L4M5 CIPS Commercial Negotiation Free Practice Exam Questions (2026 Updated)

At the first stage of CIPS Procurement and Supply Cycle (Understand need and develop a high-level specification), procurement professional mainly negotiate with internal stakeholders. They have a duty to proportionately and constructively challenge specification if there's genuine doubt over the need or how the need is expressed. This is called demand management. Their first duty is to the organisation's treasury, not to functional managers.

Demand management including: negotiation/challenge between procurement and internal stakeholders over the need/requirement/specification. Remember that in any process or product, the greatest opportunity for cost reduction is at the design stage.

In some markets, suppliers experience peaks and troughs in demand and so buyers can increase their leverage through developing an understanding of how busy their vendor are at particular time during the year or business cycle and targetting at quieter period. Similarly, if a buyer can develop an understanding of supplier capacity and to what extent have they covered their fixed cost, they may be able to target suppliers when their average costs are likely to be lowest. Vendor's average costs will be higher at low and high capacity utilisation.

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Monopolies exist in many markets in real life for very different reasons:

Ownership of a Key Resource: When one company exerts sole control over a resource that is necessary for the production of a specific product, the market may become a monopoly. For example, the only medication deemed acceptable to treat a disease comes from a particular ingredient X, and knowledge of this ingredient X is owned by a single family owned company. The company can, therefore, be said to have a monopoly over ingredient X that is needed to cure the disease because it is the only company that can produce a product deemed acceptable.

Government Franchise: In certain instances, a monopoly may be explicitly created by the government if it grants a single company, whether private or government-owned, the right to conduct business in a particular market. For example, when a national railways transportation service is created by the government, in most cases they are granted a monopoly on the operation of passenger trains in the country. As a result, other firms are only able to offer passenger train services with the cooperation and/or permission of the government-owned provider.

Intellectual Property Protection: Extending intellectual property protection to a company in the form of patents and copyrights is yet another way in which monopolies are created. When a government does this, it is in fact giving a single company an exclusive right to provide a particular product / service to the market. Patents and copyrights work in providing owners of intellectual property with the right to act as an exclusive provider of a new product for a specific length of time. This creates a temporary monopoly in the market with regards to new products and services.

Natural Monopoly: A market may also become a monopoly simply because it may be more cost-effective for one company to serve the whole market than to have several smaller firms in competition with one another. A company with virtually unlimited economies of scale is referred to as a natural monopoly. Such firms become monopolies due to their position and size, which makes it impossible for new entrants in the market to compete price-wise. Natural monopolies are common in industries with high fixed costs and low marginal costs of operation such as providers of television, telephone, and internet services.

In this question, 'A single firm is very large' is not enough to tell whether this market is monopolistic.

In the scenario, anyone who has concerns can join a meeting to raise their thoughts. The project team takes the stakeholders' ideas into account. This is known as coalition: A group of people or organisations come together and work collaboratively to achieve some goals. Specifically in this scenario, the goal is creating a high-quality and unified specification for an important project.

The question asks about the point in time when Jane should make concessions with the supplier. These concessions should be traded after preliminary stages such as opening, testing and proposing are over and proposals move from being tentative and general to being more definite and specific. This stage is called bargaining phase. The bargaining phase is the 'meat' of the negotiation meeting.

LO 3, AC 3.1

Adversarial (win–lose) negotiation is viable when buyers can leverage abundant alternatives and substitutes, reducing supplier power. In such cases, buyers can adopt tough tactics, knowing they can switch suppliers if necessary. By contrast, limited supply, single sourcing, or monopolist suppliers constrain buyer power, making adversarial strategies risky and often ineffective. CIPS stresses that negotiation style must be matched to market conditions and the power balance.

By removing the requirement for named personnel, CDL could allow the supplier flexibility in allocating equally competent but possibly less expensive staff. This tradeable does not compromise on quality but helps control costs.

There are many macro economic factors that could influence procurement in general and commercial negotiation in particular. Below are six factors that are agreed to be fairly significant:

• Economy growth rate

• Inflation rates

• Interest rates

• Currency exchange rate

• Unemployment rate

• Protectionism

LO 2, AC 2.2

The testing stage of the negotiation cycle is where each party explores and validates information provided by the other side. By asking the supplier to present their performance to date, Ben is testing claims, checking credibility, and assessing whether the supplier’s performance supports or undermines their position in the negotiation. This is distinct from preparation (which happens before the meeting), bargaining (where concessions and tradeables are exchanged), and agreement (where final terms are confirmed). CIPS highlights that testing allows negotiators to challenge assumptions, clarify evidence, and strengthen their position before moving into bargaining or closure.

Both organisational and personal power have the ability to influence the outcomes of negotiation. Good negotiators recognises the different sources of relative personal power they possess in a negotiation. There is no one superior source of personal power; they will vary in their effectiveness based on the situation. The more personal sources available the better, even if some not used, these can be used as a fallback.

LO 1, AC 1.3

While understanding the supply market and preparing aBATNA (Best Alternative to a Negotiated Agreement)are essential, theydo not cover all risks. Comprehensive preparation includes defining thenegotiation team, setting clearobjectives, planningtradeables, and anticipatingcommunication tactics. Skipping these steps can lead to poor coordination, misunderstandings, and missed opportunities. Effective negotiation is amultifaceted process, not a single strategy.

Open questions (“how/why/what…”) encourage the other party to share information, interests, and constraints, supporting rapport, listening, and exploration—key to persuasive dialogue and integrative outcomes. Closed questions check facts; open ones surface interests.

Contextual (environmental) power includes home-ground advantage, control of the venue, access to colleagues and data, and comfort with logistics—all of which can tilt confidence and leverage toward the host (the buyer).

Effective listening is crucial in integrative negotiations because it promotes understanding and collaboration. By actively listening, parties can identify shared interests and address concerns, which supports the goal of reaching mutually beneficial solutions. This is a key component in CIPS guidelines on successful integrative negotiation practices.

There are many tactics and ploys that can be used to persuade others, particularly those not trained in negotiation. But in general these tactics should be used with care, as they can backfire; and in situations where a long-term relationship is desired, they can be, if detected, become an irritant to TOP.

Tactics are particularly effective if and when you are dealing with untrained negotiators, in consumer's buying situation and in once-off encounter.

Mark-up and margin allow supplier to make gross profit. Remember that every supplier operates under different cost structures and some are set up to be most profitable at a particular level of volume, so it is dangerous to assume all suppliers can survive on a lower margin if their volume increases. Intelligent buyers understand that mark-up and margin may define gross profits, but they tell you very little about a supplier's net profits.

LO 2, AC 2.1

Integrative negotiation seeks joint value creation. Collaboration builds trust and open exchange, while problem solving identifies creative tradeables that satisfy both sides. Coercion and risk transfer belong to adversarial, distributive strategies, where one side gains at the expense of the other. Persuasion can play a role, but without collaboration, it leans toward manipulation rather than true win-win. In practice, integrative approaches require willingness to share data, listen actively, and seek long-term alignment.