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CIPS L4M5 Exam Syllabus Topics:

Topic	Details
Topic 1	How purchasers can improve leverage with suppliers The importance of power in commercial negotiations
Topic 2	Setting objectives and defining the variables for a commercial negotiation Use of telephone, teleconferencing or web based meetings
Topic 3	Costing methods such as absorption, marginal or variable and activity based costing Know how to prepare for negotiations with external organisations
Topic 4	Organisational power: comparing the relative power of purchasers and suppliers Explain how the balance of power in commercial negotiations can affect outcomes
Topic 5	Identify the different types of relationships that impact on commercial negotiations Pragmatic and principled styles of negotiation
Topic 6	Setting targets and creating a best alternative to a negotiated agreement (BATNA) Collaborative win-win integrative approaches to negotiations
Topic 7	Building relationships based on reputation, and trust Repairing a relationship The relationship spectrum
Topic 8	Differentiate between the types of approaches that can be pursued in commercial negotiations Distributive win-lose, distributive approaches to negotiation
Topic 9	Analyse the application of commercial negotiations in the work of procurement and supply Negotiation in relation to the stages of the sourcing process
Topic 10	Team management and the influence of stakeholders in negotiations Definitions of commercial negotiation
Topic 11	Analyse how to assess the process and outcomes of negotiations to inform future practice Protecting relationships after the negotiation
Topic 12	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 (Q58-Q63):

NEW QUESTION # 58
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. Postponing the issue
• C. Yielding the supplier's point of view
• D. Seeking a quick middle-ground position

Answer: B Explanation:
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
NEW QUESTION # 59
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. Shehas 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?

• A. Directive (push)
• B. Persuasive reasoning (push)
• C. Collaborative (pull)
• D. Visionary (pull)

Answer: C Explanation:
There are two major persuasion methods: 'push' and 'pull'.
Persuasion can be defined as encouraging someone to dosomething 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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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.
NEW QUESTION # 60
Which of the following are most likely to help buyer become preferred customer in supplier's perspective?
Select TWO that apply.

• A. Onerous supplier terms and conditions
• B. Shorter payment period
• C. Ensuring an increased number of repeat orders
• D. Reduction in delivery errors
• E. Compliance with agreed repair lead time

Answer: B,C Explanation:
Explanation
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
- Simple contracting processes
- Clear and concise documentation
- Absence of onerous supplier terms and conditions (onerous supplier terms and conditions mean that obligations imposed on suppliers are greater than their gains)
- On-time payment: The reduction in hassle for both supplier and the buyer, if bills are paid on time, is significant. From the customer's perspective it could also be the opener to agreeing preferential payment terms. A supplier may weigh up that payment on time at 60 days is worth taking, over the current 30-day terms that slip to 90 days and beyond.
-Transparent processes
- Ethical behavior
LO 1, AC 1.3
NEW QUESTION # 61
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. Market penetration pricing
• D. Cost plus arrangement

Answer: D 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 # 62
Which of the following are intangible values created by trust in business relationships? Select TWO that apply.

• A. More focus oncore business
• B. Increasing response time to request
• C. Frequent conflict escalation
• D. Higher revenues
• E. Positive feedbacks from customers

Answer: A,E Explanation:
Explanation
Trust may create value as following:
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LO 1, AC 1.4
NEW QUESTION # 63
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