L4M5 Exam Dumps - Commercial Negotiation

Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:

- Vendor base reduction: straightforward reduction of number of suppliers in any category

- Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts

- Volume redistribution: making recommendations following spend analysis to move from one supplier to another

- Volume consolidation across categories: certain purchase requirements may be common across a number of categories. In the scenario, XYZ has combined different categories but closely related to office services into a larger contract so that they can increase their leverage.

- Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.

- Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.

LO 1, AC 1.3

There are nine commonly used influence tactic:

1. Rational persuasion includes using facts, data, and logical arguments to try to convince others that your point of view is the best alternative. This is the most commonly applied influence tactic.

2. Legitimating

3. Personal appeals

4. Exchange

5. Ingratiation

6. Pressure refers to exerting undue influence on someone to do what you want or else something undesirable will occur.

7. Coalitions refer to a group of individuals working together toward a common goal to influence others.

8. Inspirational appeals

9. Consultation refers to the influence agent’s asking others for help in directly influencing or planning to influence another person or group.

In the scenario, there is a problem with demand forecasting and supply chain planning in Leitax. The new Supply chain director invites the stakeholders to a meeting to find the solution. She is using coalition tactics.

Packaging is considered a variable cost because it fluctuates with the level of production or sales activity. Variable costs change directly in relation to the volume of output or service. In contrast:

Rent (A), Loan repayments (B), and Insurance (C) are fixed costs, as they generally do not vary with production levels within a certain range. These are recurring costs that remain constant over time, aligning with CIPS's cost classification in procurement.

Best alternative to a negotiated agreement (BATNA) is the plan B or back-up plan in the event of a ‘walk away’. In case of no deal, buyer (or supplier) may switch to this option.

The zone of potential agreement (ZOPA) is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.

STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical.

PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird’s eye view of the whole environment from many different angles that one wants to check and keep a track of while contemplating on a certain idea/plan.

LO 1, AC 1.2

Variable costs fluctuate with production volume — e.g., raw materials and delivery costs. Fixed costs such as rent and insurance remain constant regardless of output. In negotiations, suppliers may inflate fixed cost allocations to justify pricing; buyers should differentiate between fixed and variable costs to challenge pricing more effectively. Recognising true variable costs also allows negotiating for volume-related discounts.

Negotiating at the supplier's site can give the supplier a psychological advantage due to their familiarity with the setting. To ensure a neutral and balanced negotiation environment, it’s preferable to conduct negotiations in a neutral location or through structured channels, as recommended in CIPS's guidance on negotiation settings.

All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forces which both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:

LO 1, AC 1.3

The Myers–Briggs Type Indicator (MBTI) is an introspective self-report questionnaire indicating differing psychological preferences in how people perceive the world and make decisions. MBTI indicates personality preferences in four dimensions.

The Thomas–Kilmann Conflict Mode Instrument (TKI) is a conflict style inventory, which is a tool developed to measure an individual's response to conflict situations.

Mill's RESPECT mnemonic is set out by Harry A. Mills which describes seven steps to agreements

An intelligence quotient (IQ) is a total score derived from a set of standardized tests designed to assess human intelligence.