L4M5 Sample Questions Answers

The opening stage of the negotiation covers the very first few minutes when the parties meet and greet each other and are seated in the negotiation room in preparation for the main event.

Typical behaviours at the opening stage: 'dos' and 'don'ts'

Do’s

Be punctual and well presented (welcome their arrival)

Break the ice with small talks

Start the conditioning process

Check authority

Check agenda

Consider using visual aid to set out key objectives or make key points

Don’ts

Use strong, pushy, cold or tough style at the opening

Put down marker at this stage

Criticise other organisations/TOP's previous contacts/third parties.

In this scenario, Diana has made her proposal right at the opening stage. This is an example of 'don'ts'. Good negotiators are very careful about 'red lines'. If she puts such barrier up too early, the supplier may not try to look for more creative solutions later in the negotiation.

Supplier bargaining power is stronger when there arefew suppliers,low volume requirementsfrom buyers, and when suppliers possessunique capabilities or technology(like specialized machinery). These conditions reduce buyer leverage and increase supplier influence.

Monopolistic competition exists in market where there are many competing producers but they will try to use product differentiation. Although their products may be very similar, their ability to differentiate means that they can act as monopolies in short run, irrespective of the actions of their competitors.

In perfect competition, there are no barriers to entry to the market or exit from the market. In monopolistic competition, there tend to be fewer barriers to entry or exit in these markets than inoligopolistic markets, but it doesn't mean that there are absolutely no barriers to entry in monopolistic competition.

In perfect competition, the demand curve is perfectly elastic, which means that it will be horizontal. Otherwise, in monopolistic competition market, the demand curve will have normal downward slope.

LO 2, AC 2.2

There are two major persuasion methods: 'push' and 'pull'.

Persuasion can be defined as encouraging someone to do something 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':

Table Description automatically generated

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.

Building rapport sets apositive tonefor the negotiation and encourages openness. It is particularly vital during theopening phase, where first impressions are formed, and trust begins to build. Trust facilitates moreconstructive dialogue, enhances collaboration, and helps parties exploremutual interests.

“Developing rapport at the start of negotiations helps to foster trust and cooperation. This enhances the likelihood of reaching agreements that are mutually beneficial.”

(L4M5 Commercial Negotiation, 2nd edition, Section 3.4 - The Opening Phase and Relationship Building)

When a buyer’s purchase represents asignificant portion of a supplier’s revenue, it increases the buyer’s leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.

“Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer’s ability to influence terms.”

(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)

In most commercial negotiations with monopolistic organisations, one can expect that in general they will have far greater bargaining power - you will need them more than they need you. There BATNA is stronger in the short run, but over time their power can be challenged effectively.

Ways of dealing with monopoly suppliers include the following:

Making yourself an attractive buyer

Seeking out alternatives / substitutes in a private or public manner

Designing out the requirement that forces you to go to the monopoly suppliers, or seek to make the product, or threaten to make it yourself if feasible

Lobbying government or campaigning, as part of an industry or trade body, for a reduction in barriers to entry that support the monopoly

The Myers–Briggs Type Indicator (MBTI) is an introspective self-report questionnaire indicating differing psychological preferences in how people perceive the world and make decisions. MBTI indicates personality preferences in four dimensions.

The Thomas–Kilmann Conflict Mode Instrument (TKI) is a conflict style inventory, which is a tool developed to measure an individual's response to conflict situations.

Mill's RESPECT mnemonic is set out by Harry A. Mills which describes seven steps to agreements

An intelligence quotient (IQ) is a total score derived from a set of standardized tests designed to assess human intelligence.

In order to identify opportunities where you can increase your leverage with supplier, you need to understand your spend. Undertaking spend analysis of your accounts payable (AP) data is an essential first step here.

With non-critical commodity products, the relationship will be transactional. Buyer should not spend too much time and effort into the negotiation.

LO 1, AC 1.4

In the scenario, the value of contract as well as the importance of purchased item justify the procurement's travel. Visiting a supplier at their HQ or operational facility may facilitate the procurement team in assessing, albeit briefly, the culture of the organisation, how busy they seem and how staff engage with each other. A visit is a good opportunity to assess supplier's capacity.

LO 2, AC 2.2

In the scenario, the buyer states that permission from senior management is required to shorten payment period and she only has authority to sign off a deal in which the payment period lasts at least 30 days. The buyer is using lack of authority. The buyer also repeats the matter again throughout the negotiation. This is a common tactic known as broken record.

Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Commercial situations often demand a distributive bargaining approach, if the 'pie' is inherently of a fixed size. In this case, any conflicts must be resolved by sharing it.

In win-lose approach, a negotiator wants to maximise the value obtained in a single deal, the relationship with the other party is not important. Therefore, a strong party may win more than 50% of the metaphorical 'pie'.

It should not be assumed that win-win can be applied to all commercial negotiations, or that win-lose approaches are inherently inferior.

A shift in demand occurs when an influencing factor other than price changes. Those factors are:

- The income of buyers

- The tastes and preferences of buyers

- The prices of other goods and services, especially substitutes and complements

- Expectations of buyer about the future

In this question:

- 'Prices of complementary goods decrease' will lead to quantity demanded for that complements rising, then demand for consumer good will increase accordingly.

- 'Price of the consumer good decreases' will increase the quantity demanded for that good, but it will not shift the demand curve

- 'Customers' expectation of higher prices in the future': in this scenario, customers tend to buy more to store in present, which leads to demand curve shifting to the right

- 'Consumer tastes shift toward substitute products': Demand for substitutes will rise, so demand for that consumer good will decrease and the demand curve shifts to the left.

LO 2, AC 2.2

Trust is built through consistent communication (e.g., regular meetings) and fulfilling commitments (keeping promises). Coercion erodes trust, while mediation is reactive and not a foundational element of trust-building.

A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.

Warm - a people person

Tough - a hard-nosed negotiator

Logic - a numbers person

Dealer - a trader who loves bargaining

Strengths, weaknesses of logical style are described below:

Table Description automatically generated

Expert power is based on a person's high levels of skill and knowledge, formal training, qualifications and experience in a particular procurement category would give someone expert status and mean that in negotiation their voice is listened to as a more objective, informed knowledge leader. Expert power is based on facts, knowledge, research, insight and study.

Legitimate power comes from rules, formal authority, organisation rank, staff rate or official position held.

Reward power comes from one person's ability to compensate or reward another for compliance.

Referent power stems from their personality, way of engaging with others and habit of acting in a way that is in line with a strong set of values and principles.

In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:

Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.

Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.

By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.

Internal stakeholder support will be important not just at the initial negotiation of the contract, but potentially throughout the life of the contract right through to exit.

As a general rule, connected stakeholders (with the exception of suppliers) have a low level of influence on procurement negotiations.

Suppliers are connected stakeholders who have contractual relationships with the organisation.

Commercial negotiation objective should be driven by the business needs of the organisation, and not just the instinct of procurement.

Foreign exchange rates impact import costs, profit margins, and overall turnover when transactions are conducted in foreign currencies. Understanding these fluctuations allows buyersto anticipate changes in purchasing costs, supporting informed decision-making, as highlighted in CIPS guidance on global procurement considerations.

Hypothetical questionsare used to explore scenarios or options without making a commitment. For example, asking "What if we were to increase the order volume?" encourages creative thinking and testing potential agreements without binding either party. This technique is valuable in theproposing and bargaining stagesof negotiation to explore trade-offs and build mutual solutions.

As a negotiation nears theclosure stage, experienced negotiators look forbuying signals— both verbal (e.g., positive affirmations) and non-verbal (e.g., nodding, leaning in). These cues indicate readiness to agree and allow the negotiator to move confidently into closing the deal.

“At the closing stage, negotiators should observe both verbal and non-verbal buying signals. These cues can indicate readiness to commit, helping to time the final proposal or acceptance effectively.”

(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Closing the Negotiation)

A perfectly competitive market is one with the following features:

- There are many firms producing identical or very similar (homogeneous) goods or services

- There are no barriers to entry to the market or exit from the market - anyone can enter or leave easily

- Both producers and customers have perfect knowledge of the market place, prices, costs of production and influences on demand and supply

Under these conditions, the price and quantity will always tend toward equilibrium as any producer that sets a price above equilibrium will not sell anything at all, and any producer that sets a price below a equilibrium will obtain 100% market share in theory. The demand curve is perfectly elastic, which means that it will be horizontal. In a perfectly competitive market, it is difficult to increase profits through pricing, and suppliers instead must focus on their cost structure. As these conditions imply, there are few if any examples of perfectly competitive market.

LO 2, AC 2.2

Integrative approach to negotiation used when the interested parties are attempting to create more of something of value to share, also known as collaborative approach or win-win. Integrative, interest-based negotiation can facilitate constructive, positive relationship and establishes contracts between parties on a foundation of goodwill. In integrative bargaining, both parties seek to 'expand the pie' by creating more value for both the buyer and the seller. Integrative negotiation ‘shares the pie’ and is interest rather than positional based.

In distributive bargaining, the focus is on claiming value and getting as much of the pie as parties can.

LO 1, AC 1.2

Trust may create value as following:

LO 1, AC 1.4

If interest rate are too low and credit is too, cheap rates can fund a spending boom with consumers and businesses buying (investment) more than they can afford to pay back.

An adversarial relationship in purchasing and supply arises when identical or equivalent good or services are available from competing suppliers and buyers/sellers are trying to gain an advantage over each other. Low levels of trust are characteristic of adversarial relationships. The outcome when two organisations with adversarial negotiate is most likely to be win-lose.

Legitimate power comes from the belief that a person has the formal right to make demands, and to expect others to be compliant and obedient. Legitimate power comes from rules, formal authority, organisation rank, staff grade or official position held. In commercial negotiation, legitimate power can be demonstrated by job title and rank.

LO 1, AC 1.3

Professional buyers, when planning or engaging in negotiation with suppliers, should always be aware of where the intended and actual relationship with this supplier is positioned on the 'spectrum' or 'continuum' of commercial relationships. The relationship spectrum describes the range of commercial relationships between a buyer and supplier based on richness of communication, longevity and mutual dependence.

Timeline Description automatically generated

In the question, the contract is simple one-off (or spot buy), which means the relationship will likely to be more transactional. In such relationship, price is the most important criteria and buyer may adopt arm's-length approach.

Investors or shareholders who have high level of influence but low interest belong to 'Keep satisfied' quadrant of Mendelow's Stakeholder Matrix.

You may read 2 versions from L4M1 and L4M5 here:

Table Description automatically generated

LO 1, AC 1.1

Afixed price agreementprovides the buyer withcost predictability. Once the price is agreed upon, the buyer is insulated from any cost increases on the supplier's side. The supplier bears the risk of fluctuating input prices, which simplifies cost control and contract administration for the buyer.

“With a fixed price arrangement, the buyer is protected from future price increases and does not need to monitor the supplier’s ongoing costs. This is particularly useful for budgeting and forecasting.”

(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Fixed Price Agreements)

At the proposing phase either side may start making tentative proposals regarding their offering. In the case of negotiation where TOP has already submitted a tender or proposal, this stage may provide an opportunity for them to make proposals to improve on their initial offers in general or in areas highlighted by the buying side in advance.

The word 'if' is very useful at this stage and allows you to test tentative proposals without committing yourself. Skilled negotiators use language very carefully. The questions with 'if' are hypothetical ones.

LO 3, AC 3.1

The question asks about negotiation techniques which are not present in the book. In this question, there are only 3 recognised techniques:

- Framing and reframing: A frame is an assumption, or set of assumptions, that guides our attention and behavior. Reframing is the ability to identify and significantly change assumptions or perspectives. Framing has a significant impact on the effectiveness of negotiation outcomes and negotiator working relationships. You can read more on framing and reframing here.

- Anchoring: Anchoring bias is well-known cognitive bias in negotiation and in other contexts. The anchoring bias describes the common tendency to give too much weight to the first number put forth in a discussion and then inadequately adjust from that starting point, or the “anchor.” We even fixate on anchors when we know they are irrelevant to the discussion at hand. You can read more on anchoring here.

- Pacing and leading: Pacing and leading is a two-step lever of persuasion. First – You “match your pace” to the person you want to influence in as many ways as possible. You can do this by mimicking the way the person talks, stands, their appearance, etc. You can also mimic less tangible aspects like the way they act, or their emotional state. Second – Once you’ve set your pace with someone, lead them to whatever decision or behavior you want them to take! You can read more on pacing and leading here.

Distributive bargainingfocuses onmaximizing one's own gainat the expense of the other party. Common tactics includewithholding informationandcoercion. It is typically used in zero-sum negotiations where parties compete over a fixed value.

“Tactics in distributive bargaining include withholding key information, making extreme opening offers, and using pressure to achieve concessions. These are aimed at maximizing individual outcomes.”

(L4M5 Commercial Negotiation, 2nd edition, Section 3.5 - Tactics of Distributive Bargaining)

Coercive power comes from the belief that a person can punish other for non-compliance, and can be considered as the flip side of reward power. Coercive power rests in the individual's ability to change other people's behaviour through threat, intimidation, use of guilt, ability to embarrass or shame, or withdrawal of benefits,...

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

Contribution = Price - Variable cost

Break-even point (volume) = Fixed cost/Contribution

Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor:

The price of a product can be described as being elastic if a small change in price leads to a big change in demand.

The price of a product can be described as being inelastic if a big change in price leads to a small change in demand.

The formulae of elasticity of demand is known as the following:

Text Description automatically generated with low confidence

Variable costsare expenses that change in proportion to business activity or production volume.Raw materialsanddelivery costsdirectly increase as more products are produced. In contrast,rentandinsuranceare fixed costs that remain constant regardless of output levels.

“Variable costs are directly linked to production output. Raw materials and logistics (e.g., delivery) scale with order volume, impacting supplier pricing and buyer negotiations.”

(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Direct and Variable Cost Classifications)

Closed questions are useful for verifying facts, as they prompt specific, concise responses. These questions allow the negotiator to confirm details without ambiguity, which is crucial for clarity in negotiation settings, as highlighted in CIPS’s guidelines on questioning techniques.

Principled negotiation is based on four fundamentals: people, interest, options and criteria:

Diagram Description automatically generated

1st Principle: separate the people from the problem: Negotiator should depersonalise the situation and accepting that the subject matter of the negotiation. This can be difficult for untrained negotiators, but this is a key skill to develop

2nd principle: focus on interests, not positions: It is important in principled negotiations not to focus on their parties' positions (what are expressed during negotiations), but on the interests (underlying needs) behind them

3rd principle: invent options for mutual gains: this principle aims to help the parties find a solution that both would benefit from. The more options - or tradeables - that can be brought to the table the better.

4th principle: insist on using objective criteria: is about making sure that the negotiation stays focused on outcomes based on objective criteria and that it is productive.

LO 1, AC 1.2

Legitimate poweris derived from theposition or authorityheld within the organisation. It supports the buyer’s ability to influence negotiation outcomes based on formal responsibility, legal rights, or contractual mandates.

“Legitimate power stems from formal roles, authority or responsibility. It enables negotiators to assert terms backed by organisational policy or legal mandate.”

(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Organisational Power Structures in Negotiation)

For low-value, routine purchases, the involvement of The procurement manager (C) and An internal business user (E) is appropriate. The procurement manager brings expertise in supplier engagement, while the internal business user provides insights on specific needs for the productor service. Involving high-level roles, like the CEO or a legal advisor, is unnecessary for routine purchases, as per CIPS guidance on resource alignment in procurement.

An adversarial negotiation style is more suitable in a market with many alternative sources and substitutes (B). When there are multiple suppliers, buyers have the upper hand and can adopt a competitive stance without risking supply continuity. This aligns with CIPS guidance on the use of adversarial styles in competitive markets with numerous alternatives.

Direct costs are those costs that can be directly attributed to the production of specific goods or services. They typically include raw materials and labor directly involved in production. Metal used in the product is a raw material that becomes part of the final product, making it a direct cost.

Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing tounderstand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:

The organisation - What the organisation wants to achieve. This is generally well stated and understood

The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual

Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.

Power, or more precisely perceptions of power, are critically important in understanding the commercial negotiation process. From a commercial negotiation point of view (under any circumstances, either integrative or distributive approach), CIPS is interested in power from both a personal and organisational perspective. When you are negotiating on behalf of your employer, you bring the power of your organisation (its brand, reputation and purchasing spend) as well your own personal power (6 sources of personal power, based on French and Raven's power base model) to the negotiation.

In both integrative and distributive approaches, personal power plays an important role. It helps both parties push through negotiating barriers and secure commitment and final agreement

LO 1, AC 1.3

The earlier procurement get involved in the procurement processes, the better. If procurement are involved in design at the specification stage they can feed in prices and costs to designer so they know the likely budget implication of choices made. Sending in a procurement team to negotiate at or close to the end of the procurement process effectively ties their hands and limits their negotiation leverage. This is illustrated in the graph below:

Chart Description automatically generated

LO 2, AC 2.1

The relationship spectrum categorizes supplier relationships based on factors like strategic importance, allowing organizations to tailor their approach to each supplier relationship. CIPS emphasizes the relationship spectrum as a valuable tool for assessing and managing supplier interactions based on strategic relevance.

Currency exchange rates are determined by macroeconomic factors and demand and supply. In general, countries with stable political and economic systems, a growing economy and a strong rule of law will have stronger and more stable currency than those without these characteristics. In this question, the British Pound is stronger than other currency, which means that buyers who import goods from the UK have to pay higher in their own currencies.

LO 2, AC 2.2

Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.

Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.

Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.

Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.

Otherwise, trust also has legal meaning. A trust is a legal document that can be created during a person's lifetime and survive the person's death. A trust can also be created by a will and formed after death. Charitable trusts are trusts which benefit a particular charity or the public in general.

A monopoly exists when only one company can supply an essential product or service in a given region because of significant barriers to entry for any competitor. The barriers can be legal, regulatory, economic, or geographic. Ma Bell case is an example of monopoly. The company was broken up in 1982.

A monopsony is a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers.

Pure or perfect competition is a theoretical market structure in which the following criteria are met:

- All firms sell an identical product (the product is a "commodity" or "homogeneous").

- All firms are price takers (they cannot influence the market price of their product).

- Market share has no influence on prices.

- Buyers have complete or "perfect" information—in the past, present and future—about the product being sold and the prices charged by each firm.

- Resources for such a labor are perfectly mobile.

- Firms can enter or exit the market without cost.

Monopolistic competition characterizes an industry in which many firms offer products or services that are similar, but not perfect substitutes. Barriers to entry and exit in a monopolistic competitive industry are low, and the decisions of any one firm do not directly affect those of its competitors. Monopolistic competition is closely related to the business strategy of brand differentiation

Asking questions the right way is both an art and a science. Ask the question the wrong way, and the other negotiator might act like a turtle, becoming defensive and withdrawing into their shell. Ask the question the right way, and the other negotiator might “spill the beans.”.

Closed Questions: How and when to use them?

Closed questions are those that require a short and focused answer, and are especially helpful in the beginning stages of the negotiation to encourage interaction. They can be used to clarify a point, or to reconfirm certain facts. For example, you can use a closed question to confirm the amount of units the company can produce in a week, or to clarify that what they are really saying is that they don’t feel comfortable outsourcing their accounts to India. Most closed questions only require a simple “yes” or “no” response, so there really isn’t much room for misinterpretation – great for finding out where both you and they stand.

SMART is an acronym that you can use to guide your goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound

A student met this question in the L4M5 exam. SMART is mentioned primarily in L4M3 Commercial Contracting.

LO: Unknown, AC: Unknown

In 1959, French and Raven described five bases of power:

1. Legitimate – This comes from the belief that a person has the formal right to make demands, and to expect others to be compliant and obedient.

2. Reward – This results from one person's ability to compensate another for compliance.

3. Expert – This is based on a person's high levels of skill and knowledge.

4. Referent – This is the result of a person's perceived attractiveness, worthiness and right to others' respect.

5. Coercive – This comes from the belief that a person can punish others for noncompliance.

Six years later, Raven added an extra power base:

6. Informational – This results from a person's ability to control the information that others need to accomplish something.

In the scenario, Neville attracts and keeps good relationship with his colleagues not because of neither position nor reward nor coercion. He has good skills and kindness, which increase his charisma. His source of power is referent power.

At the first stage of CIPS Procurement and Supply Cycle (Understand need and develop a high-level specification), procurement professional mainly negotiate with internal stakeholders. They have a duty to proportionately and constructively challenge specification if there's genuine doubt over the need or how the need is expressed. This is called demand management. Their first duty is to the organisation's treasury, not to functional managers.

Demand management including: negotiation/challenge between procurement and internal stakeholders over the need/requirement/specification. Remember that in any process or product, the greatest opportunity for cost reduction is at the design stage.

Giving positive group and individual feedback is easy, as is self-congratulation and, in many cases, it is hoped, this will be an accurate reflection on actual performance. When it comes to developmental or difficult feedback, it is only natural to want to move on and not reflect on the negative or developmental points, or why a negotiation did not achieve its objectives. But this is a mistake. The best learning opportunities come from reflection on what could be done better, and this can be achieved without blame, threat or condemnation. Everyone and every team will make mistakes and/or have areas where they could have improved. Clearly, if every reflection session concludes that an individual or team keeps making the same mistake, then there is a case to change roles or consider alternative approaches.

About Dos and Don'ts of reflection, you can refer here: https://offices.depaul.edu/human-resources/employee-relations/Documents/Self%20Assesement.pdf

Both organisational and personal power have the ability to influence the outcomes of negotiation. Good negotiators recognises the different sources of relative personal power they possess in a negotiation. There is no one superior source of personal power; they will vary in their effectiveness based on the situation. The more personal sources available the better, even if some not used, these can be used as a fallback.

LO 1, AC 1.3

An organisation's expense can be categorised into three groups:

Fixed Costs – costs that do not change with output.

Variable Costs – costs that vary in direct proportion to output.

Semi-variable costs – costs that are a combination of the above, with both a fixed and variable element.

Among the four options:

"Land rental paid in advance": This is fixed cost. The rental won't increase when the production increases.

"Additional pallet hires due to higher demand in year-end season": This can be identified as semi-variable cost (or step cost).

"Governments taxes": The taxes are often levied by a percentage of income or revenue. Therefore, it is variable

"Raw materials for next year production": This is obviously variable cost.

Post-negotiation analysis should include performance evaluation, learning outcomes, and a comparison of achieved results versus original objectives. These elements contribute to continuous improvement and future strategy development.

Integrative negotiationfocuses onmutual gainand long-term collaboration. It seeks tomaximize joint outcomesand encourages parties to align interests andpursue shared goals. This contrasts with distributive tactics that prioritize individual wins and short-term gains.

“Integrative negotiations aim to create outcomes where both parties benefit. Shared problem-solving, information exchange, and joint goal pursuit are central features of this approach.”

(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Principles of Integrative Negotiation)

There are several pricing strategies used by suppliers:

Cost-plus pricing – Total variable + Fixed cost + profit

Premium pricing – based on branding. Supplier determines to charge a very high price, not connected with cost structures, usually based on its reputation and/or the perception that the product/service is of

a superior quality. This strategy typically found in the early part of the product life cycle/when demand exceeds supply.

Penetration pricing - Supplier attempts to enter a new market or extend its share in an established one. It is characterised by price reductions to increase volume, followed by steady price increases; may

even be loss leading at start (no profit made)

Marginal cost pricing – covers only variable cost

Market pricing – suppliers prices in line with what the market is willing to pay

A key consideration when seeking to negotiate prices is to establish what proportion of the spend is addressable by procurement action such as negotiation. Addressability of spend is influenceable through negotiations or application of other saving effort or leverage with suppliers.

LO 2, AC 2.1

Monopolies exist in many markets in real life for very different reasons:

Ownership of a Key Resource: When one company exerts sole control over a resource that is necessary for the production of a specific product, the market may become a monopoly. For example, the only medication deemed acceptable to treat a disease comes from a particular ingredient X, and knowledge of this ingredient X is owned by a single family owned company. The company can, therefore, be said to have a monopoly over ingredient X that is needed to cure the disease because it is the only company that can produce a product deemed acceptable.

Government Franchise: In certain instances, a monopoly may be explicitly created by the government if it grants a single company, whether private or government-owned, the right to conduct business in a particular market. For example, when a national railways transportation service is created by the government, in most cases they are granted a monopoly on the operation of passenger trains in the country. As a result, other firms are only able to offer passenger train services with the cooperation and/or permission of the government-owned provider.

Intellectual Property Protection: Extending intellectual property protection to a company in the form of patents and copyrights is yet another way in which monopolies are created. When a government does this, it is in fact giving a single company an exclusive right to provide a particular product / service to the market. Patents and copyrights work in providing owners of intellectual property with the right to act as an exclusive provider of a new product for a specific length of time. This creates a temporary monopoly in the market with regards to new products and services.

Natural Monopoly: A market may also become a monopoly simply because it may be more cost-effective for one company to serve the whole market than to have several smaller firms in competition with one another. A company with virtually unlimited economies of scale is referred to as a natural monopoly. Such firms become monopolies due to their position and size, which makes it impossible for new entrants in the market to compete price-wise. Natural monopolies are common in industries with high fixed costs and low marginal costs of operation such as providers of television, telephone, and internet services.

In this question, 'A single firm is very large' is not enough to tell whether this market is monopolistic.

Closed questions are designed to elicit specific, factual responses — typically “yes” or “no” or a brief piece of information. These are particularly useful when verifying details during negotiation. For example, asking “Did you receive the revised schedule on Monday?” ensures clarity and reduces ambiguity.

According to Paul Steele's 'The Seller's Perspective', customer can be classified into 4 categories as below:

To increase the leverage in negotiation, buyer may increase its attractiveness and/or increase spend value. In this scenario, the buyer is already attractive to supplier as it always pays on-time, but the spend is still low. So to have greater leverage, the buyer has to increase its spend volume by spend concentration. Spend concentration may take many forms as following:

- Vendor base reduction

- Volume pooling

- Volume redistribution

- Volume consolidation across categories

- Standardisation and harmonisation of specifications

- Forming purchasing consortia

LO 1, AC 1.3

Ground rules are the basic rules for doing something (Cambridge Dictionary). A negotiation goes more smoothly if ground rules are adopted. Then if something goes awry at a later time, you can point out the ground rule that has been violated. Procurement professional should seek to minimise conflict over process through agreeing 'ground rules' and approach as far as possible with the other party in advance of any negotiation meetings.

There should be two sets of ground rules: 1) ground rules for the negotiations between the two parties and 2) ground rules for the negotiating team itself. This article is about the negotiating team ground rules.

The rule of law is the condition in which all members of society, including its political leaders, accept the authority of the law.

Ground zero describes the point on the Earth's surface closest to a nuclear detonation. In the case of an explosion above the ground, ground zero refers to the point on the ground directly below the nuclear detonation.

The Ground Beam is the beam which is provided usually at the foundation level to support building walls, joists, etc.

Negotiating at the supplier's site can give the supplier a psychological advantage due to their familiarity with the setting. To ensure a neutral and balanced negotiation environment, it’s preferable to conduct negotiations in a neutral location or through structured channels, as recommended in CIPS's guidance on negotiation settings.

LO 2, AC 2.1

Afixed price agreementprovides stability and predictability. The supplier bears the risk of cost fluctuations, which is especially advantageous in volatile markets. Moreover, it simplifies administrative processes for the buyer over the contract duration.

“Fixed price agreements transfer cost risk to the supplier and enable simplified contract management. This can reduce overhead for buyers and support budgeting accuracy.”

(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Pricing Models in Negotiation)

There are many tactics and ploys that can be used to persuade others, particularly those not trained in negotiation. But in general these tactics should be used with care, as they can backfire; and in situations where a long-term relationship is desired, they can be, if detected, become an irritant to TOP.

Tactics are particularly effective if and when you are dealing with untrained negotiators, in consumer's buying situation and in once-off encounter.

Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.

When facing a monopoly supplier, buyers must find creative ways to introduce leverage. Publicly exploring alternative solutions can create the perception of competition or a fallback plan, thus shifting bargaining power slightly toward the buyer.

Different questioning styles can be used to elicit desired responses:

Text Description automatically generated

Essential goods and services such as electricity, fuel, basic food stuffs, commuter transport and habitual products such as tobacco, alcohol and sugar-based drinks are often sited as facing a relatively inelastic demand curve. This means when the price goes up, the quantity demanded does not decrease very much and so they are often the target of government taxation.

LO2, AC 2.2

The assumption is false, because when a procurement professional negotiates on behalf of his employer, he brings the power of his organisation (its brand, reputation and purchasing spend) as well his own personal power (that which is embedded within him) to the negotiation.

From a negotiation perspective, both organisational and personal power have the ability to influence the behaviours of other or the cause of event. This power is clearly core to negotiation, and of enormous important in seeking to achieve the objectives.

Listening involves both hearing (1) and interpreting (2) the information shared by the other party. Effective listening is an active process that goes beyond simply hearing words; it involvesinterpreting meaning, understanding the speaker’s intent, and responding accordingly. CIPS emphasizes these steps as part of effective communication in negotiations.

The following graph shows the factors that shift the supply curve to the left and to the right.

Using webcams in a web conference means you are able to communicate both verbally and non verbally.

Over the phone, you cannot see TOP, the only cue/signal you have regarding their mood, interest and attitude is person's voice, intonation and any delay.

A teleconference is a telephone meeting among two or more participants involving technology more sophisticated than a simple two-way phone connection.

In-person meeting requires you team and TOP to be in the same place at the same time.

LO 2, AC 2.4

Jayden's use ofeye contact to demonstrate understandingis a core element ofactive and effective listening. This technique includes not only listening to spoken words but also using non-verbal cues (e.g., nodding, eye contact) to confirm comprehension and engagement. Effective listening is essential to ensure that both parties feel heard and respected, which can de-escalate tension and improve outcomes.

“Effective listening involves verbal and non-verbal behaviours that show attentiveness. Maintaining eye contact, nodding, and reflecting key points show engagement and help in building rapport and trust.”

(L4M5 Commercial Negotiation, 2nd edition, Section 3.3 - Communication Techniques in Negotiation)

The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.

LO 3, AC 3.1

In 1983, Peter Kraljic devised a means to segment the supplier base in the article in HBR. In this, he argued that supply items should be mapped against two key dimensions: risk and profitability.

Risk relates to the likelihood for an unexpected event in the supply chains to disrupt operations. For instance, in important areas of spend, such as tire suppliers for an automotive are business critical, and should a disruption occur, the auto company is likely itself to face substantial problems.

Profitability describes the impact of a supply item upon the bottom line. For certain areas of spend, such as stationery, supplies have only a negligible effect on profits. In other categories, a single source of supply can make or break a business.

Putting these two dimensions together yields a classic two-by-two matrix.

Source: Peter Kraljic, HBR

'Macroeconomic factors always directly influence the negotiations': This statement is false. For any given negotiation it is not the macroeconomic factor itself that necessarily influences the negotiation but the change or rate of change that factor.

'Changes in macroeconomic factors may affect businesses and individuals differently': This statement is true. Macroeconomic factors are factors that have general effects on the economy and many businesses may be completely unaffected or affected more or less than others in the same industry by a change in a factor.

'Macroeconomic factors cannot be influenced by anyone's expectation or sentiment': This statement is false. When it comes to macroeconomic factors another key consideration is expectation regarding what might happen to these factors, or specifically the measures, metrics or percentage rates associated with these factors in the future.

'Expectations on macroeconomic prospect are always correct': This statement is false. Expectations are not always correct.

LO 2, AC 2.2

In contracts which have major commodity input, the price is determined by market forces with no individual supplier or buyer able to influence it significantly. Prices are much more variable even within long term contracts and seeking a fixed price would create financial risks for both the buyers and the suppliers. It is often intelligent to agree a contract price adjustment mechanism to allow for market price changes so both sides share risk.

A distributive approach is appropriate when multiple suppliers offer similar products, as this competitive environment allows the buyer to focus on maximizing their position rather than building long-term partnerships. CIPS suggests that a distributive or competitive approach is best used in non-critical purchases or when supplier dependency is low, as is the case here.

Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.

Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.