L4M5 Practice Questions

The bargaining power of buyers increases when the buyer is large relative to the supplier. A large

buyer can leverage its size to negotiate more favorable terms due to its significant impact on the

supplier's business. CIPS notes that a buyer’s size and purchasing volume are key factors that

enhance its negotiating power in buyer-supplier relationships.

It has been said that most negotiations are won (or lost) at the preparation stage. Success in a

negotiation cannot be claimed unless you can refer back to your objectives and show how you have

achieve them. In broad terms, negotiation plans/strategies involve 4 key activities:

1. Developing and prioritising your objectives and limits

2. Seeking to understand TOP's objectives

3. Developing concession plans

4. Planning the resources and logistics required and agreeing team roles.

Questions to gain an understanding of why a negotiation failed

Did we collect and make effective use of all information available when preparing for the

negotiation?

Did we set objectives for the negotiation that were stretching and achievable and established MIL

objectives?

Did we determine a strategy for the negotiation?

Did the other party understand our needs correctly?

Were we aware of the underlying interests of the other party?

Were our proposals convincing enough for acceptance by the other party?

Did we explore different variables in the negotiation?

Did we fully understand all proposals?

Did we give any unplanned concessions and did we check the importance of these?

Did we focus on common interests?

Did we ask a range of questions?

Did we get answers to all our questions?

Could we answer all the questions addressed to us in a proper and positive way?

Did we summarise effectively?

Did we use different methods of persuasion in the negotiations?

Which tactics did we use and what effect did they have?

Did our negotiating team work well as a team?

Did we help to create a co-operative atmosphere

The case in the question is illustrated as below:

The equilibrium price initially at P0 with quantity Q0, when supply curve shifts to the left, it will

converge with demand curve at new equilibrium point with price P1 and quantity Q1. As you can see

from the graph, P1 is greater than P0 and Q1 is smaller than Q0.

Effective listening is crucial in integrative negotiations because it promotes understanding and

collaboration. By actively listening, parties can identify shared interests and address concerns, which

supports the goal of reaching mutually beneficial solutions. This is a key component in CIPS

guidelines on successful integrative negotiation practices.

Microeconomic factors refer to elements that affect individual businesses or sectors rather than the

economy as a whole. In this case:

Availability of investors (B): Access to investors impacts capital availability for businesses.

Distribution channels (D): Distribution methods directly influence a business’s ability to get products

to market.

Levels of competition (F): Competition affects pricing and strategic decisions within specific

industries.

Taxation rates, unemployment levels, and inflation rates are considered macroeconomic factors,

affecting the economy on a broader scale, as per CIPS's definitions of microeconomic vs.

macroeconomic influences.

The mark-up percentage is calculated as the profit divided by the cost of production, then multiplied

by 100 to convert it into a percentage.

Calculation:

(

80

/

160

)

×

100

=

50

%

(80/160)×100=50%

Thus, the supplier’s mark-up percentage is 50%, as per standard pricing calculations used in

procurement.

MIL criteria indicate 3 limits that negotiator should establish:

M - Must achieve: minimum target/maximum you can concede on this point; the mandatory

requirement or fall back position

I - Intend to achieve: realistic target you are aiming for on this point

L – Like to achieve: stretch target to achieve on this point.

PPCA is purchase cost analysis

TIMWOOD indicates 7 types of waste in Lean principles

The RAQSCI model is a mnemonic summary of a business model used to define and structure

business requirements

In the opening phase, parties should confirm understanding and get the issues on the table.

The testing phase is an information gathering stage where the hypothesis and assumption you have

made in the planning stage can be tested or confirmed or disproved.

Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing

stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in

store in the negotiation.

Probing questions are also useful to check that the supplier fully understand their offering, as well as

your needs, and can also be used to communicate to the supplier that you know this category well.

These questions are typically useful at the opening and testing stages.

Persistent late payment of the supplier’s invoices (A) and Unequal sharing of gains, risks, and costs

with the supplier (B) are potential sources of conflict as they create dissatisfaction and imbalance in

the relationship. According to CIPS materials:

Late payments (A) can strain the supplier’s cash flow, affecting their operational stability and leading

to mistrust in the buyer.

Unequal sharing of gains, risks, and costs (B) can result in one party feeling exploited or unfairly

treated, which undermines the collaborative spirit essential for long-term partnerships.

In contrast, requesting early supplier involvement, planning visits, or setting delivery dates are

typically part of constructive relationship management practices and do not inherently lead to

conflict.

Using logic involves applying numerical data and factual evidence to support arguments in a

negotiation. Logical reasoning appeals to objective analysis rather than emotional or coercive tactics

and is effective in convincing the other party through structured, fact-based arguments, aligning with

CIPS's guidance on logical negotiation techniques.