, often have an interest in procurement negotiations, particularly when the contract impacts strategic objectives, IT infrastructure, or organizational operations. This broader stakeholder involvement aligns with CIPS's emphasis on inclusive stakeholder management in procurement to ensure well-rounded decision-making.
Question 1886
The bargaining power of buyers is likely to be high in relation to suppliers in which of the following situations?
Answer : D
The bargaining power of buyers increases when the buyer is large relative to the supplier. A large buyer can leverage its size to negotiate more favorable terms due to its significant impact on the supplier's business. CIPS notes that a buyer's size and purchasing volume are key factors that enhance its negotiating power in buyer-supplier relationships.
Question 1887
A buyer is approaching a negotiation where the company is in a low-power negotiating position in relation to the supplier. How can the buyer improve leverage and power with the supplier?
Consolidate the expenditure from across the organisation to increase the size and value of the requirement
Understand the supplier's costs and margins prior to the negotiation to demonstrate that you know what it costs to produce the product
Take a distributive approach to the negotiation and refuse to make concessions
Limit communication and information sharing with the supplier so as not to give anything away
Answer : A
When buyer power is low, leverage must be created rather than assumed. Consolidating organisational spend increases volume and commercial importance to the supplier, directly strengthening buyer power. Understanding supplier costs and margins reduces information asymmetry and demonstrates commercial competence, which improves credibility and influence during negotiations. Refusing concessions and limiting communication are typical of adversarial tactics and often weaken relationships when power is already limited. CIPS clearly advises buyers to use aggregation of demand and market intelligence as ethical and effective methods to rebalance power without damaging long-term supplier relationships.
Question 1888
XYZ Ltd decides to go to market for a cleaning contract to service a number of offices. It knows that it will get a price which may, or may not, be better than the one it is currently paying. To gain leverage in the marketplace, the organisation decides to add other related services to the scope, such as gardening, security and maintenance, which increase the value of the contract. This is an example of which forms of spend consolidation?
Answer : B
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
- Vendor base reduction: straightforward reduction of number of suppliers in any category
- Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
- Volume redistribution: making recommendations following spend analysis to move from one supplier to another
- Volume consolidation across categories: certain purchase requirements may be common across a number of categories. In the scenario, XYZ has combined different categories but closely related to office services into a larger contract so that they can increase their leverage.
- Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
- Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
LO 1, AC 1.3
Question 1889
Which of the following are features of a single-sourced type of relationship on the relationship spectrum?
Exclusivity granted in relation to a particular product
The supplier is an oligopoly market structure
The supplier is trusted and collaborative
Framework contracts are used to identify the supplier
Answer : B
Single-sourced relationships often involve exclusivity for a specific product (1) and a high level of trust and collaboration (3) between buyer and supplier. This type of relationship is selected forstrategic procurement purposes, often involving long-term partnerships, which align with CIPS's relationship spectrum guidelines.
Question 1890
The procurement manager of a private healthcare provider is running an IT project. Who would be the stakeholders?
General public
Pharmaceutical suppliers
Senior Management
Software support developers
Answer : D
In the context of aninternal IT project, the relevant stakeholders would be thosedirectly involved in decision-making and implementation.Senior managementoversees funding and strategic fit, whilesoftware developersensure technical support. The general public and pharmaceutical suppliers are external and not primary stakeholders in this scenario.
''Stakeholder identification must focus on individuals or groups directly involved or affected by the procurement. This includes internal sponsors, end-users, and technical staff responsible for delivery.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Internal and External Stakeholders)
Question 1891
During a negotiation, Jos Gmez (salesperson for a strategic supplier) says his sales director will not approve discounts on initial purchases. However, he offers a 5% discount on the aftercare package, which gives the same monetary saving. Sally Pampas needs both the product and the aftercare package and aims for a 5% discount off the purchase price. To achieve a win-win (integrative) outcome, Sally should:
Answer : B
Integrative (win-win) negotiation looks for value-equivalent tradeables across the bargaining mix (price, service, warranty, aftercare, etc.). If the same total saving is achieved via aftercare---and the buyer needs it---accepting the tradeable meets objectives without forcing a distributive fight on unit price.
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Question 1892
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 1893
Effective listening is important in integrative negotiations. Is this statement correct?
Answer : A
Effective listening is crucial in integrative negotiations as it fosters mutual understanding and helps identify shared interests, leading to collaborative solutions. It enables negotiators to comprehend the other party's needs and concerns fully.
Question 1894
If a negotiation results in an offer which does not meet the buyer's minimum requirements, which of the following could the buyer pursue?
Answer : B
Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a 'walk away'. In case of no deal, buyer (or supplier) may switch to this option.
The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird's eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.
LO 1, AC 1.2
Question 1895
Which of the following are stages within the negotiation process?
Planning and preparation
Arguing and persuasion
Accepting hospitality
Testing and proposing
Answer : C
The formal negotiation process includes planning and preparation (objectives, BATNA, MIL) and testing/proposing (exchanging offers). Hospitality is not a stage---it may support relationships but is not part of structured negotiation. Arguing/persuasion occurs within bargaining but is not defined as a stage in itself. Understanding the stages ensures structured progress and prevents disorganised discussions, which often result in suboptimal agreements.
Question 1896
Which factors give rise to conflict within the procurement negotiation context? Select THREE that apply.
Answer : A, C, F
Conflict can arise in procurement negotiations due to a power imbalance, which occurs when one party has more influence than the other, leading to potential exploitation or dissatisfaction. Differences in goals between parties---such as cost minimization for buyers and profit maximization for suppliers---also contribute to tension. Surprisingly, similar motives can lead to conflict as well, particularly when both parties are competing for limited benefits or market share.
Question 1897
Listening is a key activity in any negotiation. Which of the following are characteristics of effective listeners?
Answer : C
Question 1898
Which of the following would describe a push approach to influencing?
Exerting power or authority
Extensive use of open questioning
The party being influenced is fully aware of the process occurring
The party being influenced may not be aware of the process happening
Answer : C
A push approach typically involves exerting authority or power (1) with the party being influenced generally aware of the influence process (3). This method involves overtly directing or persuading the other party, often through explicit information or directives, as per CIPS's understanding of push influence techniques.
Question 1899
Citywide Developments Ltd (CDL) is a construction programme management company that delivers high-value property development schemes. CDL uses named consultant design services in contracts. Recently, consultancy day rates have increased. Which of the following tradeable concessions could CDL offer when negotiating with suppliers to achieve lower rates, without lowering service quality?
Answer : D
By removing the requirement for named personnel, CDL could allow the supplier flexibility in allocating equally competent but possibly less expensive staff. This tradeable does not compromise on quality but helps control costs.
Question 1900
In what circumstances is the bargaining power of suppliers likely to be high, in relation to buyer power? Select THREE that apply.
Answer : A, D, E
Supplier bargaining power is stronger when there arefew suppliers,low volume requirementsfrom buyers, and when suppliers possessunique capabilities or technology(like specialized machinery). These conditions reduce buyer leverage and increase supplier influence.
Question 1901
Stalemate is more likely to happen if both parties trade more variables in a commercial negotiation. Is this assumption true?
Answer : C
Negotiation variables such as price or contract length, etc are that can be traded with TOP in a negotiation. The more variables you can identify, the better. The more variables you can identify and articulate, the lower the chances of the negotiation reaching deadlock as more possibilities are facilitated regarding more creative solutions.
Below are examples of negotiation tradeables in buying professional services:
LO 2, AC 2.3
Question 1902
Sally is negotiating with an oversea supplier on the price and payment period. Her company and the supplying organisation are equal in bargaining power. The supplier says that they are investing in new facilities and machinery so the payment period should not be longer than 30 days. Sally knows that her company often pays the suppliers after 45 days from the delivery, but at the moment the company has positive cash flow and it is able to pay immediately. Which of the following should be Sally's concession plan?
Answer : B
In the scenario, the length of payment period is particularly important to the supplier as they are investing new facilities. Otherwise, the buyer's company has a positive cash flow position and budget is available for a shorter payment terms. So this tradeable (payment period) is important to supplier but it is not a significant problem with the buyer. This tradeable will fall within 'Easy concession to trade' quadrant in the following matrix:
Table Description automatically generated
If the tradeable fall within this quadrant, Sally should shorten the payment period in supplier's favour and try to win as many concessions as possible in return. Asking for a discount may be a reasonable trade-off.
LO 2, AC 2.3
Question 1903
Which of the following is a variable cost?
Answer : D
Variable costs change in proportion to production volume, such as packaging, raw materials, and delivery. Fixed costs (rent, insurance, loan repayments) remain constant regardless of output. Recognising the difference is crucial when negotiating supplier pricing, as variable costs are often more open to tradeable adjustments (e.g., bulk discounts). Buyers who understand cost structures can challenge inflated fixed allocations or negotiate on genuine variable elements. This knowledge is vital in price breakdown discussions and in cost-modelling negotiations.
Question 1904
Which of the following are stages of a win-win approach to negotiations?
Find out where the interests of both parties align
Design new options, where everyone gets more of what they need
Limit the resources to a fixed number
Insist that the agreement includes subjective regulatory standards
Answer : A
A win-win (integrative) negotiation focuses on shared interests and joint value creation. The first step is identifying where both parties' interests align, followed by designing creative options that allow both sides to gain more of what they need. Limiting resources and imposing subjective standards are characteristics of distributive or adversarial approaches and restrict value creation. CIPS clearly distinguishes integrative negotiation as collaborative, interest-based, and solution-focused, particularly suitable for long-term and strategic supplier relationships.
Question 1905
Which of the following are sources of personal power?
Legitimate power
Strategic power
Expert power
Leverage power
Answer : C
Personal poweris derived from an individual's unique qualities or expertise. It differs from positional power, which is based on job title or authority.Legitimate powerstems from an official position of authority, whileexpert poweris based on skills, knowledge, and credibility. These are both commonly used by procurement professionals to influence outcomes in negotiations.
''Expert power arises from experience, qualifications, or specialist knowledge that is recognised and respected by others. Legitimate power stems from a formal position or role within an organisation.''
(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Sources of Power in Negotiation)
Note: Strategic and leverage power are more aligned with organisational positioning and external factors, not personal influence.
Question 1906
For a commercial negotiation to be effective, the organisation has to identify resources required for negotiation. Which one of the following could help?
Answer : B
Involving an appropriate cross-functional team is beneficial for effective commercial negotiation because it brings together diverse perspectives and expertise relevant to the negotiation context. According to CIPS, a cross-functional team ensures that all aspects, such as technical, financial, and operational inputs, are considered, leading to more balanced and informed decision-making. This approach also helps in addressing complex negotiation elements effectively.
Question 1907
Champion Toys (CT) is negotiating a large order of luxury toys with its supplier, Top Teds. CT has identified that lead times, order quantities, and delivery locations are tradeables that could be used in this negotiation. At which negotiation stage should CT introduce these tradeables?
Answer : A
Bargaining is the negotiation stage where tradeables are typically introduced and discussed. During this phase, both parties exchange offers and concessions, using tradeables such as lead times and order quantities to find a mutually acceptable agreement. This aligns with CIPS's guidance on the stages of negotiation.
Question 1908
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
Question 1909
Which of the following tactics would be appropriate in an integrative negotiation?
Answer : C
''Expanding the pie'' is a strategy used in integrative negotiations where both parties collaborate to increase the total value available before dividing it. This leads to mutual gains and supports long-term, strategic relationships.
Question 1910
Buying organisation may increase its leverage with suppliers by concentrating spend. Which of the following are most likely to be forms of supplier spend consolidation? Select THREE that apply.
Answer : A, B, E
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
Volume redistribution: making recommendations following spend analysis to move from one supplier to another
Volume consolidation across categories: certain purchase requirements may be common across a number of categories
Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
Question 1911
The bargaining power of buyers is likely to be high in relation to suppliers in which of the following situations?
Answer : D
The bargaining power of buyers increases when the buyer is large relative to the supplier. A large buyer can leverage its size to negotiate more favorable terms due to its significant impact on the supplier's business. CIPS notes that a buyer's size and purchasing volume are key factors that enhance its negotiating power in buyer-supplier relationships.
Question 1912
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to explore options with the other party without making any formal commitment, which type of question style would they use?
Answer : B
Question 1913
Information generated through Purchase Price Cost Analysis can be useful to the purchaser, by helping to identify which of the following costs relating to the supplier? Select the THREE that apply.
Answer : C, F
Below are some examples of cost input that can be analysed in PPCA process:
- Material costs
- Process and labour costs
- Employment costs
- Overhead costs
- Distribution costs
- Depreciation on equipment
- Profit
If you want to learn more on PPCA, you can study from OGC document here: https://webarchive.nationalarchives.gov.uk/20100609100650/www.ogc.gov.uk/documents/Cost_Price_analysis(1).pdf
LO 2, AC 2.1
Question 1914
Colin Smith is preparing for a negotiation with a supplier that provides a chemical for grass fertiliser. Colin has been given an action to secure a commercial deal that achieves his organisation's objective of 'ethical and sustainable procurement.' As part of his negotiation plan, Colin is using the 'must, intend, like (MIL)' framework to prepare for the negotiation. Colin would categorise his organisation's objective within the negotiation plan as ...
Answer : C
In the MIL framework, ''Must have'' refers to non-negotiable elements. For Colin's organisation,ethical and sustainable procurementis a core, uncompromisable value, making it a ''Must have'' in negotiations.
Question 1915
Which of the following two are recognized strategies to achieve a win-lose outcome?
Making the other party lower its resistance point
Making the other party think this settlement is the best it can achieve
Employ empathy to gain mutual understanding
Using compromise and creativity tactics
Answer : A
In a win-lose outcome, tactics often involve lowering the other party's resistance point (1) and convincing them that the offer is the best possible (2). These strategies are designed to maximize advantage for one party at the expense of the other, fitting with CIPS's win-lose negotiation techniques.
Question 1916
Which of the following is an advantage of consultation as an influencing tactic?
Answer : B
Consultation involves actively involving stakeholders or counterparties in decision-making. By seeking input, it fosters a sense of ownership, increasing commitment to negotiated outcomes. It is particularly effective when the negotiator has low positional power, as it shifts dynamics from authority to collaboration. Unlike coercion or compliance tactics, consultation builds engagement and long-term trust, which is critical in complex procurement where buy-in is essential for contract success. CIPS stresses its role in building influence where direct authority is limited.
Question 1917
A procurement professional is preparing for a negotiation of purchasing non-critical commodity products. He knows that the product can be easily replaced by other substitutes in the market. The negotiation for these products is typified by which of the following?
Answer : C
With non-critical commodity products, the relationship will be transactional. Buyer should not spend too much time and effort into the negotiation.
LO 1, AC 1.4
Question 1918
Which of the following occur within the planning and preparation stage in a negotiation process? Select THREE that apply.
Answer : A, B, F
In the planning and preparation stage of negotiation, it is essential to build a strong foundation by understanding various factors that influence the negotiation outcome. According to CIPS resources, critical aspects of preparation include:
Understanding the other party (A): This helps in anticipating their needs, objectives, and potential negotiation styles, leading to more strategic discussions.
Defining the constituents (B): This involves identifying all stakeholders or parties impacted by the negotiation, ensuring their interests are considered when planning the negotiation strategy.
Analyzing the bargaining power (F): Understanding the relative power each party brings to the negotiation helps in setting realistic goals and predicting possible negotiation dynamics.
These elements are foundational in ensuring a well-rounded approach and enabling both parties to enter negotiations with clarity and strategy, enhancing the potential for a positive outcome.
Question 1919
A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier over a contract for critical new services. They have decided they want to find a Win/Win (integrative) solution. Which TWO of the following would be appropriate in this scenario?
Answer : A, B
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.
Question 1920
During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price. To achieve a win-win (integrative) negotiation, Sally should ...
Answer : A
Sally's objective is to achieve a 5% saving. If the supplier offers this saving in a different form (aftercare package), and the total value meets her goal, then accepting this alternative shows flexibility and supports a collaborative,win-winoutcome.
Question 1921
The buyer's bargaining power tends to be relatively higher than supplier's bargaining power in which of the following circumstances?
Answer : D
Buyer power gives customers/consumers (buyers) the ability to squeeze industry margins by pressuring firms (the suppliers) to reduce prices or increase the quality of services or products offered.
There are four major factors to consider when determining the bargaining power of buyers:
1. Number of buyers relative to suppliers: If the number of buyers is small relative to that of suppliers, the buyer's power will be stronger.
2. Dependence of a buyer's purchase on a particular supplier: If a buyer is able to get similar products/services from other suppliers, buyers depend less on a particular supplier. Therefore, the power of the buyer would be greater.
3. Switching costs: If there are not many alternative suppliers available, the cost of switching is high. Therefore, buyer power would be low.
4. Backward Integration: If the buyer is able to integrate or merge suppliers, the buyer has greater bargaining power over the existing suppliers.
When is Bargaining Power of Buyers High/Strong?
There are fewer buyers relative to that of suppliers
The switching costs of the buyer are low
If the buyer is able to backward integrate
The buyer purchases product in bulk (high volume)
The buyer is able to get similar product/services from other suppliers
The buyer purchases the majority of the seller's products
Several substitutes are available on the market
Product is not differentiated
CIPS study guide page 54-56
What is the Bargaining Power of Buyers?
Question 1922
Effective listening is important in integrative negotiations. Is this statement correct?
Answer : A
Effective listening is crucial in integrative negotiations because it promotes understanding and collaboration. By actively listening, parties can identify shared interests and address concerns, which supports the goal of reaching mutually beneficial solutions. This is a key component in CIPS guidelines on successful integrative negotiation practices.
Question 1923
A good negotiator invests time in understanding the needs of the individuals in a negotiation. Is this statement true?
Answer : D
Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing tounderstand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:
The organisation - What the organisation wants to achieve. This is generally well stated and understood
The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual
Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.
Question 1924
At which stage in a negotiation would questions be asked to obtain missing information?
Answer : D
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 1925
Where there are high levels of commitment to relationships between both the buyer and supplier, this is seen as collaborative and beneficial to negotiations. Is this statement correct?
Answer : A
A collaborative relationship is characterized by mutual commitment, which enhances risk management and strategic planning between buyer and supplier. High levels of trust and commitment enable both parties to work closely to achieve shared objectives, creating a beneficial negotiation environment. This approach aligns with CIPS's principles of collaborative procurement relationships.
Question 1926
Which of the following are examples of non-verbal negotiation? Select THREE that apply.
Answer : B, D, F
Nonverbal communication is important because it gives us valuable information about a situation including how a person might be feeling, how someone receives information and how to approach a person or group of people.
There are several types of nonverbal communications you should be aware of, including:
1. Body language
Body language is the way someone situates their body naturally depending on the situation, the environment and how they are feeling.
Example: Someone might cross their arms if they are feeling angry or nervous.
2. Movement
The way you move your arms and legs such as walking quickly or slowly, standing, sitting or fidgeting, can all convey different messages to onlookers.
Example: Sitting still and paying attention in a meeting conveys respect and attention.
3. Posture
The way you sit or stand can also communicate your comfort level, professionalism and general disposition towards a person or conversation.
Example: Someone might slouch their shoulders if they feel tired, frustrated or disappointed.
4. Gestures
While gestures vary widely across communities, they are generally used both intentionally and unintentionally to convey information to others.
Example: Someone in the United States might display a ''thumbs up'' to communicate confirmation or that they feel positively about something.
5. Space
Creating or closing distance between yourself and the people around you can also convey messages about your comfort level, the importance of the conversation, your desire to support or connect with others and more.
Example: You might stand two to three feet away from a new contact to respect their boundaries.
6. Paralanguage:
Paralanguage includes the non-language elements of speech, such as your talking speed, pitch, intonation, volume and more.
Example: You might speak quickly if you are excited about something.
7. Facial expressions
One of the most common forms of nonverbal communication is facial expressions. Using the eyebrows, mouth, eyes and facial muscles to convey can be very effective when communicating both emotion and information.
Example: Someone might raise their eyebrows and open their eyes widely if they feel surprised.
8. Eye contact
Strategically using eye content (or lack of eye contact) is an extremely effective way to communicate your attention and interest.
Example: Looking away from someone and at the ground or your phone may convey disinterest or disrespect.
9. Touch
Some people also use touch as a form of communication. Most commonly, it is used to communicate support or comfort. This form of communication should be used sparingly and only when you know the receiving party is okay with it. It should never be used to convey anger, frustration or any other negative emotions.
Example: Placing your hand on a friend's shoulder may convey support or empathy.
- CIPS study guide page 174-175
- Nonverbal Communication Skills: Definition and Examples
LO 3, AC 3.3
Question 1927
A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction.
What is the mark-up profit percentage earned by the supplier on this transaction?
Answer : D
Mark-upis calculated as:
Mark-up%=(ProfitCost)100\text{Mark-up \%} = \left( \frac{\text{Profit}}{\text{Cost}} \right) \times 100Mark-up%=(CostProfit)100
In this case:
Profit = $240 - $160 = $80
Cost = $160
Mark-up = (80 / 160) 100 =50%
''Understanding mark-up percentages helps in assessing supplier pricing behaviour and negotiating realistic margins.''
(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Pricing Models and Profit Margins)
Question 1928
Which negotiation approach is focused on a win--win outcome?
Answer : C
A collaborative negotiation approach is explicitly designed to achieve win--win outcomes, where both parties work together to maximise joint value. This approach is closely associated with integrative negotiation, emphasising trust, information sharing, and joint problem-solving. Distributive and adversarial approaches are win--lose, focusing on dividing value rather than creating it. ''Collective'' is not a recognised CIPS negotiation approach. Collaborative negotiation is particularly suitable where long-term relationships, shared objectives, or strategic partnerships are important.
Question 1929
Any commercial negotiation process has only three stakeholders: procurement, budget holders, and users. Is this TRUE?
Answer : D
Commercial negotiations involve a wider set of stakeholders than procurement, budget holders, and users. Depending on context, directors, IT specialists, legal teams, regulators, or external partners may all be impacted. Ignoring them risks resistance or missed requirements. CIPS stresses stakeholder mapping tools (such as Mendelow's Matrix) to identify influence and interest levels, ensuring all relevant parties are managed appropriately in negotiation preparation and execution. Narrow stakeholder identification can undermine outcomes.
Question 1930
Which of the following is a source of information on microeconomic factors?
Answer : D
Microeconomic data specific to industries, suppliers, or products can often be found in commodity markets, trade exchanges, and financial databases. These provide detailed insights on supply, demand, pricing, and trends.
Question 1931
Which of the following would help build trust in a relationship?
Mediation attendance
Regular meetings
Keep promises
Coercion
Answer : B
Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.
Question 1932
Which of the following is definition of elasticity of demand in microeconomics?
Answer : C
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:
Text Description automatically generated with low confidence
Question 1933
Which of the following are most likely to be the potential cultural differences that can make transactions with an international supplier more problematic that with local suppliers? Select TWO that apply.
Answer : B, D
The question requires student to detect factors of cultural differences. Problems may occur on the international scene with such things as the importance of extending courtesy between cultures, the importance of timescales, the use of negotiating ploys, the sense of 'fair play', the use and interpretation of body language, the role of women in negotiations (or indeed, in business in general), the importance of status, the role of conflict, standards of dress and deportment and the readiness to ignore or uphold contract terms and conditions.
LO 3, AC 3.3
Question 1934
A procurement professional is negotiating with a supplier on cleaning service. She realises that there are huge cost-saving opportunities if the supplier agrees to reduce its mark-up and unnecessary employee benefits. Supplier's mark-up and employee benefits are examples of which of the following?
Answer : D
A key consideration when seeking to negotiate prices is to establish what proportion of the spend is addressable by procurement action such as negotiation. Addressability of spend is influenceable through negotiations or application of other saving effort or leverage with suppliers.
LO 2, AC 2.1
Question 1935
John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?
Answer : C
While stakeholder feedback is crucial, meetings are not always the most effective review method. Reviews may be better conducted through reports, surveys, or individual debriefs, depending on context. The key is to capture lessons learned, successes, and areas for improvement, and to record them for future negotiations. Forcing all stakeholders into one meeting risks inefficiency or unproductive blame games. CIPS stresses structured reflection and documentation as best practice, ensuring organisational learning and preparation improvements.
Question 1936
During a negotiation, Jos Gmez (salesperson for a strategic supplier) says his sales director will not approve discounts on initial purchases. However, he offers a 5% discount on the aftercare package, which gives the same monetary saving. Sally Pampas needs both the product and the aftercare package and aims for a 5% discount off the purchase price. To achieve a win-win (integrative) outcome, Sally should:
Answer : B
Integrative (win-win) negotiation looks for value-equivalent tradeables across the bargaining mix (price, service, warranty, aftercare, etc.). If the same total saving is achieved via aftercare---and the buyer needs it---accepting the tradeable meets objectives without forcing a distributive fight on unit price.
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Question 1937
Which of the following are types of questions that are useful in opening and testing phases of a negotiation? Select the TWO that apply.
Answer : C, E
In the opening phase, parties should confirm understanding and get the issues on the table.
The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.
Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.
Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening and testing stages.
Question 1938
Which of the following are hardball tactics in negotiations? Select TWO that apply.
Answer : B, C
In difficult negotiations and disputes, hardball tactics like punishment and threats often seem like the only way to win concessions. Some negotiators seem to believe that hardball tactics are the key to success in any negotiation. They resort to extreme demands and even unethical behaviour to try to get the upper hand in a negotiation.
The following are 8 typical hardball tactics:
1. Good cop / Bad cop
2. Low ball / High ball
3. Bogey
4. The Nibble
5. Chicken
6. Intimidation
7. Aggressive Behaviour
8. Snow Job
You can read the details of each tactic here.
In the contrary to hardball tactics, negotiators can adopt integrative approach to the negotiation. Some of integrative tactics are:
1. Expand the Pie
2. Bridging
3. Post Settlement --Settlement
Et cetera
Question 1939
Lina Rawlins is a senior buyer working for a medical equipment company. Lina is in charge of the company's largest supplier account, Great Barrington Gas (GBG), a medical equipment supplier. Recently, GBG's performance has declined, leading to an increasing number of rejected items. Lina is aware of the seriousness of this and has asked GBG to attend an urgent meeting. In the meeting, Lina asked the GBG representative, ''Can you tell me exactly what you are doing to ensure quality?" What type of question is Lina asking?
Answer : A
Lina is asking a probing question to gather more detailed information on the actions GBG is taking to address quality issues. Probing questions are intended to delve deeper into a topic and elicit specific details, making them suitable for understanding underlying issues, as per CIPS's negotiation question types.
Question 1940
A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier over a contract for critical new services. They have decided they want to find a Win/Win (integrative) solution. Which TWO of the following would be appropriate in this scenario?
Answer : A, B
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.
Question 1941
What is a benefit to the buyer of having a BATNA (best alternative to a negotiated agreement) in a negotiation?
Answer : C
A BATNA provides the buyer with the confidence to walk away if terms are not favorable, ensuring they don't settle for a suboptimal agreement. Knowing the best alternative enables buyers to negotiate from a position of strength, as per CIPS's guidance on negotiation strategies.
Question 1942
Why is the use of power important for integrative commercial negotiations?
Moving negotiations forward when they get stuck on certain issues
Maximising the share of value gains for the negotiator's side
Coercion of the other party into a submissive agreement
Breaking through negotiation barriers related to attitude
Answer : C
In integrative (win--win) negotiations, power is not used to dominate or coerce but to enable progress and overcome barriers. Power can help move negotiations forward when discussions stall on specific issues and can help address behavioural or attitudinal barriers that prevent collaboration. Maximising one side's share of gains and coercion are characteristics of distributive or adversarial negotiations, not integrative ones. CIPS clearly differentiates the constructive use of power in integrative negotiations as a means to facilitate dialogue, encourage engagement, and unlock joint value, rather than to force submission or extract disproportionate gains.
Question 1943
Which of the following is an attribute of a distributive negotiation approach?
Answer : C
Distributive negotiation is often described as a 'win-lose' approach, where each party aims to maximize their own gain, often at the expense of the other. The focus is onachieving personal success, not collaboration.
Question 1944
Langham Industries is seeking to expand its operations globally. The CEO has asked the procurement department to engage in a macroeconomic analysis for its potential new supply chain to meet organisational objectives and outcomes. Which of the following would be a source of macroeconomic data?
Answer : C
Published market indices are a source of macroeconomic data, as they reflect broader economic trends and provide insights into the overall market environment, which is essential for globalexpansion planning. Macroeconomic analysis focuses on high-level economic indicators, as recommended in CIPS's guidelines on sourcing macroeconomic data.
Question 1945
A procurement manager withholds important information to strengthen negotiating power. Is this appropriate when using an integrative negotiation style?
Answer : B
Integrative negotiation relies on openness and trust, aiming to identify underlying interests, not just positions. Withholding information is typical of distributive (win-lose) bargaining, where each side protects its bottom line. In an integrative context, hiding key details prevents mutual understanding, reduces creative option-building, and damages relationship trust. Instead, transparency enables value creation---such as joint cost reduction or innovation. CIPS emphasises that power must be balanced with openness when integrative outcomes are desired.
Question 1946
Which of the following are external factors in supplier pricing decisions? Select TWO.
Answer : A, D
Suppliers' pricing decisions are influenced by both internal and external factors. Internal include cost of production, overheads, and lifecycle stage. External include competition (market dynamics, alternatives available) and customer perception of value (willingness to pay, brand image). These external elements are beyond supplier control but crucial in determining market price levels. Recognising these allows buyers to assess supplier pricing flexibility and to negotiate based on market realities rather than supplier cost claims.
Question 1947
Can a party gain huge advantages in negotiation from setting room layout?
Answer : B
Essentially, for trained negotiators under most circumstances, the physical locations of negotiations and the room layout should not make much difference to the outcomes of the meeting. It is reasonable to assume that most commercial negotiations are based at least initially on a principled- or pragmatic-type approach. It is arguable also that any advantage gained through intentionally creating an uncomfortable environment to put short-term pressure on TOP is likely to be short-lived as TOP will likely reflect on this later and seek means to get even.
Question 1948
In a commercial negotiation, a procurement professional negotiates on his company's behalf. The power of buying organisation is the only factor that influences the behaviours of the other party. Is this assumption true?
Answer : B
The assumption is false, because when a procurement professional negotiates on behalf of his employer, he brings the power of his organisation (its brand, reputation and purchasing spend) as well his own personal power (that which is embedded within him) to the negotiation.
From a negotiation perspective, both organisational and personal power have the ability to influence the behaviours of other or the cause of event. This power is clearly core to negotiation, and of enormous important in seeking to achieve the objectives.
Question 1949
When developing a negotiation approach, according to recognised theory (for example Mendelow), how should stakeholders with high interest but low power be managed?
Answer : C
According toMendelow's Matrix, stakeholders withhigh interest but low powershould be keptinformed. Their interest means they care about the negotiation's outcome, but their low power means they can't significantly influence it. Keeping them informed avoids alienation and ensures smoother implementation of negotiated agreements.
''Stakeholders with high interest but low power should be managed by keeping them informed. They may become powerful advocates or opponents in the future, so engaging them is a strategic approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Stakeholder Management in Commercial Negotiations)
Question 1950
Jessica Taylor, a senior buyer, is reflecting on her most recent negotiation. She has been asked by her manager to create a written record of performance. Which of the following should Jessica include in this negotiation performance report? Select THREE that apply:
Answer : C, E, F
Question 1951
Which of the following are stages within the negotiation process?
Planning and preparation
Arguing and persuasion
Accepting hospitality
Testing and proposing
Answer : C
The formal negotiation process includes planning and preparation (objectives, BATNA, MIL) and testing/proposing (exchanging offers). Hospitality is not a stage---it may support relationships but is not part of structured negotiation. Arguing/persuasion occurs within bargaining but is not defined as a stage in itself. Understanding the stages ensures structured progress and prevents disorganised discussions, which often result in suboptimal agreements.
Question 1952
XYZ Ltd decides to go to market for a cleaning contract to service a number of offices. It knows that it will get a price which may, or may not, be better than the one it is currently paying. To gain leverage in the marketplace, the organisation decides to add other related services to the scope, such as gardening, security and maintenance, which increase the value of the contract. This is an example of which forms of spend consolidation?
Answer : B
Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
- Vendor base reduction: straightforward reduction of number of suppliers in any category
- Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
- Volume redistribution: making recommendations following spend analysis to move from one supplier to another
- Volume consolidation across categories: certain purchase requirements may be common across a number of categories. In the scenario, XYZ has combined different categories but closely related to office services into a larger contract so that they can increase their leverage.
- Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
- Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
LO 1, AC 1.3
Question 1953
In a negotiation for a new contract, the supplier suggests the buyer to shorten payment period from 45 days to 15 days because they are investing in new facilities to expand the supply capacity. The buyer replies that she can only sign off the deal if the payment period is 30 days ormore since it often takes at least 30 days for her company to collect the payment from customers. A permission from senior management is required for this suggestion. In order to ensure that supplier understands the matter, she reiterates it throughout the meeting. Which tactics is she using?
1. Outrageous initial demand
2. Salami slicing
3. Lack of authority
4. Broken record
Answer : C
In the scenario, the buyer states that permission from senior management is required to shorten payment period and she only has authority to sign off a deal in which the payment period lasts at least 30 days. The buyer is using lack of authority. The buyer also repeats the matter again throughout the negotiation. This is a common tactic known as broken record.
Question 1954
Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
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
Question 1955
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares in response to market conditions. Dynamics pricing is based on which costing method?
Answer : D
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Question 1956
XYZ Ltd is importing goods from overseas. They prefer to pay their supplier in their own currency. Which of the following is a true statement?
Answer : B
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
LO 2, AC 2.2
Question 1957
Which of the following occur in the planning and preparation stage of negotiation? Select THREE.
Answer : B, C, D
Planning and preparation involve analysing bargaining power, understanding the counterpart's needs, and defining the constituents (parties involved). Questioning and concessions come later during bargaining. Narrowing solutions occurs during closure. Proper planning ensures negotiators enter with clear objectives, strategies, and knowledge, reducing surprises. CIPS highlights preparation as the most critical determinant of negotiation success, aligning with the saying: ''Failing to prepare is preparing to fail.''
Question 1958
At the first stage of CIPS Procurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
Answer : A
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 to proportionately 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 1959
Which of the following should be adopted to minimise the conflict between parties in commercial negotiation?
Answer : D
Ground rules are the basic rules for doing something (Cambridge Dictionary). A negotiation goes more smoothly if ground rules are adopted. Then if something goes awry at a later time, you can point out the ground rule that has been violated. Procurement professional should seek to minimise conflict over process through agreeing 'ground rules' and approach as far as possible with the other party in advance of any negotiation meetings.
There should be two sets of ground rules: 1) ground rules for the negotiations between the two parties and 2) ground rules for the negotiating team itself. This article is about the negotiating team ground rules.
The rule of law is the condition in which all members of society, including its political leaders, accept the authority of the law.
Ground zero describes the point on the Earth's surface closest to a nuclear detonation. In the case of an explosion above the ground, ground zero refers to the point on the ground directly below the nuclear detonation.
The Ground Beam is the beam which is provided usually at the foundation level to support building walls, joists, etc.
Question 1960
Which characteristics are likely to feature within an integrative negotiation?
Maximising the other party's outcome to enhance relationships
Maximising joint outcomes
Short-term focus
Pursuit of goals held jointly with other party
Answer : C
Integrative negotiationfocuses onmutual gainand long-term collaboration. It seeks tomaximize joint outcomesand encourages parties to align interests andpursue shared goals. This contrasts with distributive tactics that prioritize individual wins and short-term gains.
''Integrative negotiations aim to create outcomes where both parties benefit. Shared problem-solving, information exchange, and joint goal pursuit are central features of this approach.''
(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Principles of Integrative Negotiation)
Question 1961
Which type of question is most effective for checking facts in negotiation?
Answer : D
Closed questions (requiring yes/no or factual answers) are best for verifying facts, ensuring clarity and accuracy. Open questions are useful for exploration, while hypothetical test possibilities, and leading steer responses. In negotiation, closed questions confirm details such as prices, quantities, or deadlines, preventing ambiguity in agreements. CIPS stresses using the full range of question types strategically, with closed questions essential in finalising commitments.
Question 1962
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
Answer : A, C, E
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 conditionthat would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
Question 1963
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
Answer : D
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
Question 1964
Two firms negotiating a contract have an adversarial relationship. What type of negotiation would you expect?
Answer : B
Adversarial relationships typically lead to distributive (win--lose) negotiations, where each party seeks maximum gain at the other's expense. Trust is low, information is withheld, and concessions are hard-fought. While it can deliver short-term wins, it risks damaging long-term relationships and may reduce overall value. Collaborative, integrative approaches are more sustainable, but adversarial conditions often prevent them. CIPS highlights the importance of recognising relationship dynamics before selecting negotiation style, as forcing integrative approaches in adversarial contexts may be unrealistic.
Question 1965
Which of the following can help both parties to break the vicious cycle of blame when a relationship needs repairing? Select TWO that apply.
Answer : A, C
In order to break vicious cycle of blame, procurement will need to use their negotiation and conflict management skills, adopting a collaborative and integrative approach. Your first action should be to establish the facts that led to the situation where the relationship broke down. Most day-to-day relationship between buying organisations and suppliers do not of course involve procurement staff, so you will need to consult with your business partners internally to establish their point of view of where the issue and sources of conflict are. You should also contact the supplier and get their side of the story - this is particularly to when you have previously identified the supplier as critical or otherwise important to your operations. Ideally you will be able to apply principled negotiation here, separating the people from the issue, focusing on interests and not positions, and then looking for options of mutual benefits.
Question 1966
''Finding the middle ground between buyer and supplier is a satisfactory way to complete contract negotiations.'' Is this statement correct?
Answer : D
While compromise seems fair, it often erodes credibility and weakens long-term negotiation outcomes. Skilled negotiators avoid ''splitting the difference'' automatically, since it signals weak preparation and can encourage exploitation in future talks. Instead, agreements should be built on objective value, data, and tradeables. Compromise has a place, but reliance on it damages strategic positioning. CIPS stresses integrative or principled negotiation over simplistic middle-ground settlements.
Question 1967
''BATNA is a concept that should be considered at the start of negotiations.'' Is this statement correct?
Answer : A
BATNA (Best Alternative to a Negotiated Agreement) is a core preparation concept and should always be considered before negotiations begin. It gives the buyer clarity on the minimum acceptable outcome and provides leverage by ensuring they do not accept a deal worse than their alternative. BATNA is not a legal requirement, nor should it be developed only when negotiations fail, as this weakens negotiating confidence and decision-making. CIPS emphasises BATNA as a fundamental planning tool that underpins effective and disciplined negotiation behaviour.
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