Commercial Negotiation Flashcards
Which of the following best describes the term ‘negotiation’?
a. Obtaining the lowest price from a supplier.
b. Reaching a mutually acceptable agreement.
c. Discussing a supplier’s quality control systems.
d. Forcing one party to agree to the other party’s demands.
b. Reaching a mutually acceptable agreement.
Which of these approaches to negotiation seeks to maximise the benefits for both parties?
a. Distributive Negotiation.
b. Win –Lose Negotiation.
c. Lose – Win Negotiation.
d. Integrative Negotiation.
d. Integrative Negotiation.
Distributive Negotiation is known as:
a. A no-deal outcome.
b. A collaborative negotiation.
c. A zero sum game.
d. A win- win outcome.
c. A zero sum game.
A ‘win-win’ negotiation is most likely to include which of the following behaviours?
a. Competition.
b. Collaboration.
c. Conflict.
d. Confrontation.
b. Collaboration.
In a commercial situation when is negotiation necessary?
a. In order to achieve a zero sum outcome.
b. To clarify expectations.
c. In order to procure items.
d. When there is potential disagreement.
d. When there is potential disagreement.
Which of the following courses of action might a buyer invoke if the supplier cannot meet the minimum target set in the buyer’s objectives?
a. SMART.
b. LIM.
c. BATNA.
d. ZOPA.
c. BATNA.
If a product costs $50 to make and sells at $100 what is the Mark-up?
a. 100%.
b. $50.
c. 50%.
d. 200%.
a. 100%.
If a product costs $50 to make and sells at $100 what is the Margin?
a. 100%
b. $50
c. 50%
d. 200%
c. 50%
Which of the following is an example of personal power?
a. Expert power.
b. Time power.
c. Supplier power.
d. Market power.
a. Expert power.
The person in the organisation who could be described as the ‘Gatekeeper’ demonstrates which of the following sources of power?
a. Legitimate.
b. Reward.
c. Informational.
d. Referent.
c. Informational.
Which of the following descriptions best describes ‘The Five Forces Model’?
a. Strengths, weaknesses, opportunities, threats and challenges in a
complex marketplace.
b. Risks, threats, opportunities for new suppliers, weaknesses of existing suppliers and external market forces.
c. Power of buyers, suppliers, threat of new entrants, substitutes and
competitive rivalry.
d. Supplier bargaining power, external governmental pressures, legal
restrictions, market conditions and inter-company trade.
c. Power of buyers, suppliers, threat of new entrants, substitutes and
competitive rivalry.
According to the supplier perception matrix, a customer with a very high spend and an attractive business would be described as which of the following?
a. Nuisance.
b. Core.
c. Develop.
d. Exploit.
b. Core.
A manufacturer sells a product for $10 and has $6 worth of variable costs per unit and total fixed costs of $120,000 what is its breakeven point.
a. 30,000 units.
b. $20,000.
c. $30,000.
d. 20,000 units.
a. 30,000 units.
Which of the following best describes an economic market with a few main suppliers in it?
a. Duopoly.
b. Oligopoly.
c. Monopoly.
d. Perfect Competition.
b. Oligopoly.
Which of the following best describes an economic market with many different size suppliers in it?
a. Monopolistic competition.
b. Oligopoly.
c. Monopoly.
d. Perfect Competition.
a. Monopolistic competition.
In economic theory, which of the following best describes the relationship between prices, supply and demand?
a. As prices go up, supply increases and demand decreases.
b. As prices go down, supply increases and demand decreases.
c. As prices go up, supply increases and demand increases.
d. As prices go down, supply and demand decreases.
a. As prices go up, supply increases and demand decreases.
Which of the following is a characteristic of a skilled negotiator?
a. Distinguishes between interests and positions.
b. Wins every argument.
c. Jumps to a premature conclusion.
d. Gives little time to areas of common ground.
a. Distinguishes between interests and positions.
Which of the following strengths is most likely to describe a ‘logical negotiator’?
a. Creative.
b. Trusting.
c. Persistent.
d. Methodical.
d. Methodical.
A buyer who concentrates on details is commonly referred to as which of the following types of negotiator?
a. Logical.
b. Dealer.
c. Warm.
d. Tough.
a. Logical.
Which of the following would most often be regarded as a ‘quality variable’ which can be negotiated?
a. Payment terms.
b. Material used.
c. Lead times.
d. Retrospective discount.
b. Material used.
Which of the following examples represents a ‘price variable’?
a. Specification.
b. Training.
c. Discounts.
d. Delivery time.
c. Discounts.
Which of the following is a recognised phase in the process of negotiation?
a. Conclusion.
b. Analysing.
c. Bargaining.
d. Transaction.
c. Bargaining.
At which stage in a negotiation would questions be asked to obtain missing information?
A. The opening stage.
B. The bargaining stage.
C. The proposing stage.
D. The testing stage.
D. The testing stage.
During a negotiation, which of the following tactics is the most appropriate if the other party makes an unexpected offer?
A. Remain silent.
B. Re-escalation of demand.
C. Accept immediately
D. Call a Recess.
D. Call a Recess.
‘What specific type of vehicle would be most efficient for delivery to Site A?’ is an example of which type of question?
A. Closed.
B. Probing.
C. Multiple.
D. Leading.
B. Probing.
Stop talking, do not interrupt and concentrate on what is being said , - these are all requirements of which of the following?
A. Contract evaluation.
B. Body language.
C. Active listening.
D. Persuasion methods.
C. Active listening.
Which of the following is essential in successful negotiations?
A. Obtaining the lowest price.
B. Achieving our objectives.
C. Never giving in to supplier demands.
D. Taking a lead and dominating the discussion.
B. Achieving our objectives.
“Trade the variables which are easy to give up, but which are more valuable to a supplier”. This advice might be useful at which stage of a negotiation meeting?
A. Agreement.
B. Propose.
C. Test.
D. Bargaining.
D. Bargaining.
Which of the following is a characteristic of a skilled negotiator?
A. Wins arguments.
B. Uses irritators.
C. Makes immediate concessions.
D. Summarises frequently.
D. Summarises frequently.
A Supplier has some customers that have a low monthly spend but insist on very exacting quality standards that often involve the supplier in extra work. In which segment could the supplier place these customers?
A. Nuisance.
B. Core.
C. Develop.
D. Exploit.
A. Nuisance.
The act of asking for concessions little by little is known as which of the following negotiation tactics?
A. Salami.
B. Onus transfer.
C. Divide and rule.
D. Mother Hubbard.
A. Salami.
A person who enjoys the bargaining involved in a negotiation is best defined as which of the following ‘people styles’?
A. Logical.
B. Tough.
C. Warm.
D. Dealer.
D. Dealer.
Which of the following best describes the purpose of the post-negotiation phase?
A. To make proposals.
B. To set clear objectives.
C. To make counter proposals.
D. To monitor outcomes.
D. To monitor outcomes.
Which role within the negotiation team usually has the responsibility to followthe agenda?
A. The internal customer.
B. The specialist support.
C. The summariser.
D. The chairperson.
D. The chairperson.
A buying organisation with a high spend and the reputation for paying late might be viewed by a supplier as which of the following?
A. Exploit.
B. Core.
C. Nuisance.
D. Develop.
A. Exploit.
SWOT analysis is a strategic tool designed to do which of the following?
A. Evaluate negotiation performance.
B. Provide analysis of commodity prices.
C. Outline the roles of a negotiating team.
D. Appraise the overall state of an organisation.
D. Appraise the overall state of an organisation.
Which of the following will help the buyer predict the range of positive outcomes from a negotiation?
A. PPCA.
B. ZOPA.
C. BATNA.
D. SMART.
B. ZOPA.
The point of where demand and supply curves intersect is known as what?
A. Equilibrium price
B. Equality price
C. Equilibrium point
D. Equality point
A. Equilibrium price
Which approach could a Buyer use when planning for the objectives of a negotiation?
A. TQM.
B. MIL.
C. JIT.
D. MIT.
B. MIL.
Which of these is a key Macro Economic Factor
A. Inflation rates.
B. Market structures.
C. Opportunity cost.
D. Barriers to entry.
A. Inflation rates.
Which of the following best defines ‘price equilibrium’?
A. The price that will secure a company as many sales as its competitors.
B. The price that will balance a companies costs with profitability.
C. The price at which the quantities demanded and supplied are the same.
D. The price that will be acceptable to customers, directors and
shareholders.
C. The price at which the quantities demanded and supplied are the same.
Which of the following might a buyer use in order to understand a suppliers costs?
A. PPCA.
B. SMART.
C. BATNA.
D. ZOPA.
A. PPCA.
When an agreement has been reached in a negotiation it often has to be signed off by the senior managers of both parties this is known as:
A. Ratification.
B. Restitution.
C. Regression.
D. Rectification.
A. Ratification.
Which approach used within negotiation can be described as ‘encouraging someone to do something that you want them to do for you.’
A. Influence.
B. Persuasion.
C. Power.
D. Intuition.
B. Persuasion.
Which approach used within negotiation can be classified as a ‘Push’ approach?
A. Influence.
B. Persuasion.
C. Emotion.
D. Intuition.
B. Persuasion.
Which approach used within negotiation can be classified as a ‘Pull’ approach?
A. Influence.
B. Persuasion.
C. Power.
D. Intuition.
A. Influence.
Which approach used within negotiation can be described as ‘The ability to affect the manner of thinking of another.’
A. Influence.
B. Persuasion.
C. Power.
D. Intuition.
A. Influence.
EQ is centred on which of the following abilities:
A. Visual and spatial processing.
B. Linguistic reasoning.
C. Relating to others.
D. Knowledge of the world.
C. Relating to others.
Do good listeners almost always turn out to be good negotiators?
A. No- Because getting a good result is about stating your case forcefully.
B. No- Because good negotiators concentrate on what they are going to say next.
C. Yes- Because listening shows courtesy to the other party.
D. Yes- Because good negotiators consider both verbal and non verbal communication signals.
D. Yes- Because good negotiators consider both verbal and non verbal communication signals.
An organisation has had a successful negotiation and achieved all it’s objectives. Should it review the negotiation process?
A. Yes – Because most organisations have a policy that requires a review at the end of a negotiation.
B. Yes - Because there is always something to be improved on within the negotiation process.
C. No – Because if all the objectives have been achieved it would be a waste of time.
D. No – Because the negotiation team may see it as a criticism of their approach.
B. Yes - Because there is always something to be improved on within the negotiation process.
Which type of trust is based on knowing the other party has your interests at heart and will not behave opportunistically?
A. Goodwill trust.
B. Competence trust.
C. Contractual trust.
D. Emotional trust.
A. Goodwill trust.
Which of the following could be a sign of mistrust in a relationship?
A. Real-time sharing of information.
B. On-time delivery of products.
C. Clear criteria for decision marking.
D. Frequent escalation of issues.
D. Frequent escalation of issues.
In which approach to costing are all the overhead costs recovered by being incorporated into the costs of products created?
A. Standard costing.
B. Marginal costing.
C. Open book costing.
D. Absorption costing.
D. Absorption costing.
A buyer has been considering the cost make up of their suppliers product and has classified electricity as a fixed cost is that correct?
A. Yes - Because the price of electricity is fairly stable.
B. Yes – Because electricity is a direct cost.
C. No – Because the price of electricity is unstable.
D. No – Because electricity is a semi- variable cost.
D. No – Because electricity is a semi- variable cost.
Which of the following costs could be considered indirect for a food manufacturer?
A. Flour.
B. Cooked meats.
C. Lighting.
D. Production workers.
C. Lighting.
A buyer wishes to analyse the Macro environment as part of their preparation for negotiations. Which of the following tools would be most useful?
A. Kraljic Matrix.
B. STEEPLE.
C. Ansoff Matrix.
D. Porter’s Five Forces.
B. STEEPLE.
Which technique is used to set the other parties expectations about the negotiation sometimes even before the negotiations start.
A. Objectives.
B. Distributive.
C. Conditioning.
D. Integrative.
C. Conditioning.
Which of the following is more likely to occur in a distributive type negotiation?
A. Both parties feel comfortable physically.
B. A quiet facility is provided with no interruptions.
C. Agenda timings are agreed in advance.
D. One party is made to feel uncomfortable physically.
D. One party is made to feel uncomfortable physically.
Which of the following could be considered to be cultural issues when negotiating internationally – select THREE that apply
A. Attitudes to status.
B. Payment terms.
C. Contractual terms.
D. The acceptability of gifts.
E. Incoterms.
F. Attitudes to risk.
A. Attitudes to status.
D. The acceptability of gifts.
F. Attitudes to risk.
Which ONE of the following conditions is typical of a collaborative negotiation?
a. All parties must have exactly the same goals
b. Both parties understand each other’s goals
c. One party is prepared to accommodate the other
d. The supplier must allow the buyer to achieve their goals
b. Both parties understand each other’s goals
Which ONE of the following is the best example of a BATNA (best alternative to a negotiated agreement)
for a buyer?
a. A concession is made by the buyer
b. An alternate supplier is available
c. An unachievable marker is placed by the supplier
d. A walk-away point is reached by the buyer
b. An alternate supplier is available
Distributive negotiations are most typically associated with which ONE of the following conditions?
a. Purchasing a limited source of items through an auction against other buyers
b. Purchasing items from a strategic long-term supplier
c. Purchasing innovative items where both parties share the risk equally
d. Purchasing items where both parties gainshare the rewards equally
a. Purchasing a limited source of items through an auction against other buyers
A category manager is having an unsuccessful negotiation with a supplier, and has decided to adopt a
different approach to the negotiation. 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
b. Coercive
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 break, 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 ONE of the following?
a. Threat
b. Emotion
c. Logic
d. Bargaining
d. Bargaining
A supplier has provided a breakdown of its costs, which comprise of $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
a. mark-up
The supplier’s break-even point is reached when its revenues exceed which of the following?
1. Opportunity costs
2. Total fixed costs
3. Equity costs
4. Variable production costs
a. 1 and 2 only
b. 2 and 4 only
c. 1 and 3 only
d. 3 and 4 only
b. 2 and 4 only
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
a. Yes, because they are good to check understanding
Which of the following are most likely to be fixed costs for a manufacturing business? Select the THREE
that apply.
a. Factory rent
b. Full-time staff salaries
c. Insurance premiums
d. Components
e. Casual Labour
f. Spares for production machines
a. Factory rent
b. Full-time staff salaries
c. Insurance premiums
Which of the following are recognised forms of nonverbal communication? Select the THREE that apply.
a. Hand gestures
b. Body posture
c. Informal communications
d. Complex messaging
e. Short Presentations
f. Facial expressions
a. Hand gestures
b. Body posture
f. Facial expressions
A definition of a commercial negotiation is that it is aimed at achieving which ONE of the following?
a. Savings
b. Agreement
c. Concessions
d. Compromise
b. Agreement
In a collaborative negotiation the ideal outcome is …
a. Perceived win-win
b. Lose-lose
c. Win-lose
d. Win-win
d. Win-win
A logistics company has a preferred supplier for the replacement of its vehicle fleet. The preferred supplier knows it is the only organisation that can meet the logistics company’s needs in terms of the type of
vehicle required, the volume of vehicles required and in the timescales required. Which ONE of the following would be a BATNA (best alternative to a negotiated agreement) 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
c. To buy one year old vehicles from a competitor which has just gone into liquidation
An experienced procurement professional has identified advanced negotiation skills as an area for
personal development. They recognise that they will require competency in these skills in order to have a
more senior leadership position in the future. What action should they take to achieve this?
a. Undertake reflective practice after each negotiation meeting
b. Give suppliers feedback on their performance at the end of every negotiation meeting
c. Publish the outcome of their negotiations on the company’s intranet site
d. Dictate to team members what their roles are in a negotiation
a. Undertake reflective practice after each negotiation meeting
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?
1. Coercive power
2. Reward power
3. Expert power
4. Referent power
a. 1 and 2 only
b. 2 and 3 only
c. 3 and 4 only
d. 1 and 3 only
d. 1 and 3 only
In negotiation meeting, 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 meeting when the deal is
being concluded. Which tactics are they using?
1. Good cop-bad cop
2. Thanks and bank
3. Add-on
4. Broken record
a. 1 and 2 only
b. 2 and 3 only
c. 3 and 4 only
d. 1 and 3 only
b. 2 and 3 only
Understanding the supplier’s profit margins in a negotiation is a useful piece of information as it
identifies the profitability of the contract in relation to the supplier’s costs. Is this statement TRUE?
a. No, the profit margin relates to the supplier’s general overheads
b. Yes, it expresses profit as a relative percentage of the total revenue
c. No, as suppliers only make a profit on direct costs
d. Yes, a positive profit margin means the supplier is breaking even as a company
b. Yes, it expresses profit as a relative percentage of the total revenue
In a negotiation, a procurement organisation will generally have more power with a supplier that is in a
monopoly position in the market. Is this statement TRUE?
a. No, the 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
a. No, the supplier is in a market dominant position
Which of the following are types of questions that are useful to obtain comprehensive detailed answers
from the other party that will also include their own opinions and thoughts? Select the TWO that apply.
a. Leading
b. Narrow
c. Open
d. Probing
e. Closed
c. Open
d. Probing
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
a. Pricing
c. Variable costs
e. Fixed costs
