COMMERCIAL

NEGOTIATION
1

L4M5
REVISION QUESTIONS

FARAI MUBEREKWA

‘NO ONE OF US IS AS SMART AS ALL OF US’

Which of the following are stages within the negotiation
process?

1. Planning and preparation

2. Arguing and persuasion
3. Accepting hospitality
4. Testing and proposing

a. 1 and 3 only
b. 2 and 3 only
c. 1 and 4 only
d. 2 and 4 only

2
At the end of a negotiation the process of having the
outcomes of negotiation approved and endorsed is
called?

a. Summation
b. Confirmation
c. Ratification
d. Aggregation

3
The bargaining power of suppliers is likely to be high in
relation to a buyer in which of one of the following
situation

a. The volume purchased by the buyer is important to

the supplier
b. The switching cost for the buyer is low
c. The supplier has limited pre-negotiation information
about the buyer
d. The supplier has rare specialist processes machinery
or expertise

4
In preparation for negotiation with external
organization which of the following resources are
required by an organization to ensure a positive
outcome?

a. Initiate a re-location plan

b. Invest in appropriate lightning and comfortable
seating
c. Involve appropriate colleagues
d. Involve as many colleagues as possible

5
Break-even analysis can be used to determine
when a business makes neither a profit nor loss.
The break-even point can be calculated by using
which of the following formula?

a. Fixed cost/( selling price - variable cost)

b. Total cost /(planned sales level - variable cost)
c. Variable cost/( total cost - selling price)
d. Planned sale level /(variable cost - fixed cost)

6
A manufacturer makes products A&B. The total cost
to make product A is $80 and it sells for $105,
product B costs $90 and sells for $120.What would
the mark-up value be for product A and B
respectively?

a. 25% and 30%

b. 34.3 % and 32.3 %
c. 23.8% and 25%
d. 31.3% and 33%

7
Rachel a junior buyer is about to leave for her first
negotiation with an international supplier. She is
concerned that the supplier may not respect her
authority as they have previously only dealt with her
manager. She has decided to hold a negotiation at
her Office. Which of the following will be the biggest
benefit for Rachel of a home negotiation?

a. Familiarity with the environment

b. The immediate presence of managerial support
c. Less traveling time required
d. The sense of obligation felt by the supplier
8
Amelia need to negotiate prices with a potential client that
she has not met before. She was due to attend their offices
next week but the meeting has been cancelled. The
potential client has offered a telephone call as an
alternative but Amelia has declined the offer as she feels
negotiation cannot succeed without a face-to-face meeting
Is this the right decision?

a. Yes because negotiation for the first time it is essential to

meet face-to-face
b. Yes because you can only do negotiation face-to-face to
observe nonverbal cues
c. No because it can be a useful introduction for
conditioning expectation prior to a face-to-face meet
d. No because telephone negotiation enable stronger
arguments which lead to better influence

9
Fast & East limited as a global fast food retailer is in
negotiation with the major meat supplier. The supplier
has asked for a 25% price increase which Fast & Easy
are strongly resisting. The supplier justifies this
increase by stating how the currency fluctuation, an
unstable economic climate and rising transport costs
have necessitated this increase. Which persuasion
tactic is the supplier using?

a) Rational Persuasion
b) Inspirational appeal
c) Personal appeal
d) Coalition

10
A procurement manager has been negotiating with a
supplier for half an hour and is frustrated with the lack
of progress. They are seeking a price reduction. After a
short recess the procurement manager says to the
supplier 'How about if we agree to increase the
guaranteed volume for the first twelve months - by
how much will you reduce the price?'. This is an
example of which of the following?

a. Threat
b. Emotion
c. Logic
d. Bargaining
11
What type of question can be used to ascertain a
particular effect from a supplier in negotiation

a. Closed
b. Rhetorical
c. Open
d. Divergent

12
Can closed questions be useful in a negotiation?

a. Yes, because they are good to check understanding

b. Yes, because they can encourage detailed responses
c. No, because open questions should always be asked
d. No, because closed questions only gather opinions

13
Which of the following are recognised forms of
'nonverbal communication'? Select THREE that
apply.

a. Hand gestures
b. Body posture
c. Informal communications
d. Complex messaging
e. Short Presentations
f. Facial expressions

14
A category manager is having an unsuccessful
negotiation with a supplier. A recess is called during
which the category manager has decided to adopt a
different approach when the negotiation reconvenes.
As the meeting restarts the category manager reminds
the supplier of its contractual obligations and says 'if
we cannot reach agreement here today do not forget
that I can serve notice to terminate the contract'. This
is an example of which type of power?

a. Expertise
b. Coercive
c. Reward
d. Reciprocity

15
Which of the following are likely to be features of
strategic negotiation. Select two that apply

a. It is settled issue involving rescheduling daily

deliveries
b. It is conducted at higher levels of management
c. It is distributive because each party tries to achieve
greater again
d. It Focuses on the issue of affecting the
organization's competitive advantage
e. It cover the operational issue arising in the cross-
functional work groups

16
Any commercial negotiation process has only three
potential stakeholders; procurement, the budget
holder and the users. Is this true?

a. Yes and the budget holder is the most important

because of the finances involved
b. Yes the role of procurement is to ensure that the
technical specification are fit for the purpose
c. No only procurement ,the uses and the supplier have
interest in the products negotiated
d. No other stakeholders such as directors and IT
might also be interested in the negotiation outcomes

17
Negotiating best value should follow which stage of the
sourcing process?

a. Appraise suppliers
b. Award the contract
c. Analyse quotations
d. Develop the contract terms

18
Which of the following are tactics of distributive
bargaining?

1. Withholding information that may open common ground

2. Coercing in the other party to accept your position
3. Finding common ground between the parties
4. Being open about all your needs

A. 1 and 4 only
B. 2 and 3 only
C. 1 and 2 only
D. 3 and 4 only

19
There are two approaches that can be pursued when
doing commercial negotiation integrative or
distributive. Which of the following features are
associated with the distributive approach to
negotiation?

a. The parties aim to share the gains from the

agreement
b. There is a fair distribution of profits between the
winner and the loser
c. An open book summary of its cost is provided by the
supplier
d. The negotiation is conducted in an adversarial type

20
A supplier’s expenditure which can be attributed to a
specific product is known as

a. Fixed cost
b. Indirect cost
c. Direct cost
d. Sunk cost

21
Which of the following is the best example of a BATNA
(best alternative to a negotiated agreement)?

a. A concession is made
b. A contingency supplier
c. A marker is placed
d. A walk-away point

22
A BATNA is always required at the start of negotiation.
Is this statement correct?

a. Yes a buyer always needs an alternative plan to

leverage
b. Yes because it is mandatory as part of the negotiation
strategy
c. No it may not be used and therefore not needed
d. No fallback position can be produced as the
negotiation progress

23
Ranjit is facilities category buyer for a hospital and he is
managing and overseas sourcing project for security guard
in clothing and personal protective equipment. Ranjit is
aware that foreign exchange fluctuation can create risk for
his organization and would like to remove the risk .
Ranjit has asked the international supplier to quote GBP
sterling. Will Ranjit approach remove the fluctuation risks
for the hospital?

a. Yes as the value of GBP sterling may increase

b. No as the risk will sit with the buyer
c. Yes as the risk will sit with the supplier
d. No ,as the value of the suppliers currency may decrees

24
A procurement manager is considering negotiating variable
pricing for a contract duration of 12 months. Would this be
the right thing to do?

a. No this will not enhance the buyer supplier relationship

b. No because it will prove difficult to budget for the
duration of the contract and provide financial uncertainty
c. Yes because this method of pricing will always provide
value for money
d. Yes because it will build relationship with the supplier
and provide a stronger platform for the next contract
renewal

25
Procurement professionals should understand various
costing methods that supplier may use when preparing
their prices and setting targets for their negotiations. There
are two main approaches used in calculating the cost of
products and services one of which is ‘ marginal costing’.
Which of the following is a feature of “marginal costing”
approach to pricing?

a. Product costing that uses fixed cost only and provide a

sufficient mark-up to cover variable cost and profit
b. Product costing that uses variable cost only and provide
a sufficient mark-up to cover fixed cost and profit
c. Product costing that includes fixed cost as a fair
proportion of variable cost and a mark-up
d. product costing that includes variable cost as a fair
proportion of fixed cost and a mark-up

26
During negotiations which of the following would be
manageable questions

I. What do you think of our proposal?

II. Are you saying these are the only acceptable terms?
III. Here’s is how I see the situation don't you agree?
IV. Can you tell us how you come to that conclusion?

a. 1 and 2 only
b. 3 and 4 only
c. 1 and 4 only
d. 2 and 3 only

27
Absorption costing attempt to calculate the total cost of
producing additional units traditionally this is completed
by determining the input of resources consumed in
production period and the overhead cost. Which of the
following is a challenge of absorption costing?

a. Attributing a fair amount of fixed cost to each unit of

production
b. Attributing fair cost drivers and cost pools to each unit of
production
c. Understanding the profit element as a percentage of
course
d. Understanding the profit element as a percentage of
selling price
28
Which of the following is an example of an indirect
cost?

a. Raw materials required to produce a widget

b. The staff wages of those producing a widget
c. Maintaining of widget production line equipment
d. The packaging used on each widget production

29
Which of the following tactics would be appropriate in
an integrative negotiation?

a. Lowball highball/ highball

b. Take it or leave it
c. Expanding the pie
d. Mother Hubbard

30
A supplier have offered international football tickets to
the procurement manager whilst they are in the middle
of a contract negotiation. What should the
procurement manager do?

a. Accept the offer of the tickets as these will enhance

the relationship between both parties
b. Accept the offer is this will not affect the relationship
with the supplier
c. Reject the offer as this may be seen as conflict of
interest during the negotiation
d. Reject the offer as the procurement manager will
have to repay the kind offer

31
Information is a key source of power in establishing
power and leverage. Select three reliable source of
information suppliers can gather on purchasers

a. Published accounts
b. Personal emails
c. National press
d. Investment reports
e. Past negotiations
e. Blogs

32
Which of the following would identify that a pull
approach to influence is being adopted?

a. One party gains compliance from the other

b. One-party exerts authority over the other
c. One party is able to persuade the other
d. One-party threatened to sanction the other

33
Coercive power is likely to be displayed in distributive
negotiation approach. This may originate from one
organization that has more bargaining power than the
other or one individual wielding higher positional power
than the opponent . Why is coercive power discouraged in
negotiation and supplier relationship management?

a. Because it secures immediate compliance from the

supplier
b. Because it provides greater advantage to the buyer in the
short term
c. Because it provides unconventional leverage in the
negotiation process
d. Because it might drive away under-performing suppliers

34
When looking into push and pull techniques of influencing
the push approach has which of the following
characteristics?

I. Exerts power
II. Persuasion
III. Secured compliance
IV. Secure commitment

a. 1 and 2 only
b. 1 and 3 only
c. 2 and 4 only
d. 3 and 4 only

35
One of the most important steps in preparing for
negotiation is to appraise the relative power of the parties.
The buying organization must assess its bargaining power
against that of the supplier it intends to negotiate with.
This information is necessary in facilitating the preparation
the negotiation team and negotiation strategy. In what
situation is the bargaining power of the buyers likely to be
higher relative to suppliers?

a. The supplier product project is critical to buyers business

b. There are fewer buyers relative to suppliers
c. The buyer in requirement is urgent and cannot be
postponed
d. They are few supplier relative to the buyer

36
A procurement manager has been asked to procure
1000 pens. He suggest to his manager that to obtain best
value for money they should undertake competitive bidding
process. Would with this be the best course of action?

a. Yes all procurement process should go through

competitive bidding in order to achieve best value for
money
b. Yes the process will be open up too many suppliers and
therefore will result in a cheaper price for the pens
c. No competitive bidding should only be used when the
value justifies the time spent on the process
d. No competitive bidding should only be used in public
sector organization

37
A procurement manager is about to secure a deal with an
overseas supplier. He suggested to his line manager that
securing a fixed price during the contract period of 36
months would be beneficial for the organization. Would
this be the right thing to do?

a. Yes because fixing a price will always ensure the best

deal possible
b. Yes because exchange rate can fluctuate and fixing the
price will help provide financial certainty
c. No because this may cause a disruption in supply as
oversea exchange rates may change
d. No because fixing pricing with foreign suppliers for
more than 24 months is an unethical

38
Sunita and her team are in a negotiation with the
supplier. A member of the suppliers negotiation team
states that meeting your needs is meeting my needs
because we are in this together. What type of
negotiation are the supplier and buyer undertaking?

a. Adversarial negotiation
b. Distributive negotiation
c. Lose-lose negotiation
d. Integrative negotiation

39
Listening is a key activity in any negotiation, the activity of
listening in negotiation includes which two processes?

I. Hearing
II. Interpreting
III. Rapport
IV. Influencing

a. 1 and 2 only
b. 2 and 3 only
c. 1 and 3 only
d. 2 and 4 only

40
A wide range of factors may be taken into account by
supplier when setting or negotiating prices. Which of
the following are external factor in pricing decisions?
Select two that apply.

a. Competition in the market

b. Cost of production
c. Where the product is in the life cycle
d. Customer perception of value
e. Cost of sales

41
As a buyer you have been let down by one of your new
supplier and you have lost some trust in the ability to
perform the contract. You are keen to repair the
relationship as you know that market is narrow and not
many supply can fulfill your needs. What approach would
be appropriate to start to rebuild the relationship?

a. A reduction in the price for the remainder of the contract

b. Acknowledgement by the supplier of the need to
improve
c. An offer of a hospitality package for yourself and the
partner
d. Amend the key performance indicator so that the
supplier can achieve them
42
The influence of culture has significant impact on
international negotiation. Which one of the following
communication skill could support a successful
outcome?

a. Understanding a language
b. Understanding position in an organization
c. Understanding the social position
d. Involving position

43
Which of the following would be considered
appropriate influencing techniques within contract
negotiation?
Select THREE that apply

a. Ratification
b. Anchoring
c. Framing and re-framing
d. Pacing and leading
e. Rule ethics
f. Validation

44
In which of the following is the buyers bargaining
power relatively high compared to the suppliers?

I. Few substitute products in the market

II. Demand is not urgent
III. The buyer can produce in house
IV. There are limited supplier in the market

a. 1 and 4 only
b. 1 and 2 only
c. 2 and 3 only
d. 2 and 4 only
45
Which of the following is a persuasion technique that
may include a statement of negative consequence?

a. Logic
b. Compromise
c. Threat
d. Bargaining

46
What are the potential source of conflict between the
buyer and the supplier? Select two that apply

a. Persistent late payment of supplier invoices

b. Scheduling athletes a delivery dates
c. Unequal sharing of risk and cost with the supplier
d. Requesting early supplier involvement
e. Planning schedule site visit to the suppliers side

47
Which of the following are internal factors when a
supplier is making a pricing decision?

I. Price elasticity of demand

II. Environmental Factor
III. Risk management
IV. Stages in the product life cycle

a. 1 and 2 only
b. 1 and 4 only
c. 2 and 3 only
d. 3 and 4 only

48
Effective listening is important in integrative
negotiation. Is the statement correct?

a. Yes as it allows issues to be shared and understood

between parties
b. Yes it means that the supplier attempts at
negotiation can be stopped quickly with the reasoning
c. No as what the other party has to say is not
important
d. No in effective listening is important only in a
distributive negotiation

49
Dave a procurement manager of XTC company has been
tasked with running a high value, long term procurement.
Dave as part of his negotiation strategy is reviewing how
the country economy may affect his negotiation position. In
which of the following would Dave find reliable
macroeconomic information?

I. Company accounts
II. Stock exchange
III. Government forecast
IV. Trade fairs

a. 1 and 2 only
b. 3 and 4 only
c. 1 and 4 only
d. 2 and 3 only
50
Mike is a junior buyer who has been working for a
manufacturing organization for two years specialising
in purchasing procedures. Over this time he has built
good relationship within his team and with other
departments. Which of the following source of power is
Mike likely to possess?

a. Position
b. Personality
c. Reward
d. Coercive

51
Which task should be carried out in a closure stage of
commercial negotiation?

a. Defining limits
b. Building rapport
c. Research and understanding
d. Obtain ratification

52
A procurement manager is preparing for negotiation
with a major supplier. He is holding back some
important information to ensure he has the stronger
negotiation power. Is this approach appropriate when
considering using an integrative negotiation Style?

a. No because this was not discovered the supplier

resistance point
b. No because this is not being open about the
requirement
c. Yes because it will discover the supplier resistant
point
d. Yes because it will maximize the outcome for the
procurement manager
53
Following commercial negotiation the outcome can be
assessed by which of the following ?

a. Reflecting on performance
b. Reflecting on risk
c. Reflecting on special condition
d. Reflecting on letter of acceptance

54
Exerting influencing over people by means other than
using authority or power is often required in contract
negotiation. Using emotions as a technique in
persuasion is ethical. Do you believe this is true or a
fair statement?
a. Yes because it will appeal to the suppliers Goodwill
b. No because emotion should not be involved in
business agreements
c. Yes because failure to comply would encourage an
agreement
d. No because it is not the best route to enhance
credibility

55
Effective objective for a negotiation have which of the
following characteristics? Select two that apply.

a. Measurable
b. Tactical
c. Specific
d. Accountable
e. Reliable

56
Which negotiation approach is focused on a win-lose
outcome

a. Collaborative
b. Adversarial
c. Compromise
d. Integrative

57
Which of the following source of personal power in
commercial negotiations?

I. Expert power
II. Informational power
III. Reward power
IV. Charismatic power

a. 1 and 2 only
b. 2 and 3 only
c. 1 and 3 only
d. 2 and 4 only
58
A procurement professional is able to influence the
outcome of a negotiation due to their superior knowledge
and because they have threatened to cancel the contract if
they are unhappy with the outcome. Which of the following
sources of personal power are being used?

I. Coercive power.
II. Reward power.
III. Expert power.
IV. Referent power.

a. 1 and 2
b. 2 and 3
c. 3 and 4
d. 1 and 3

59
Which of the following can be considered as on the
job training?

I. Taught workshop
II. Feedback
III. Coaching
IV. Anchoring

a. 1 and 2 only
b. 2 and 3 only
c. 1 and 3 only
d. 3 and 4 only

60
Steph is in tough negotiation with an internal
stakeholder who believes the product she has
developed is not suitable for use. Steph has decided to
change her influencing tactic to bring the stakeholder
on board. She has suggested the stakeholder sits in the
product development meeting and voices their
opinions to help develop the product. Which of the
following influencing techniques is Steph using?

a. Consultation
b. Coalition
c. Ingratiation
d. Pressure
61
Which of the following source of personal power in
commercial negotiations?

I. Expert power
II. Informational power
III. Reward power
IV. Charismatic power

a. 1 and 2 only
b. 2 and 3 only
c. 1 and 3 only
d. 2 and 4 only

62
Following commercial negotiation the outcome can be
assessed by which of the following?

a. Reflecting on performance
b. Reflecting on risk
c. Reflecting on special condition
d. Reflecting on letter of acceptance

63
Distributive negotiations are most typically associated
with which type of items?

a. Routine
b. Bottleneck
c. Leverage
d. Strategic

64
Logistics company has a preferred supplier for the
replacement of its vehicle fleet. The preferred supplier
knows it is the only organisation which can meet the
logistics company's needs, in terms of the type of vehicle,
the volume and the timescales. Which of the following
would be the most plausible BATNA for the logistics
company to use as leverage in the negotiation?

a. To threaten to reduce the number of vehicles it wants to

buy from the supplier
b. To cancel the order altogether and carry our more
regular maintenance on the ageing vehicle fleet
c. To buy one year old vehicles from a competitor which has
just gone into liquidation
d. To specify smaller vehicles from another supplier and
recruit more drivers.

65
A supplier has provided a breakdown of its costs,
which comprise $250,000 fixed costs and $75 per unit
variable costs. Its total costs for Product X amount to
$800,000. It determines its pricing based on applying
a fixed profit percentage of 25% of these costs, so the
price is $1 million. The 25% profit is known as …

a. mark-up
b. margin
c. absorption
d. costed

66
The supplier's break-even point is reached when its
revenues exceed which of the following?

I. Opportunity costs
II. Total fixed costs
III. Equity costs
IV. Variable production costs

a. 1 and 2 only
b. 2 and 4 only
c. 1 and 3 only
d. 3 and 4 only
67
The generally agreed definition of a commercial
negotiation is that it is aimed at achieving which of the
following?

a. Savings
b. Agreement
c. Concessions
d. Compromise

68
An experienced procurement professional has identified
negotiation skills as an area of development need. They
recognise they must have a high level of these skills as they
aspire to a leadership position in the future. They negotiate
with suppliers on a regular basis. What action should they
take?

a. Undertake reflective practice after each negotiation

meeting
b. Ask suppliers for feedback at the end of every negotiation
meeting
c. Publish the outcome of their negotiations on the
company's intranet site
d. Engage with all stakeholders for suggestions on best
practice

69
A buyer always makes a point of acknowledging every
concession they are offered by a supplier and will attempt
to gain a little extra at the very end of the negotiation
meeting when the deal is being concluded. Which tactics
are they using?

I. Good cop-bad cop.

II. Thanks and bank.
III. Add-on.
IV. Broken record.

a. 1 and 2
b. 2 and 3
c. 3 and 4
d. 1 and 3

70
Understanding the supplier's mark-up in a negotiation
is useful as it identifies the profitability of the contract
in relation to the supplier's costs. Is this correct?

a. No, the mark-up relates to the supplier's general

overheads.
b. Yes, it expresses profit as a percentage of costs.
c. No, it relates to the amount of profit made in relation
to the price.
d. Yes, a positive mark-up means the supplier is
breaking even as a company.

71
The procurement organisation will generally have
more power in a negotiation with a supplier which is in
a monopolistic position in the market. Is this correct?

a. No, such a supplier is in a market dominant position

b. Yes, the buyer will have several suppliers to choose
from
c. No, because the supplier might not have enough
capacity
d. Yes, as long as buyer has run a competitive tender

72
Which of the following are types of questions that are
useful to obtain detailed answers from the other party
that will include their own opinions and thoughts?
Select the TWO that apply.

a. Leading.
b. Narrow.
c. Open.
d. Probing.
e. Closed

73
Which of the following are required pieces of
information to calculate the break-even point of a
product? Select the THREE that apply.

a. Pricing.
b. Product type.
c. Variable costs.
d. Level of competition.
e. Fixed costs
f. Elasticity

74