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CIPS Commercial Negotiation Sample Questions (Q141-Q146):

NEW QUESTION # 141
Sally is negotiating with an oversea supplier on the price and payment period. Her company and the supplying organisation are equal in bargaining power. The supplier says that they are investing in new facilities and machinery so the payment period should not be longer than 30 days. Sally knows that her company often pays the suppliers after 45 days from the delivery, but at the moment the company has positive cash flow and it is able to pay immediately. Which of the following should be Sally's concession plan?

• A. Agree with supplier's payment period without any further demand
• B. Contend on the normal payment period
• C. Demand for a discount without any other concessions
• D. Shorten payment period but ask for a discount

Answer: D

Explanation:
In the scenario, the length of payment period is particularly important to the supplier as they are investing new facilities. Otherwise, the buyer's company has a positive cash flow position and budget is available for a shorter payment terms. So this tradeable (payment period) is important to supplier but it is not a significant problem with the buyer. This tradeable will fall within 'Easy concession to trade' quadrant in the following matrix:
Table Description automatically generated
If the tradeable fall within this quadrant, Sally should shorten the payment period in supplier's favour and try to win as many concessions as possible in return. Asking for a discount may be a reasonable trade-off.
LO 2, AC 2.3

 

NEW QUESTION # 142
Which of the following will positively affect reputational strength of an organisation? Select TWO that apply.

• A. Strong customer focus
• B. Weak internal coordination
• C. Adopting out-of-date technology
• D. Great gap between reputation and reality
• E. High ethical standards

Answer: A,E

Explanation:
In a globalised commercial world characterised by dynamic market and multiple companies competing for business, a positive corporate reputation can be an enormous asset. Reputational strength in one organisation might be based on some or all of the following characteristics:
- Quality of products or services
- Low cost/high value for money
- High ethical standards
- Reliability
- Cutting-edge technology
- Strong customer focus
- Engineering excellence
LO 1, AC 1.4

 

NEW QUESTION # 143
Which of the following is NOT a barrier to entry in amonopolized market?

• A. The costs of production make a single producer more efficient than a large number of producers
• B. A key resource is owned by a single firm
• C. The government gives a single firm the exclusive right to produce some good
• D. A single firm is very large

Answer: D

Explanation:
Monopolies exist in many markets in real life for very different reasons:
Ownership of a Key Resource: When one company exerts sole control over a resource that is necessary for the production of a specific product,the market may become a monopoly. For example, the only medication deemed acceptable to treat a disease comes from a particular ingredient X, and knowledge of this ingredient X is owned by a single family owned company. The company can, therefore, be saidto have a monopoly over ingredient X that is needed to cure the disease because it is the only company that can produce a product deemed acceptable.
Government Franchise: In certain instances, a monopoly may be explicitly created by the government if it grants a single company, whether private or government-owned, the right to conduct business in a particular market. For example, when a national railways transportation service is created by the government, in most cases they are granted a monopoly on the operation of passenger trains in the country. As a result, other firms are only able to offer passenger train services with the cooperation and/or permission of the government-owned provider.
Intellectual Property Protection: Extending intellectual propertyprotection to a company in the form of patents and copyrights is yet another way in which monopolies are created. When a government does this, it is in fact giving a single company an exclusive right to provide a particular product / service to the market. Patents and copyrights work in providing owners of intellectual property with the right to act as an exclusive provider of a new product for a specific length of time. This creates a temporary monopoly in the market with regards to new products and services.
Natural Monopoly: A market may also become a monopoly simply because it may be more cost-effective for one company to serve the whole market than to have several smaller firms in competition with one another. A company with virtually unlimited economies of scale is referred to as a natural monopoly. Such firms become monopolies due to their position and size, which makes it impossible for new entrants in the market to compete price-wise. Natural monopolies are common in industries with high fixed costsand low marginal costs of operation such as providers of television, telephone, and internet services.
In this question, 'A single firm is very large' is not enough to tell whether this market is monopolistic.

 

NEW QUESTION # 144
The purpose of ongoing supplier relationship management following a negotiation and contract award is that it:

• A. 1 and 2 (Enables the buyer to monitor supplier performance and persuade the supplier to renegotiate better terms)
• B. 1 and 3 (Enables the buyer to monitor supplier performance and work with the supplier to resolve relationship problems)
• C. 2 and 3 (Enables the buyer to persuade the supplier to renegotiate better terms and work with the supplier to resolve relationship problems)
• D. 3 and 4 (Enables the buyer to work with the supplier to resolve relationship problems and evaluate unnecessary concessions)

Answer: B

 

NEW QUESTION # 145
Which of the following types of question are likely to be the most effective to check facts in negotiations?

• A. Hypothetical
• B. Leading
• C. Closed
• D. Open

Answer: C

 

NEW QUESTION # 146
......

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