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CIPS L4M5 Exam Syllabus Topics:

Topic	Details
Topic 1	Team management and the influence of stakeholders in negotiations Definitions of commercial negotiation
Topic 2	Macroeconomics and its influence on commercial negotiations Contrast the economic factors that impact on commercial negotiations
Topic 3	Building relationships based on reputation, and trust Repairing a relationship The relationship spectrum
Topic 4	Analyse the application of commercial negotiations in the work of procurement and supply Negotiation in relation to the stages of the sourcing process
Topic 5	Identify the different types of relationships that impact on commercial negotiations Pragmatic and principled styles of negotiation
Topic 6	Setting objectives and defining the variables for a commercial negotiation Use of telephone, teleconferencing or web based meetings
Topic 7	Setting targets and creating a best alternative to a negotiated agreement (BATNA) Collaborative win-win integrative approaches to negotiations
Topic 8	How purchasers can improve leverage with suppliers The importance of power in commercial negotiations
Topic 9	How behaviours should change during the different stages of a negotiation Compare the key communication skills that help achieve desired outcomes

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CIPS Commercial Negotiation Sample Questions (Q94-Q99):

NEW QUESTION # 94
Which of the following are hardball tactics in negotiations? Select TWO that apply.

• A. Sweetening the deal
• B. Good cop, bad cop
• C. Expand the pie
• D. Snow job
• E. Bridging

Answer: B,D Explanation:
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
NEW QUESTION # 95
Which of the following is mostlikely to be a reason why a supplier charges its customer higher price after it has reached the break-even point?

• A. The supplier may have reached economy of scale
• B. Supplier may want to encourage buyer's demand
• C. Supplier may need to open new facilities to meet increasing customer's demand
• D. Supplier may have high fixed cost - variable cost ratio

Answer: C Explanation:
Explanation
'Supplier may want to encourage buyer's demand': the buyer tends to prefer lower price, if supplier wants to encourage its customers tobuy more, it needs to offer discount at bulk amount. So this option is not acceptable.
'Supplier may have high fixed cost - variable cost ratio': Supplier with high fixed cost needs high volumes to break even, but once achieved, it may be able to offer significant discounts for bulk orders
'The supplier may have reached economy of scale': when economy of scale is reached, cost per unit will be minimal which often leads to more favourable price.
'Supplier may need to open new facilities to meet increasing customer's demand': Increasing customer's demands may excess supplier's current capacity. Therefore, supplier may need to extend its capacity by investing more in facilities. To cover these fixed cost investment, supplier may charge higher price.
LO 2, AC 2.1
NEW QUESTION # 96
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.

• A. Regulations on health and safety
  Switching costs of buyer
• B. Digitalisation of medicine
• C. Order quantity
• D. Forward integration

Answer: A,B Explanation:
Explanation
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 forceswhich both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
Table Description automatically generated

Particularly, pharmaceutical industry is a heavily regulated sector, therefore, legal and regulatory matters in theindustry 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
NEW QUESTION # 97
XYZ Ltd needs to purchase a bundle of IT products from suppliers. The procurement manager requests details of costs regarding designing and managing those products. After receiving reports from suppliers, she realises that they have charged up to a 1,095% mark-up on IT products. In order to ensure value for money, which of the following should be a priority pricing arrangement of the procurement manager in the negotiation with these IT suppliers?

• A. Market skimming
• B. Premium pricing
• C. Cost plus arrangement
• D. Market penetration pricing

Answer: C Explanation:
In the scenario, the main cost driver is suppliers' mark-up. The priority should be limit the margin to be added.
XYZ Ltd can agree "cost plus"contracts with their suppliers to ensure no IT product purchased exceeds an agreed maximum margin level. Procurement teams can use their benchmarking tools to police these contracts.
Cost plus contracts are agreements where the contractor's pricing is based on itemising allowable costs and then adding an agreed margin.
Market penetration pricing - pricing low to win a large share of the market Market skimming - pricing a new product high in order to make a large profit from the purchases by initial customers. This is an effective strategy only in the absence of competition.When competition appears, market skimmers usually drop their prices Premium pricing - usually pricing high because the market is prepared to pay extra for the kudos associated with the product, thanks to, say, a reputation for quality, or a highly fashionable brand name, and so on
NEW QUESTION # 98
Understanding supplier's mark-up and margin can provide procurement professional a comprehensive insight into supplier's net profits. Is this statement true?

• A. Yes, becausesupplier's mark-up and margin are two most valuable sources of information to procurement
• B. No, because margin is enough to tell procurement about supplier's profitability
• C. Yes,because these are two indicators of supplier's future prospect
• D. No, because mark-up and margin inform little about supplier's net profit

Answer: D Explanation:
Explanation
Mark-up and margin allow supplier to make gross profit. Remember that every supplier operates under different cost structures and some are set up to be most profitableat a particular level of volume, so it is dangerous to assume all suppliers can survive on a lower margin if their volume increases. Intelligent buyers understand that mark-up and margin may define gross profits, but they tell you very little about a supplier's net profits.
LO 2, AC 2.1
NEW QUESTION # 99
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