Commercial Negotiation - L4M5 Exam Practice Test

Question 1

John Browne, a junior buyer for a corporation, is analyzing 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?

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

B. No, exchange rates only apply to the national economy

C. Yes, only if the organization can handle foreign currencies in their accounts

D. Yes, as they can affect profit and turnover

Correct Answer: D

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Question 2

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

A. Narrowing the range of solutions

B. Making as few concessions as possible

C. Using questions to elicit information

D. Analyse the bargaining power

E. Defining the constituents

F. Understanding the other party

Correct Answer: D,E,F

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Question 3

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

A. SRI's purchase amount makes significant proportion of supplier revenue

B. There are no close substitutes for rubber

C. SRI sets up its own rubber plantation

D. Rubber from different suppliers is virtually similar

E. Costs of changing suppliers are high

Correct Answer: B,E

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Question 4

Which of the following are internal factors when a supplier is making its pricing decision?

A. 3 and 4 only (Risk management and The stage in the product life cycle)

B. 2 and 3 only (Environmental legislation and Risk management)

C. 1 and 4 only (Price elasticity of demand and The stage in the product life cycle)

D. 1 and 2 only (Price elasticity of demand and Environmental legislation)

Correct Answer: A

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Question 5

Which of the following is the purpose of using stakeholder support level scale?

A. To identify stakeholder level of influence and interest and plot them on stakeholder map

B. To estimate the gap and the progress towards desired levels of support

C. To identify key stakeholders

D. To identify stakeholder's needs and expectations

Correct Answer: B

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Question 6

What is the most likely outcome when two organisations with adversarial relationship negotiate with each other?

A. Lose lose

B. Deadlocked

C. Win lose

D. Win win

Correct Answer: C

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Question 7

Which characteristics are likely to feature within an integrative negotiation?
Maximising the other party's outcome to enhance relationships
Maximising joint outcomes
Short-term focus
Pursuit of goals held jointly with the other party

A. 1 and 2 only

B. 2 and 4 only

C. 1 and 3 only

D. 3 and 4 only

Correct Answer: B

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Question 8

Which type of negotiation strategy should be adopted when the relationship is important and both parties want to help each other achieve their goals?

A. Competitive

B. Collaborative

C. Accommodative

D. Avoidance

Correct Answer: B

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Question 9

Which of the following will positively affect reputational strength of an organisation? Select TWO that apply.

A. Strong customer focus

B. High ethical standards

C. Adopting out-of-date technology

D. Weak internal coordination

E. Great gap between reputation and reality

Correct Answer: A,B

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Question 10

During a negotiation, Jose Gomez (salesperson for a strategic supplier) says his sales director will not approve discounts on initial purchases. However, he offers a 5% discount on the aftercare package, which gives the same monetary saving. Sally Pampas needs both the product and the aftercare package and aims for a 5% discount off the purchase price. To achieve a win-win (integrative) outcome, Sally should:

A. Ask Jose to apply a 15% discount on the purchase price

B. Decline the offer and walk away from the negotiation

C. Accept the offer of a 5% discount on the aftercare package

D. Ask Jose to apply the 5% discount on the purchase price

Correct Answer: C

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Question 11

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?

A. Win-Lose

B. Lose-Lose

C. Win-Perceived Win

D. Win-Win

Correct Answer: D

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Question 12

Which of the following are most likely to be fundamentals of Fisher & Ury's principled negotiation?
1. Depersonalise the argument
2. Focus on positions
3. Generate creative options
4. Using subjective criteria

A. 1 and 4 only

B. 2 and 4 only

C. 1 and 3 only

D. 2 and 3 only

Correct Answer: C

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Question 13

John suggests that a post-negotiation review must involve a meeting with all stakeholders as the most effective method. Is this statement correct?

A. No, John may only record what he believes is correct

B. Yes, as it allows all stakeholders to be physically present

C. No, there may be a more effective way to undertake the review

D. Yes, it allows stakeholders to blame procurement for failings

Correct Answer: C

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Question 14

An adversarial style of negotiation is appropriate when the buyer has greater bargaining power. In what other situation may the buyer adopt this style?

A. Where there is a single sourcing strategy with one supplier retained

B. When the supplier is a monopolist and holds most of the power

C. In a market full of alternative sources and substitute products

D. In a market where buyers compete for fewer supply sources

Correct Answer: C

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Question 15

A procurement manager considers using an integrative negotiation approach with shortlisted suppliers. Which factor favours such an approach?

A. There is an absence of common or joint goals between the parties

B. The parties do not trust each other's integrity

C. Parties have a stronger motivation to work together than separately

D. The parties understand the process but are unwilling to exchange data

Correct Answer: C

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CIPS Commercial Negotiation - L4M5 Exam Practice Test

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