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CIPS Commercial Negotiation Sample Questions (Q13-Q18):
NEW QUESTION # 13
In general, which of the following is the consequence of a flatter demand curve?
- A. Quantity elastic
- B. Unit price elastic
- C. Price inelastic
- D. Price elastic
Answer: D
Explanation:
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor.
In microeconomic graphs, elasticity and inelasticity can be shown by the slope of the demand curve. If a demand curve is almost horizontal, then the product pricing can be described as very elastic. If a demand curve is almost vertical, then the product pricing can be described as very inelastic.
The formulae of elasticity:
Text Description automatically generated with low confidence
Table Description automatically generated with medium confidence
LO 2, AC 2.2
NEW QUESTION # 14
JCB is a large manufacturer of heavy machinery. The CPO is going to a negotiation with a Chinese supplier about procuring some major components. He is wondering about balance of power in the negotiation. Which of the following micro factors are most likely to shift the balance of power towards the buying organisation in this commercial negotiation? Select TWO that apply
- A. Buyers purchase in small volumes
- B. These components are highly standardised
- C. Eruption of epidemic in supply market
- D. JCB's switching costs are low
- E. Suppliers are more concentrated than buyer
Answer: B,D
Explanation:
Explanation
There are many factors that can influence the balance of power in a negotiation. These factors are classified into 3 levels:
- Macro level: STEEPLE framework: social, technological, economic, environment, political, legal and ethical
- Micro level: Porter's five forces:
Diagram Description automatically generated
- One-to-one buyer-supplier dynamics.
The question asks about the micro factors that increases buyer's bargaining power. Among 5 answers, only 2 are likely to increase buyer'spower:
- JCB's switching costs are low: Buyer may easily switch its suppliers anytime
- These components are highly standardised: The products are not different any more, buyer may choose to buy from any supplier available.
Other answers cannot be correctbecause:
- Suppliers are more concentrated than buyer: Suppliers are forming oligopoly market, their bargaining power tend to be greater.
- Eruption of epidemic in supply market: this is a macro factor. Eruption of epidemic may cause factories closed and disruptions on supply chain.
- Buyers purchase in small volumes: Buyer will be seen as less potential to suppliers. Buying organisation may have difficulties to deal better price with suppliers.
LO 1, AC 1.3
NEW QUESTION # 15
A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?
- A. Develop
- B. Nuisance
- C. Core
- D. Exploit
Answer: B
Explanation:
To answer this question, you should know The seller's perspective as in 'How to Negotiate Professionally':
In the scenario, the buyer's spend is low, while they seem unattractive to seller (as they tend to pay late). So the buyer is classified as Nuisance in seller's perspective.
NEW QUESTION # 16
Which of the following are types of non-verbal communication that could be used during a negotiation meeting? Select THREE that apply:
- A. Eye contact
- B. Meeting location
- C. Hand gestures
- D. Room layout
- E. Facial expressions
- F. Reference materials
Answer: A,C,E
NEW QUESTION # 17
At which stage in a negotiation would questions be asked to obtain missing information?
- A. The opening stage
- B. The proposing stage
- C. The bargaining stage
- D. The testing stage
Answer: D
Explanation:
:
There are 5 key phases of negotiation:
The opening phase: confirm understanding and get the issue on the table The testing phase: check assumption and confirm understanding The proposing phase: asking 'if' The bargaining phase: using tradeables The agreement and closing phase The testing could take the form of questions following a presentation by either side or questions on a tender or proposal document received by the buyer from the potential supplier. The testing phase is necessary to confirm that your approach and objectives are appropriate for the negotiation situation you now find yourself in. Careful listening, observation and interpretation of TOP's responses may give indication of the following:
Areas where TOP is willing and unwilling to make concessions
What factors or issues TOP places a high value on
If there are any non-commercial or emotional factors that may be pertinent TOP's underlying interests - why they are taking the position they are.
NEW QUESTION # 18
......
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