L4M5 CIPS Exam Lab Questions

Thebargaining stageis where both parties begin tomake concessionsand test options. This phase involves the use of strategic tactics, including the presentation of tradeables and adjustments in position to reach mutual agreement.

“The bargaining stage is characterised by movement, trade-offs, and deal-shaping. Tactics such as anchoring, making concessions, and introducing tradeables are employed to bridge the gap between opening offers.”

(L4M5 Commercial Negotiation, 2nd edition, Section 3.2 - Stages of the Negotiation Process)

Afixed price agreementprovides stability and predictability. The supplier bears the risk of cost fluctuations, which is especially advantageous in volatile markets. Moreover, it simplifies administrative processes for the buyer over the contract duration.

“Fixed price agreements transfer cost risk to the supplier and enable simplified contract management. This can reduce overhead for buyers and support budgeting accuracy.”

(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Pricing Models in Negotiation)

When preparing for a negotiation, negotiator should establish a list of tradeables and a concession plan. Good negotiators never give anything away that has not already been planned as part of the bargaining mix in the concession planning stage.

In the above scenario, the procurement manager has planned his own concession, so he can trade with supplier. The answer should be "Yes, since procurement manager has his own cost savings target to achieve and he should make use of supplier's financial status"

LO 2, AC 2.3