Free CIPS L4M5 Practice Exam with Questions & Answers | Set: 7

Direct costs are those costs that can be directly attributed to the production of specific goods or services. They typically include raw materials and labor directly involved in production. Metal used in the product is a raw material that becomes part of the final product, making it a direct cost.

Legitimate poweris derived from theposition or authorityheld within the organisation. It supports the buyer’s ability to influence negotiation outcomes based on formal responsibility, legal rights, or contractual mandates.

“Legitimate power stems from formal roles, authority or responsibility. It enables negotiators to assert terms backed by organisational policy or legal mandate.”

(L4M5 Commercial Negotiation, 2nd edition, Section 3.1 - Organisational Power Structures in Negotiation)

Expert power is based on a person's high levels of skill and knowledge, formal training, qualifications and experience in a particular procurement category would give someone expert status and mean that in negotiation their voice is listened to as a more objective, informed knowledge leader. Expert power is based on facts, knowledge, research, insight and study.

Legitimate power comes from rules, formal authority, organisation rank, staff rate or official position held.

Reward power comes from one person's ability to compensate or reward another for compliance.

Referent power stems from their personality, way of engaging with others and habit of acting in a way that is in line with a strong set of values and principles.

Lina is asking a probing question to gather more detailed information on the actions GBG is taking to address quality issues. Probing questions are intended to delve deeper into a topic and elicit specific details, making them suitable for understanding underlying issues, as per CIPS’s negotiation question types.

The bargaining power of buyers increases when the buyer is large relative to the supplier. A large buyer can leverage its size to negotiate more favorable terms due to its significant impact on the supplier's business. CIPS notes that a buyer’s size and purchasing volume are key factors that enhance its negotiating power in buyer-supplier relationships.

Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Win-lose approach is useful when the relationship with the other party (TOP) is short-term and once-off.

The question mentions 4 types of relationship:

Adversarial: Both seek to maximize position at the expense of the other. Almost no trust, communication and cooperation. These suppliers will probably provide non-core products or services with the buyer purchasing them on a one-off basis.

Outsourcing relationship: Use competent suppliers to manage non-core businesses previously done in-house. Require high level of trust and collaboration

Partnership: Both work closely on long term development by sharing information, technology and ideas.High level of trust with the aim to benefit both parties (win-win)

Strategic alliance: Both parties identify areas where they could collaborate to create mutual benefits

Among these 4 types of relationship, only adversarial is once-off. Then it is the correct answer.

The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.

LO 3, AC 3.1

Integrative negotiation seeks joint value creation. Collaboration builds trust and open exchange, while problem solving identifies creative tradeables that satisfy both sides. Coercion and risk transfer belong to adversarial, distributive strategies, where one side gains at the expense of the other. Persuasion can play a role, but without collaboration, it leans toward manipulation rather than true win-win. In practice, integrative approaches require willingness to share data, listen actively, and seek long-term alignment.

In fixed-price agreements, cost-overrun risk is transferred to the supplier, giving the buyer price certainty and reducing the need for ongoing cost scrutiny. Monitoring focuses on delivery to specification and timing, not on the supplier’s internal cost build-up (unlike cost-plus).