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CIPS L4M5 Exam

Certification Provider: CIPS
Exam Name: Commercial Negotiation
Number of questions in our database: 163
Exam Version: Mar. 21, 2024
L4M5 Exam Official Topics:
  • Topic 1: Analyse the application of commercial negotiations in the work of procurement and supply/ Negotiation in relation to the stages of the sourcing process
  • Topic 2: Understand key approaches in the negotiation of commercial agreements with external organisations/ Sources of conflict that can arise in the work of procurement and supply
  • Topic 3: Team management and the influence of stakeholders in negotiations/ Definitions of commercial negotiation
  • Topic 4: Setting targets and creating a best alternative to a negotiated agreement (BATNA)/ Collaborative win-win integrative approaches to negotiations
  • Topic 5: Differentiate between the types of approaches that can be pursued in commercial negotiations/ Distributive win-lose, distributive approaches to negotiation
  • Topic 6: Organisational power: comparing the relative power of purchasers and suppliers/ Explain how the balance of power in commercial negotiations can affect outcomes
  • Topic 7: How purchasers can improve leverage with suppliers/ The importance of power in commercial negotiations
  • Topic 8: Building relationships based on reputation, and trust/ Repairing a relationship/ The relationship spectrum
  • Topic 9: Identify the different types of relationships that impact on commercial negotiations/ Pragmatic and principled styles of negotiation
  • Topic 10: Costing methods such as absorption, marginal or variable and activity based costing/ Know how to prepare for negotiations with external organisations
  • Topic 11: Macroeconomics and its influence on commercial negotiations/ Contrast the economic factors that impact on commercial negotiations
  • Topic 12: Setting objectives and defining the variables for a commercial negotiation/ Use of telephone, teleconferencing or web based meetings
  • Topic 13: How behaviours should change during the different stages of a negotiation/ Compare the key communication skills that help achieve desired outcomes
  • Topic 14: Analyse how to assess the process and outcomes of negotiations to inform future practice/ Protecting relationships after the negotiation
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Free CIPS L4M5 Exam Actual Questions

The questions for L4M5 were last updated On Mar. 21, 2024

Question #1

Which of the following are most likely to be characteristics of a perfectly competitive market? Select TWO that apply

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Correct Answer: B, D

A perfectly competitive market is one with the following features:

- There are many firms producing identical or very similar (homogeneous) goods or services

- There are no barriers to entry to the market or exit from the market - anyone can enter or leave easily

- Both producers and customers have perfect knowledge of the market place, prices, costs of production and influences on demand and supply

Under these conditions, the price and quantity will always tend toward equilibrium as any producer that sets a price above equilibrium will not sell anything at all, and any producer that sets a price below a equilibrium will obtain 100% market share in theory. The demand curve is perfectly elastic, which means that it will be horizontal. In a perfectly competitive market, it is difficult to increase profits through pricing, and suppliers instead must focus on their cost structure. As these conditions imply, there are few if any examples of perfectly competitive market.

LO 2, AC 2.2


Question #2

Katie is preparing a negotiation with a strategic supplier. Through deep market analysis, she realises that her company and the supplier have equal bargaining power. Via regular communication, Katie knows that both parties are arguing on amount of liquidated damages and neither party shall concede all of their requirements but some are negotiable. Katie and her counterpart from supplying company still desire a long-term relationship and hope that the meeting between them will be a solution for current situation. Which of the following is the most appropriate approach that Katie should adopt to achieve the above outcome?

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Correct Answer: C

Competing is assertive and uncooperative, a power-oriented mode. When competing, an individual pursues his or her own concerns at the other person's expense, using whatever power seems appropriate to win his or her position. Competing might mean standing up for your rights, defending a position you believe is correct, or simply trying to win. Competing will not allow long-term relationship to flourish.

Compromising is intermediate in both assertiveness and cooperativeness. When compromising, the objective is to find an expedient, mutually acceptable solution that partially satisfies both parties. Compromising falls on a middle ground between competing and accommodating, giving up more than competing but less than accommodating. Likewise, it addresses an issue more directly than avoiding but doesn't explore it in as much depth as collaborating. Compromising might mean splitting the difference, exchanging concessions, or seeking a quick middle-ground position. It is a valid approach when long-term relationships are at stake and it is important to find some common ground on which to base an agreement. Both sides get something but not everything. Therefore, this is the most appropriate for this scenario.

Avoiding is unassertive and uncooperative. When avoiding, an individual does not immediately pursue his or her own concerns or those of the other person. He or she does not address the conflict. Avoiding might take the form of diplomatically sidestepping an issue, postponing an issue until a better time, or simply withdrawing from a threatening situation. In the scenario, both parties want to take the opportunity, then avoiding is not an appropriate solution.

Accommodating is unassertive and cooperative---the opposite of competing. When accommodating, an individual neglects his or her own concerns to satisfy the concerns of the other person; there is an element of self-sacrifice in this mode. Accommodating might take the form of selfless generosity or charity, obeying another person's order when you would prefer not to, or yielding to another's point of view. In the scenario, neither party shall concede all of their requirements, it is unnecessary to adopt this approach.

LO 1, AC 1.1


Question #3

An automotive company purchases high quality steel to produce components. The steel is an important raw material and the contract value is enormous. They sources the steel from oversea and contact some potential suppliers. One of the potential suppliers invites the procurement team to their premise for a new business opportunity. Should the procurement team accept the invitation?

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Correct Answer: C

In the scenario, the value of contract as well as the importance of purchased item justify the procurement's travel. Visiting a supplier at their HQ or operational facility may facilitate the procurement team in assessing, albeit briefly, the culture of the organisation, how busy they seem and how staff engage with each other. A visit is a good opportunity to assess supplier's capacity.

LO 2, AC 2.2


Question #4

Active listening in negotiation includes which of the following activities?

1. Hearing

2. Interpreting

3. Rapport

4. Influence

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Correct Answer: C

Listening is a hugely important skill in the world of work. It's a key part of effective communication [...].

Regarding active listening, there is a model called 'The SIER Hierarchy of Active Listening'. It details four key stages required for effective listening. As with all models associated with active listening, its purpose is to help the listener be a better, more effective listener who really hears what is being said, connects with the individual with whom they are communicating and builds effective relationships.

The model is a hierarchical model meaning that each stage builds on the stage before it. While the model is sometimes used for training in the sales arena, it is helpful in all walks of life. The stages of the model are: Sensing (including hearing and watching body language), Interpreting, Evaluating and Responding.


- CIPS study guide page 171-173

- The SIER Hierarchy of Active Listening: Become a Better Listener

LO 3, AC 3.3

Question #5

Which of the following will shift the supply curve to the right?

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Correct Answer: B

The following graph shows the factors that shift the supply curve to the left and to the right.


- CIPS study guide page 103

- Principles of Microeconomics 2e, 2017, Open Stax - Rice University.

LO 2, AC 2.2


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