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L4M5 Commercial Negotiation Questions and Answers

Questions 4

Katie is preparing a negotiation with a strategic supplier. Through deep market analysis, she realises that her company and the supplier have equal bargaining power. Via regular communication, Katie knows that both parties are arguing on amount of liquidated damages and neither party shall concede all of their requirements but some are negotiable. Katie and her counterpart from supplying company still desire a long-term relationship and hope that the meeting between them will be a solution for current situation. Which of the following is the most appropriate approach that Katie should adopt to achieve the above outcome?

Options:

A.

Avoiding approach

B.

Competing approach

C.

Compromising approach

D.

Accommodating approach

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Questions 5

What letter R in the acronym SMART stands for?

Options:

A.

Recommended

B.

Random

C.

Relevant

D.

Risk-free

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Questions 6

A negotiation process ends once the negotiating meeting has finished. Is this statement true?

Options:

A.

Yes, provided that the meeting results in a win-win for both parties

B.

Yes, because both parties have all of the emotional intelligence they need to proceed

C.

No, best practice would include a period of reflection after the meeting as part of the process

D.

No, the negotiation of terms should always continue after the meeting and until signed by the supplier only

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Questions 7

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

Options:

A.

SRI's purchase amount makes significant proportion of supplier revenue

B.

Costs of changing suppliers are high

C.

Rubber from different suppliers is virtually similar

D.

SRI sets up its own rubber plantation

E.

There are no close substitutes for rubber

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Questions 8

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?

Options:

A.

1 and 2 (Consolidate expenditure and understand supplier costs)

B.

2 and 3 (Understand supplier costs and take a distributive approach)

C.

3 and 4 (Take a distributive approach and limit communication)

D.

1 and 4 (Consolidate expenditure and limit communication)

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Questions 9

Which type of power is considered the opposite of coercive power?

Options:

A.

Referent power

B.

Informational power

C.

Reward power

D.

Expert power

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Questions 10

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?

Options:

A.

Resources and cost spectrum

B.

The relationship spectrum

C.

The color spectrum

D.

A spectrum of non-critical items

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Questions 11

Which of the following is most likely a consequence of falling interest rate?

Options:

A.

Increase aggregate demand

B.

Decrease investment

C.

Increase savings

D.

Decrease consumption

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Questions 12

Power is used only in adversarial negotiation situations to secure a ‘win’ outcome against the other side. Is this statement correct?

Options:

A.

Yes, it only in adversarial negotiation that the use of power is necessary, because of the win-lose outcome

B.

Yes, all negotiations entail a commercial contest which is always adversarial, as the powerful side gains

C.

No, the use of power can be necessary in integrative negotiations to help overcome time-wasting issues

D.

No, the use of power is not important in commercial negotiations as each side only looks for areas of agreement

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Questions 13

Which of the following is a source of information on microeconomic factors?

Options:

A.

Analysts published in the mainstream and financial media

B.

Data published by the financial markets and commodity markets and exchanges

C.

The marketing and corporate communications of suppliers

D.

Published economic indices such as the Retail Price Index (RPI)

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Questions 14

If the price of a good is above the equilibrium price, which of the following will happen?

Options:

A.

The quantity demanded is equal to the quantity supplied and the price remains unchanged

B.

There is a shortage (i.e. an excess demand) and the price will fall

C.

There is a surplus (i.e. an excess supply) and the price will rise

D.

There is a surplus (i.e. an excess supply) and the price will fall

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Questions 15

Understanding supplier's mark-up and margin can provide procurement professional a comprehensive insight into supplier's net profits. Is this statement true?

Options:

A.

Yes, because supplier's mark-up and margin are two most valuable sources of information to procurement

B.

No, because mark-up and margin inform little about supplier's net profit

C.

No, because margin is enough to tell procurement about supplier's profitability

D.

Yes, because these are two indicators of supplier's future prospect

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Questions 16

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?

Options:

A.

SMART

B.

STOPS WASTE

C.

OWN-IT

D.

SAMOA

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Questions 17

Which of the following is the most appropriate pricing arrangement in contracts where major inputs are commodities?

Options:

A.

Price adjustment mechanism

B.

Cost reimbursable pricing arrangement

C.

Standard schedule of rates

D.

Fixed pricing arrangement

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Questions 18

Which of the following would cause a demand curve for a good to be price inelastic?

Options:

A.

There are a great number of substitutes for the good

B.

The consultancy service

C.

The luxury goods

D.

The necessary goods

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Questions 19

In what circumstances is the bargaining power of suppliers likely to be high, in relation to buyer power? Select THREE that apply.

Options:

A.

The number of suppliers is limited

B.

The demand is not urgent

C.

The product the buyer requires is undifferentiated

D.

The volume required is low

E.

The supplier has highly specialized machinery

F.

The buying firm is large in comparison to the supplier

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Questions 20

A negotiation meeting commences with the supplier asking the buyer 'How do you feel about the service you receive from us currently?', followed by 'What do you think about our latest products?' and 'How do we compare with other suppliers you use?'

The supplier is using which type of questions?

Options:

A.

Probing questions

B.

Closed questions

C.

Open questions

D.

Hypothetical questions

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Questions 21

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?

Options:

A.

The buyer should focus on wider costs and risk elements

B.

The approach must be collaborative

C.

There will be only limited negotiation

D.

There will be regular structured negotiations

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Questions 22

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?

Options:

A.

Reward

B.

Expertise

C.

Coercive

D.

Informational

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Questions 23

Which of the following statements about oligopoly is incorrect?

Options:

A.

A few firms play an important role in the sale of a product

B.

Oligopolistic firms recognize their interdependence

C.

One firm's behaviour is a function of what its rivals do

D.

Prices in oligopoly are predicted to fluctuate widely and frequently

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Questions 24

Ma Bell was the sole provider of landline telephone service to most of the US in 1980s. This is an example of...?

Options:

A.

Monopsony

B.

Monopoly

C.

Monopolistic competition

D.

Perfect competition

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Questions 25

Which of the following are most likely to be sources of conflict that can emerge from the process of commercial negotiations? Select TWO that apply.

Options:

A.

Differences in conflict management style

B.

Differences in culture

C.

Types of purchase

D.

Standard terms and conditions

E.

Line of the best fits

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Questions 26

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?

Options:

A.

No, purchasing can negotiate other details of the purchase requisition even where value analysis is absent

B.

No, value analysis is a very technical process that requires the expertise of engineering and financial analysts

C.

Yes, the role of purchasing is to add value to the purchase, and therefore every purchase requisition must go through a team value analysis

D.

Yes, value analysis is the single most important responsibility of procurement in the processing of repeat requisitions

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Questions 27

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?

Options:

A.

The gains that the supplier receives when the sales revenue exceeds fixed costs

B.

The gains from sales revenue that the supplier is willing to contribute in a profit-sharing contractual arrangement

C.

The gains that the supplier receives when the sales revenue exceeds variable costs

D.

The gains from sales revenue which the supplier retains as reserves to contribute to future development projects

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Questions 28

Win-lose approach is most likely to be associated with which of the following type of relationship?

Options:

A.

Adversarial

B.

Partnership

C.

Strategic alliance

D.

Outsourcing

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Questions 29

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

Options:

A.

Threat

B.

Logic

C.

Emotion

D.

Power

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Questions 30

Which of the following will help to indicate personality preferences in four dimensions?

Options:

A.

Thomas-Kilmann Conflict Resolution model

B.

Intelligence quotient

C.

Mill's RESPECT mnemonic

D.

Myers-Briggs Type Indicator

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Questions 31

Which of the following are most likely to be abilities of a person with high emotional intelligence? Select TWO that apply.

Options:

A.

Complex idea comprehension

B.

Controlling one's own emotions

C.

Perceiving how others feel

D.

Reasoning and problem solvingAbstract thinking

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Questions 32

If the value of the British Pound in other currencies is strong, which of the following is most likely to occur?

Options:

A.

The price of UK products in the UK will rise

B.

The price of UK products in the UK will fall

C.

The price of UK products abroad in foreign currency will fall

D.

The price of UK products abroad in foreign currency will rise

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Questions 33

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

Options:

A.

1 and 4 only

B.

2 and 3 only

C.

1 and 2 only

D.

3 and 4 only

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Questions 34

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?

Options:

A.

Activity-based costing

B.

Cost plus costing

C.

Absorption costing

D.

Marginal costing

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Questions 35

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?

Options:

A.

The buyer would be able to know the right volume to reach break-even point

B.

The buyer would be able to know the point at which the supplier would reject the offer

C.

With the sole understanding of supplier's fixed cost, the buyer would be able to know the volume at which supplier maximises their profit in short-run

D.

The buyer would be able to get a comprehensive picture of supplier's efficiency

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Questions 36

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?

Options:

A.

Supplier will receive less if XYZ's currency appreciates

B.

XYZ has an advantage in negotiating discounts if their currency appreciates

C.

XYZ is able to pay less if their currency depreciates

D.

XYZ has to pay more if their currency depreciates

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Questions 37

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?

Options:

A.

No, exchange rates only apply to the national economy

B.

No, as they only affect the bank's interest rates for loans

C.

Yes, as they can affect profit and turnover

D.

Yes, only if the organisation can handle foreign currencies in their accounts

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Questions 38

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

Options:

A.

2 and 4 only

B.

3 and 4 only

C.

1 and 2 only

D.

1 and 3 only

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Questions 39

When is the best time in procurement process in which procurement should get involved so that the cost-saving opportunities are the greatest?

Options:

A.

Market consult stage

B.

Post-contract stage

C.

Specification stage

D.

Post-tender stage

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Questions 40

When is the best time to adopt accommodating style according to Thomas-Kilmann conflict mode instrument?

Options:

A.

When both buyer and supplier want to find an integrative solution as their concerns are too important to be compromised

B.

When buyer needs to gather more information to gain more advantages in later negotiations

C.

When preserving harmony and avoiding disruption with supplier are especially important

D.

When buyer and supplier have equal power but are strongly committed to mutually exclusive goals

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Questions 41

Which of the following are examples of variable costs?

Building and site rent

Annual insurance premium

Raw materials expenditure

Delivery costs for materials

Options:

A.

1 and 3

B.

2 and 3

C.

1 and 4

D.

3 and 4

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Questions 42

Which of the following is the best description of direct cost?

Options:

A.

Direct costs are only variable raw materials that constitute a product

B.

Direct costs include raw materials, labour and overheads

C.

Direct costs include only raw materials and labour of making the final product

D.

Direct costs include raw materials, labour and other expenses attributable to the final product

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Questions 43

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?

Options:

A.

Win-Lose

B.

Lose-Lose

C.

Win-Perceived Win

D.

Win-Win

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Questions 44

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 on 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...

Options:

A.

Ask Jose to apply a 15% discount against the purchase price

B.

Accept the offer of a 5% discount against the aftercare package

C.

Decline the offer and walk away from the negotiation

D.

Ask Jose to apply the 5% discount against the purchase price

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Questions 45

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

Options:

A.

2 and 4 only

B.

1 and 3 only

C.

1 and 2 only

D.

3 and 4 only

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Questions 46

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?

Options:

A.

Collaboration

B.

Problem solving

C.

Coercion

D.

Persuasion

E.

Transfer of risk

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Questions 47

Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.

Options:

A.

Exploring a disagreement to learn from each other’s insights

B.

Yielding to another’s point of view

C.

Resolving some conditions that would otherwise have them competing for resources

D.

Trying to win at any cost

E.

Trying to find a creative solution to current problem

F.

Seeking a quick middle-ground position

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Questions 48

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?

Options:

A.

Leading

B.

Hypothetic

C.

Reflective

D.

Multiple

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Questions 49

A breakeven analysis uses which of the following aspects as part of the analysis?

Options:

A.

Fixed cost

B.

Buying cost minus variable cost per unit

C.

Variable cost

D.

Selling price minus variable cost per unit

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Questions 50

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

Options:

A.

Yes, as it allows issues to be shared and understood between all parties

B.

Yes, as it means the supplier’s attempts at negotiation can be stopped quickly with reasoning

C.

No, as what the other party has to say is not important

D.

No, as effective listening is important only in a distributive negotiation

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Questions 51

Which of the following are sources of personal power?

    Legitimate power

    Strategic power

    Expert power

    Leverage power

Options:

A.

1 and 2 only

B.

2 and 3 only

C.

1 and 3 only

D.

2 and 4 only

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Questions 52

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?

Options:

A.

Accept the offer as this would be an ideal opportunity to see what the supplier can offer and will provide the supplier with familiarity while negotiating

B.

Accept the offer as this would save time. A supplier visit and negotiation could be done at the same time

C.

Decline the offer as it would take too much time to go and visit the supplier

D.

Decline the offer as negotiating while on a site visit will provide the supplier with an unfair advantage because they will be in a familiar environment

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Questions 53

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?

Options:

A.

Contend on the normal payment period

B.

Shorten payment period but ask for a discount

C.

Agree with supplier's payment period without any further demand

D.

Demand for a discount without any other concessions

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Questions 54

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?

Options:

A.

Bargaining

B.

Closure

C.

Proposing

D.

Opening

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Questions 55

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.

Options:

A.

Minimal sharing of information

B.

Requirement to exceed expectations

C.

Degree of mutual commitment

D.

Use of power to seek the best possible deal

E.

Requirement to secure quality of supply

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Questions 56

Which of the following are most likely to be sources of conflict that can emerge from the content of commercial negotiations? Select TWO that apply.

Options:

A.

Framework arrangement

B.

Payment terms

C.

Contract governing law

D.

Requisition

E.

Cultural differences

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Questions 57

Macroeconomics can have an impact on commercial negotiations. Is this statement correct?

Options:

A.

Yes, because factors such as inflation might influence pricing decisions

B.

No, because these considerations only affect the buyer

C.

Yes, because sales volumes are a key factor in the discussions

D.

No, because these macroeconomics can be discussed and addressed with a WIN/WIN (integrative) strategy

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Questions 58

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

Options:

A.

Develop

B.

Nuisance

C.

Core

D.

Exploit

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Questions 59

A competitive win-lose distributive approach to a negotiation is seeking to:

Options:

A.

Foster collaboration and trust between the parties to enable joint problem solving

B.

Obtain the largest possible share of resources or benefits at the expense of the other party

C.

Maximise joint gains for both parties so that resources and benefits are equally shared

D.

Compromise and split the difference so that both parties do not get what they want

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Questions 60

Which of the following is an example of non-verbal communication?

Options:

A.

1 and 3 only (Interview and Eye contact)

B.

2 and 4 only (Word-of-mouth communication and Body language)

C.

3 and 4 only (Eye contact and Body language)

D.

2 and 3 only (Word-of-mouth communication and Eye contact)

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Questions 61

Which of the following tactics would be appropriate in an integrative negotiation?

Options:

A.

Lowball/Highball

B.

Take it or leave it

C.

Expanding the Pie

D.

Mother Hubbard

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Questions 62

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?

Options:

A.

Directive (push)

B.

Persuasive reasoning (push)

C.

Collaborative (pull)

D.

Visionary (pull)

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Questions 63

Which of the following is definition of elasticity of demand in microeconomics?

Options:

A.

The percentage change in the quantity demanded divided by the percentage change in income

B.

The percentage change in price of a good divided by the percentage change in the quantity demanded of that good.

C.

The percentage change in the quantity demanded of a good divided by the percentage change in the price of that good

D.

The percentage change in income divided by the percentage change in the quantity demanded

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Questions 64

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?

Options:

A.

Adopt opaque processes

B.

Increase the spend value

C.

Raise the transactional costs to do business

D.

Pay the suppliers on time

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Questions 65

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?

Options:

A.

Reflective

B.

Leading

C.

Hypothetical

D.

Probing

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Questions 66

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?

Options:

A.

Best Alternative to a Negotiated Agreement

B.

The Bargaining Mix

C.

Offer of Agreement

D.

Walk Away Point

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Questions 67

How can having a best alternative to a negotiated agreement (BATNA) support the buyer in a negotiation? Select THREE options that apply.

Options:

A.

It helps to be more assertive in a negotiation

B.

It reduces the likelihood of accepting a poor agreement

C.

It guarantees a win-win outcome

D.

It produces an unacceptable outcome

E.

It extends the length of the negotiation period

F.

It helps to identify the point at which the buyer should walk away

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Questions 68

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?

Options:

A.

Competitor analysis

B.

Attending trade conferences

C.

Published market indices

D.

Online supplier forums

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Questions 69

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?

Options:

A.

Yes, because the negotiation should be done as quick as possible

B.

Yes, because Diana's proposal is a fair trade for both parties

C.

No, because Diana should state exactly the increasing quantity

D.

No, because Diana has put the markers down too soon

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Questions 70

Economic growth can be measured by...?

Options:

A.

The PPI

B.

GDP

C.

The CPI

D.

SBLI

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Questions 71

Where a market consists of a large producer of a product with high market power, it is known as:

Options:

A.

A monopolistic structure

B.

An oligopoly structure

C.

A monopoly structure

D.

A monopsony structure

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Questions 72

An automotive company purchases high quality steel to produce components. The steel is an important raw material and the contract value is enormous. They sources the steel from oversea and contact some potential suppliers. One of the potential suppliers invites the procurement team to their premise for a new business opportunity. Should the procurement team accept the invitation?

Options:

A.

No, because negotiating over telephone is enough to collect information on supplier's capability

B.

Yes, because the visit would increase the buyer's bargaining power

C.

Yes, because this is an opportunity to assess the supplier's capacity

D.

No, because the travel would incur unnecessary costs

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Questions 73

Which of the following are the most typical characteristics of integrative approach to negotiation? Select TWO that apply.

Options:

A.

Positional-based

B.

Claiming value

C.

Interest-based

D.

Short-term wins

E.

Creating more value

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Questions 74

Which of the following are sources of power in organisational relationships?

    Coercive power

    Intruded power

    Referent power

    Tactical power

Options:

A.

1 and 2 only

B.

2 and 4 only

C.

1 and 3 only

D.

1 and 4 only

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Questions 75

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:

Options:

A.

Likely to have

B.

Intend to have

C.

Must have

D.

Like to have

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Questions 76

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:

Options:

A.

Travel expenses to attend the meeting

B.

Other suppliers that could have been used

C.

A detailed pricing structure

D.

A checklist of for future

E.

Evaluation of the negotiator’s performance

F.

A comparison of actual versus set objectives

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Questions 77

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

Options:

A.

Yes, as it allows issues to be shared and understood between all parties

B.

Yes, as it means the supplier's attempts at negotiation can be stopped quickly with reasoning

C.

No, as what the other party has to say is not important

D.

No, as effective listening is important only in a distributive negotiation

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Questions 78

Are tactical ploys only used in distributive approach?

Options:

A.

No, because tactical ploys strengthen the other party's position

B.

No, because tactical ploys will be more effective with integrative approach

C.

Yes, because tactical ploys will help to gain insights into the other party's interests

D.

Yes, because they will be irritants to long-term relationship

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Questions 79

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?

Options:

A.

Accept the offer as this would be an ideal opportunity to see what the supplier can offer and will provide the supplier with familiarity while negotiating

B.

Accept the offer as this would save time; a supplier visit and negotiation could be done at the same time

C.

Decline the offer as it would take too much time to go and visit the supplier

D.

Decline the offer as negotiating while on a site visit will provide the supplier with an unfair advantage, as they will be in a familiar environment

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Questions 80

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?

Options:

A.

The buyer will benefit from the savings that the supplier makes from the efficient cost management of the contract

B.

The buyer will not need to monitor the supplier’s costs relating to the contract

C.

Suppliers always seek price agreements that include cost-sharing incentives

D.

Suppliers calculate prices using fixed costs which the buyer must counteract by pushing for a fixed price agreement

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Questions 81

When developing a negotiation approach, according to recognised theory (for example Mendelow), how should stakeholders with high interest but low power be managed?

Options:

A.

Minimal effort

B.

Key player

C.

Keep informed

D.

Keep satisfied

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Questions 82

A procurement manager has been asked to procure 1,000 pens. He suggests to his manager that to obtain the best value for money, they should undertake a competitive bidding process. Would this be the best course of action?

Options:

A.

Yes, as all procurement processes should go through competitive bidding to achieve the best value for money

B.

Yes, the process will be opened up to many suppliers and therefore will result in a cheaper price for the pens

C.

No, competitive bidding should only be used when the value justifies the time spent on the process

D.

No, competitive bidding should only be used in public sector organisations

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Questions 83

There are no commitments in hypothetical questions. Is this statement true?

Options:

A.

No, because the party who makes hypothetical questions cannot withdraw their proposals

B.

No, because hypothetical questions are made explicitly to the other party

C.

Yes, because hypothetical questions generate a specific response

D.

Yes, because hypothetical questions only mention possible situations

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Questions 84

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

Options:

A.

Persistent late payment of the supplier’s invoices

B.

Unequal sharing of gains, risks, and costs with the supplier

C.

Requesting early supplier involvement

D.

Planning scheduled visits to the supplier site

E.

Scheduling agreed supplier delivery dates

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Questions 85

Which of the following is an attribute of a distributive negotiation approach?

Options:

A.

Focus on problem solving

B.

Identifying common ground

C.

Achieving personal success

D.

Creative problem-solving

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Questions 86

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?

Options:

A.

No, because supplier's average costs will rise as the buyer's demand increases

B.

No, because the supplier may need to invest in new facility to meet buyer's demand

C.

Yes, because larger order quantity will bring a considerable profit to supplier

D.

Yes, because larger order quantity will always enable the supplier to reach its economy of scale

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Questions 87

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

Options:

A.

Avoidance of submitting important documentations

B.

Reduced response time during contract performance

C.

Resolving some conditions that would otherwise have them competing for resources

D.

Subjective assessment of performance

E.

Exploring a disagreement to learn from each other's insights

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Questions 88

Which of the following occur within the planning and preparation stage in a negotiation process? Select THREE that apply.

Options:

A.

Understanding the other party

B.

Defining the constituents

C.

Making as few concessions as possible

D.

Using questions to elicit information

E.

Narrowing the range of solutions

F.

Analyse the bargaining power

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Questions 89

The purpose of ongoing supplier relationship management following a negotiation and contract award is that it:

Options:

A.

1 and 2 (Enables the buyer to monitor supplier performance and persuade the supplier to renegotiate better terms)

B.

1 and 3 (Enables the buyer to monitor supplier performance and work with the supplier to resolve relationship problems)

C.

3 and 4 (Enables the buyer to work with the supplier to resolve relationship problems and evaluate unnecessary concessions)

D.

2 and 3 (Enables the buyer to persuade the supplier to renegotiate better terms and work with the supplier to resolve relationship problems)

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Questions 90

Which of the following is a description of mark-up?

Options:

A.

Profit expressed as a percentage of the selling price

B.

Profit expressed as a percentage of costs

C.

Profit expressed as a percentage of fixed costs

D.

Profit expressed as a percentage of variable costs

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Questions 91

The National Schools Purchasing Forum (NSPF) is a procurement organisation that purchases goods and services on behalf of schools on a national scale. NSPF is close to concluding negotiations in a meeting with Hygienics For All (HFA) for the supply of consumables to school washrooms. Both parties have reached an agreeable position, and NSPF feels it is important that they conclude the negotiation at this point. What type of questions should NSPF ask HFA to achieve this?

Options:

A.

Hypothetical questions

B.

Open questions

C.

Closed questions

D.

Probing questions

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Questions 92

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

Options:

A.

1 and 3 only

B.

2 and 4 only

C.

3 and 4 only

D.

1 and 2 only

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Questions 93

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?

Options:

A.

An increase in the equilibrium price and quantity

B.

A decrease in the equilibrium price and quantity

C.

A decrease in the equilibrium price and an increase in the equilibrium quantity

D.

An increase in the equilibrium price and a decrease in the equilibrium quantity

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Questions 94

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?

Options:

A.

Metal used in the product

B.

Insurance for production machinery

C.

Rent for the supplier's premises

D.

Wages for the supplier's sales department

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Questions 95

The stages of commercial negotiation involve which of the following characteristics?

Options:

A.

Preparation, proposal, bargain, leave

B.

Open, testing, bargaining, closing, revisiting

C.

Preparing, opening, bargaining, agreement, closure

D.

Opening, debating, promising, testing, disagreeing, closing

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Exam Code: L4M5
Exam Name: Commercial Negotiation
Last Update: Jul 3, 2025
Questions: 317

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