How can having a best alternative to a negotiated agreement (BATNA) support the buyer in a negotiation? Select THREE options that apply.
Answer(s): A,B,F
Having a BATNA:Increases assertiveness (A): Knowing the fallback position empowers the buyer to negotiate more confidently.Reduces the chance of a poor agreement (B): A BATNA ensures the buyer does not feel pressured to accept suboptimal terms.Identifies walk-away points (F): It sets a clear boundary, allowing the buyer to exit negotiations if terms don't meet minimum requirements.These align with CIPS's guidance on using BATNA to strengthen negotiation strategies.
Which of the following two are recognized strategies to achieve a win-lose outcome?Making the other party lower its resistance pointMaking the other party think this settlement is the best it can achieve Employ empathy to gain mutual understandingUsing compromise and creativity tactics
Answer(s): A
In a win-lose outcome, tactics often involve lowering the other party's resistance point (1) and convincing them that the offer is the best possible (2). These strategies are designed to maximize advantage for one party at the expense of the other, fitting with CIPS's win-lose negotiation techniques.
Which of the following are examples of variable costs?Building and site rentAnnual insurance premiumRaw materials expenditureDelivery costs for materials
Answer(s): D
Raw materials expenditure (3) and delivery costs for materials (4) are variable costs as they fluctuate with production levels. Variable costs vary directly with the volume of production, unlike fixed costs such as rent or insurance, in line with CIPS's classifications of cost types in procurement.
Which of the following are tools that help procurement visualise cost breakdowns of products and services purchased from supplier?1. Spend candlesticks2. Spend tree3. Aggregate expenditure model4. Spend waterfall
Understanding where and with whom your supplier spends their money, or understanding the 'cost breakdowns' or 'price build-up' of the goods and services you purchase from the supplier, will help you know where and when they can offer price concessions.Cost information can be expressed with more impact through graphs that can be created using Excel and PowerPoint or other softwares. There are two commonly used models known as 'spend waterfall'and 'spend tree'. Spend waterfall shows the build-up of costs, while the spend tree shows all the spends that an organisation makes.There is no graph known as 'spend candlesticks'. Candlestick chart is a style of financial chart used to describe price movements of a security, derivative, or currency. The aggregate expenditure model is a method of calculating GDP. The aggregate expenditure model focuses on the relationships between production (GDP) and planned spending: GDP = planned spending = consumption + investment + government purchases + net exports.
Premium pricing strategies used by suppliers are characterised by which of the following? SelectTWO that apply.
Answer(s): A,D
There are several pricing strategies used by suppliers:Cost-plus pricing Total variable + Fixed cost + profit Premium pricing based on branding. Supplier determines to charge a very high price, not connected with cost structures, usually based on its reputation and/or the perception that the product/service is of a superior quality. This strategy typically found in the early part of the product life cycle/when demand exceeds supply.Penetration pricing - Supplier attempts to enter a new market or extend its share in an established one. It is characterised by price reductions to increase volume, followed by steady price increases; may even be loss leading at start (no profit made)Marginal cost pricing covers only variable costMarket pricing suppliers prices in line with what the market is willing to pay
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