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CIPS
CIPS Level 4 Diploma in Procurement and Supply
L4M5
Commercial Negotiation Questions and Answers

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Questions # 91:

Which of these personal power bases stems from the manager's position in the organisation and the authority that lies in that position?

Options:

Coercive power

Legitimate power

Expert power

Reward power

Answer

Explanation

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

Questions # 92:

A breakeven analysis uses which of the following aspects as part of the analysis?

Options:

Fixed cost

Buying cost minus variable cost per unit

Variable cost

Selling price minus variable cost per unit

Answer

A, D

Explanation

[Reference: CIPS L4M5 Study Guide, Section 2.2 - Cost and Price Analysis, , , , ]

Questions # 93:

A negotiation meeting commences with the supplier asking the buyer ‘How do you feel about the service you receive from us currently?’ The supplier then asks ‘What do you think about our latest products?’ followed by ‘How do we compare with other suppliers you use?’ The supplier is using which type of questions?

Options:

Probing questions

Closed questions

Open questions

Hypothetical questions

Answer

Explanation

[Reference: CIPS L4M5 Study Guide, Section 3.2 - The Negotiation Process, , , , ]

Questions # 94:

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

Price elasticity of demand

Environmental legislation

Risk management

The stage in the product life cycle

Options:

1 and 2 only

1 and 4 only

2 and 3 only

3 and 4 only

Answer

Explanation

Internal factors influencing a supplier's pricing decisions include risk management strategies and the stage of the product in its life cycle. These factors are within the supplier's control and directly impact cost structures and pricing strategies.

[Reference: L4M5 Commercial Negotiation 2nd edition (CORE), Section 2.2 - Economic Factors in Commercial Negotiation, , ]

Questions # 95:

One difference between perfect competition and monopolistic competition is that...?

Options:

In perfect competition, firms produce slightly differentiated products

A perfectly competitive industry has fewer firms.

Monopolistic competition has no barriers to entry

Firms in monopolistic competition face a downward-sloping demand curve

Answer

Explanation

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

Questions # 96:

A procurement professional is preparing for a negotiation of purchasing non-critical commodity products. He knows that the product can be easily replaced by other substitutes in the market. The negotiation for these products is typified by which of the following?

Options:

The buyer should focus on wider costs and risk elements

The approach must be collaborative

There will be only limited negotiation

There will be regular structured negotiations

Answer

Explanation

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

Questions # 97:

Any commercial negotiation process has only three stakeholders: procurement, budget holders, and users. Is this TRUE?

Options:

Yes, and the budget holder is the most important due to finances

Yes, procurement ensures technical specifications are fit for purpose

No, only procurement, the user and suppliers have interest in negotiations

No, other stakeholders, such as directors and IT, may also be interested

Answer

Explanation

Commercial negotiations involve a wider set of stakeholders than procurement, budget holders, and users. Depending on context, directors, IT specialists, legal teams, regulators, or external partners may all be impacted. Ignoring them risks resistance or missed requirements. CIPS stresses stakeholder mapping tools (such as Mendelow’s Matrix) to identify influence and interest levels, ensuring all relevant parties are managed appropriately in negotiation preparation and execution. Narrow stakeholder identification can undermine outcomes.

[Reference: CIPS L4M5 (2nd ed.), LO 3.1 – Stakeholder identification and management in negotiations., , , ]

Questions # 98:

There are many factors which will influence supplier pricing decisions. Which of the following are external factors that may apply? Select THREE that apply:

Options:

Customer perceptions of value

Cost of production

Price elasticity of demand

Environmental factors affecting the cost of raw materials

Where the product is in its ‘lifecycle’

Objectives of the organisation

Answer

C, D, E

Explanation

[Reference: CIPS L4M5 Study Guide, Section 2.2 - Cost and Price Analysis, , , , , , ]

Questions # 99:

A buyer continually states during negotiation that budget constraints limit their concessions. What tactic is being used?

Options:

Add-on

Good cop/Bad cop

Broken record

One more thing

Answer

Explanation

The broken record tactic involves repeating the same point to reinforce a position, making it difficult for the other party to ignore. Here, the buyer keeps citing budget constraints to avoid moving away from their position, hoping repetition will wear down the supplier’s resistance. This tactic is common in distributive bargaining and aims to anchor discussions around a fixed limitation. While effective, overuse risks damaging relationships, so skilled negotiators balance it with genuine reasoning and integrative approaches when appropriate.

[Reference: CIPS L4M5 (2nd ed.), LO 3.2 – Negotiation tactics and persuasion methods (broken record, good cop/bad cop, add-on)., , , ]

Questions # 100:

The procurement manager of a private healthcare provider is running an IT project. Who are the stakeholders?

General public

Pharmaceutical suppliers

Senior Management

Software support developers

Options:

1 and 3 only

2 and 4 only

3 and 4 only

1 and 2 only

Answer

Explanation

For a private healthcare IT project, Senior Management (strategic decision-makers) and Software support developers (technical implementers) are the primary stakeholders. The general public and pharmaceutical suppliers are external parties not directly affected by the IT project outcomes. Identifying true stakeholders ensures effective engagement, reduces resistance, and aligns negotiation priorities with those who influence or are impacted by the decision. Misidentifying stakeholders risks ignoring critical voices, undermining project success and negotiation alignment.

[Reference: CIPS L4M5 (2nd ed.), LO 3.1 – Stakeholder identification and management in negotiation., , , ]

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