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| Section | Objectives |
|---|---|
| Power, ethics and communication in negotiation | - Influencing factors
|
| Negotiation planning and preparation | - Preparation techniques
|
| Negotiation strategies and tactics | - Approaches to negotiation
|
| Negotiation fundamentals | - Principles of commercial negotiation
|
>> Examinations L4M5 Actual Questions <<
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NEW QUESTION # 254
The buyer's bargaining power tends to be relatively higher than supplier's bargaining power in which of the following circumstances?
Answer: C
Explanation:
Buyer power gives customers/consumers (buyers) the ability to squeeze industry margins by pressuring firms (the suppliers) to reduce prices or increase the quality of services or products offered.
There are four major factors to consider when determining the bargaining power of buyers:
1. Number of buyers relative to suppliers: If the number of buyers is small relative to that of suppliers, the buyer's power will be stronger.
2. Dependence of a buyer's purchase on a particular supplier: If a buyer is able to get similar products
/services from other suppliers, buyers depend less on a particular supplier. Therefore, the power of the buyer would be greater.
3. Switching costs: If there are not many alternative suppliers available, the cost of switching is high.
Therefore, buyer power would be low.
4. Backward Integration: If the buyer is able to integrate or merge suppliers, the buyer has greater bargaining power over the existing suppliers.
When is Bargaining Power of Buyers High/Strong?
There are fewer buyers relative to that of suppliers
The switching costs of the buyer are low
If the buyer is able to backward integrate
The buyer purchases product in bulk (high volume)
The buyer is able to get similar product/services from other suppliers
The buyer purchases the majority of the seller's products
Several substitutes are available on the market
Product is not differentiated
Reference:
CIPS study guide page 54-56
What is the Bargaining Power of Buyers?
NEW QUESTION # 255
The trust is built based on the other party's professional qualifications or proven or certified technical capability or experience is known as...?
Answer: C
Explanation:
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.
Goodwilltrust: 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.
NEW QUESTION # 256
In addition to organisational power, personal power of each negotiator can influence the outcomes of a negotiation. A good negotiator can leverage different sources of power. Is this statement true?
Answer: C
Explanation:
Explanation
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
NEW QUESTION # 257
Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way of analysing costs is to classify them into direct and indirect costs. Which ONE of the following is an explanation of 'direct costs'?
Answer: B
NEW QUESTION # 258
Logibox Ltd is releasing a new range of stackable storage boxes. It has adopted a pricing strategy that aims to sell at a price the consumer is prepared to pay.
Which of the following is it using?
Answer: B
NEW QUESTION # 259
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