Question 1

The bargaining power of buyers is likely to be high in relation to suppliers in which of the following situations?

Accepted Answer

D

Explanation: 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 2

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.

Accepted Answer

A, E

Explanation: 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 3

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?

Accepted Answer

D

Explanation: 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 4

Effective listening is important in integrative negotiations. Is this statement correct?

Accepted Answer

A

Explanation: 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 5

Which of the following are microeconomic factors? Select THREE that apply.

Accepted Answer

B, D, F

Explanation: 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 6

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?

Accepted Answer

C

Explanation: 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 7

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?

Accepted Answer

A

Explanation: 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 8

Which of the following are types of questions that are useful in opening and testing phases of a negotiation? Select the TWO that apply.

Accepted Answer

C, E

Explanation: 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 9

What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.

Accepted Answer

A, B

Explanation: 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 10

Where a negotiator uses numerical reasoning with facts as part of their negotiation approach, which of the following techniques will they be adopting?

Accepted Answer

B

Explanation: 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 11

Which of the following are examples of connected stakeholders in a private organisation? Select TWO that apply.

Accepted Answer

A, E

Explanation: 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 12

For a commercial negotiation to be effective, the organisation has to identify resources required for negotiation. Which one of the following could help?

Accepted Answer

B

Explanation: 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 13

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?

Accepted Answer

C

Explanation: 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 14

A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?

Accepted Answer

B

Explanation: 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 15

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?

Accepted Answer

B

Explanation: Hypothetical questions are used to explore options or scenarios without making commitments. This technique allows negotiators to understand the other party’s p

Free CIPS L4M5 Commercial Negotiation Actual Exam Questions