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CIPS L4M5 Exam Syllabus Topics:

Topic Details
Topic 1
  • Organisational power: comparing the relative power of purchasers and suppliers
  • Explain how the balance of power in commercial negotiations can affect outcomes

Topic 2
  • Analyse the application of commercial negotiations in the work of procurement and supply
  • Negotiation in relation to the stages of the sourcing process

Topic 3
  • Analyse how to assess the process and outcomes of negotiations to inform future practice
  • Protecting relationships after the negotiation

Topic 4
  • Identify the different types of relationships that impact on commercial negotiations
  • Pragmatic and principled styles of negotiation

Topic 5
  • Differentiate between the types of approaches that can be pursued in commercial negotiations
  • Distributive win-lose, distributive approaches to negotiation

Topic 6
  • How purchasers can improve leverage with suppliers
  • The importance of power in commercial negotiations

Topic 7
  • Costing methods such as absorption, marginal or variable and activity based costing
  • Know how to prepare for negotiations with external organisations

Topic 8
  • Setting targets and creating a best alternative to a negotiated agreement (BATNA)
  • Collaborative win-win integrative approaches to negotiations

CIPS Commercial Negotiation Sample Questions (Q42-Q47):

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, ormay 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?

  • A. Volume consolidation across categories
  • B. Purchasing consortia
  • C. Volume pooling
  • D. Volume redistribution

Answer: A Explanation:
Buying organisation may increase its leverage with suppliers byconcentrating 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
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?

  • A. Confronting and trying to find a creative solution immediately
  • B. Seeking a quick middle-ground position
  • C. Yielding the supplier's point of view
  • D. Postponing the issue

Answer: D Explanation:
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
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?

  • A. Yes, because all parties must have exactly the same goals in integrative negotiation
  • B. Yes, because both parties have well understood each other's goals when they engage in collaborative negotiation
  • C. No, because the parties will always find a compromise solution in integrative approach
  • D. No, because any party may leverage its own advantage during the contract

Answer: D Explanation:
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.
Which of the following are most likely to harm trust between buyer and supplier in a commercial relationship?
Select TWO that apply.

  • A. Reduced response time during contract performance
  • B. Resolving some conditions that would otherwise have them competing for resources
  • C. Avoidance of submitting important documentations
  • D. Exploring a disagreement to learn from each other's insights
  • E. Subjective assessment of performance

Answer: C,E Explanation:
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
Which of thefollowing is the purpose of using stakeholder support level scale?

  • A. To identify key stakeholders
  • B. To estimate the gap and the progress towards desired levels of support
  • C. To identify stakeholder's needs and expectations
  • D. To identify stakeholder level of influence and interest and plot them on stakeholder map

Answer: B Explanation:
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:
Graphical user interface, application Description automatically generated

LO 1, AC 1.1
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