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CIPS L4M5 Exam Syllabus Topics:

SectionWeightObjectives
Topic 1: Understand key approaches in the negotiation of commercial agreements with external organisations35%- Application of commercial negotiations in procurement and supply
  • 1. Position within the CIPS procurement cycle
  • 2. Team and stakeholder management in negotiation
  • 3. Definitions and purpose of commercial negotiation
  • 4. Sources and management of conflict
- Power dynamics in negotiation
  • 1. Impact of power balance on outcomes
  • 2. Sources of power and influence
  • 3. Relationship types and their effect on negotiation
- Types of negotiation approaches
  • 1. BATNA, target setting and reservation price
  • 2. Pragmatic and principled negotiation styles
  • 3. Collaborative / integrative (win-win)
  • 4. Distributive / competitive (win-lose)
Topic 2: Understand how commercial negotiations should be undertaken30%- Communication skills
  • 1. Active listening and questioning
  • 2. Non-verbal communication and emotional intelligence
- Review and improvement
  • 1. Evaluating results and performance
  • 2. Documenting agreements and lessons learned
- Tactics and influencing methods
  • 1. Managing concessions and deadlocks
  • 2. Persuasion and influencing techniques
  • 3. Cultural and ethical considerations
- Stages of negotiation
  • 1. Opening, exploring, bargaining, closing and implementing
Topic 3: Know how to prepare for negotiations with external organisations35%- Negotiation criteria and objectives
  • 1. Prioritising issues and trade-offs
  • 2. Defining measurable outcomes
- Planning and resources
  • 1. Team roles and preparation plans
  • 2. Information gathering and market intelligence
- Cost and price analysis
  • 1. Types of costs and pricing structures
  • 2. Cost modelling and price analysis techniques
- Economic and market factors
  • 1. Inflation, exchange rates and risk factors
  • 2. Market structure and competition
  • 3. Supply and demand conditions

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CIPS Commercial Negotiation Sample Questions (Q97-Q102):

NEW QUESTION # 97
According to Dr. Mari Sako, which of the following is potentially the weakest trust to be built?

Answer: D

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.
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.


NEW QUESTION # 98
Which of the following are most likely to be characteristics of a perfectly competitive market? Select TWO that apply

Answer: B,C

Explanation:
Explanation
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 toentry 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 andquantity 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


NEW QUESTION # 99
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. Spendwaterfall

Answer: B

Explanation:
Understanding where and with whom your supplier spends their money, or understanding the 'cost breakdowns' or 'price build-up' of the goods andservices you purchase from the supplier, will help you know where and when they can offer price concessions.
Cost information can be expressed with more impact through graphs that can be created using Excel and PowerPoint or other softwares. There are two commonly used models known as 'spend waterfall' and 'spend tree'. Spend waterfall shows the build-up of costs, while the spend tree shows all the spends that an organisation makes.
There is no graph known as 'spend candlesticks'. Candlestick chart is astyle of financial chart used to describe price movements of a security, derivative, or currency.
The aggregate expenditure model is a method of calculating GDP. The aggregate expenditure model focuses on the relationships between production (GDP) and planned spending: GDP = planned spending = consumption + investment + government purchases + net exports.


NEW QUESTION # 100
When planning a negotiation for sourcing internationally, which of the following divergent positions, and therefore potential conflict areas, should be prepared for? Select TWO that apply:

Answer: B,C,E


NEW QUESTION # 101
During a negotiation, the supplier requests for payment term shortened to 45 days from 60 days. Seeing that this proposal lies within the concession plan, the procurement manager asks for 5% discount in return. Is that right thing to do?

Answer: A

Explanation:
When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.
In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be "Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status" LO 2, AC 2.3


NEW QUESTION # 102
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