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

In the opening phase, parties should confirm understanding and get the issues on the table.

The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.

Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.

Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening and testing stages.

There are multiple sources of divergent positions that can arise in situations where money is exchange for goods and services. There are 2 different types of sources. Those that arise from the content or subject matter of the negotiation (what is being negotiated) and those that arise from the process of negotiation (how it is being negotiated).

Sources of divergent positions - the process of negotiation:

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Line of best fits is the line that goes approximately through the middle of the data points with an equal number of data points above and below it. Line of best fits is a method of calculating medium value in statistics.

Standard terms and conditions are basic terms and conditions of business governing transactions that do not have a definitive contract, usually designed to be included in form documents such as orders. While there may be conflicts regarding standard terms and conditions, they are about the content of negotiation, not the process.

Type of purchase: when buying organisation makes an decision to purchase an item, a buyer is faced with three possible scenarios. The item to be bought could be a straight re-buy, a modified re-buy or a new purchase. Decision on type of purchase is purely an internal decision.

Negotiating at the supplier's site can give the supplier a psychological advantage due to their familiarity with the setting. To ensure a neutral and balanced negotiation environment, it’s preferable to conduct negotiations in a neutral location or through structured channels, as recommended in CIPS's guidance on negotiation settings.

With a collaborative supplier, the appropriate approach is Win–Win (integrative). Both sides aim to create savings while maintaining partnership value. Win–Lose would damage collaboration, while Lose–Lose sacrifices value on both sides. Win–Perceived Win is based on optics rather than actual balance. By adopting a win–win approach, Maria ensures sustainable cost reductions while protecting critical NHS supplier relationships.

Involving an appropriate cross-functional team is beneficial for effective commercial negotiation because it brings together diverse perspectives and expertise relevant to the negotiation context. According to CIPS, a cross-functional team ensures that all aspects, such as technical, financial, and operational inputs, are considered, leading to more balanced and informed decision-making. This approach also helps in addressing complex negotiation elements effectively.

Direct costs are those directly attributable to the production of a unit — such as raw materials, components, and direct labour. Here, the metal used is a clear direct cost, as it varies with production output. Rent, insurance, and sales wages are indirect (overhead) costs, which must be allocated across products. Understanding this distinction is vital in negotiations, since direct costs are easier to challenge for efficiency gains, while indirect allocations may be arbitrary. Buyers with clear knowledge of cost breakdowns can negotiate more effectively, avoiding inflated pricing.

A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor: 'warm', 'tough', 'logical' and 'dealer', which can be applied to describe individuals' dominant preferred style in most circumstances.

Warm - a people person

Tough - a hard-nosed negotiator

Logic - a numbers person

Dealer - a trader who loves bargaining

Strengths, weaknesses of dealer style are described below:

LO 2, AC 2.4

Microeconomic factors refer to elements that affect individual businesses or sectors rather than the economy as a whole. In this case:

Availability of investors (B): Access to investors impacts capital availability for businesses.

Distribution channels (D): Distribution methods directly influence a business’s ability to get products to market.

Levels of competition (F): Competition affects pricing and strategic decisions within specific industries.

Taxation rates, unemployment levels, and inflation rates are considered macroeconomic factors, affecting the economy on a broader scale, as per CIPS's definitions of microeconomic vs. macroeconomic influences.

The collaborative strategy (win-win, integrative) focuses on joint problem-solving, transparency, and trust. It is best when long-term relationships are critical, and both parties see value in mutual success. By contrast, competitive (win-lose) is adversarial, accommodative sacrifices one party’s interests, and avoidance seeks disengagement. Collaborative strategies are common in partnerships, innovation projects, and sustainable procurement. They require sharing information, identifying tradeables, and aligning objectives beyond price to long-term outcomes.

In the scenario, the length of payment period is particularly important to the supplier as they are investing new facilities. Otherwise, the buyer's company has a positive cash flow position and budget is available for a shorter payment terms. So this tradeable (payment period) is important to supplier but it is not a significant problem with the buyer. This tradeable will fall within 'Easy concession to trade' quadrant in the following matrix:

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If the tradeable fall within this quadrant, Sally should shorten the payment period in supplier's favour and try to win as many concessions as possible in return. Asking for a discount may be a reasonable trade-off.

LO 2, AC 2.3

In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is characterized by a collaborative environment. According to CIPS principles on integrative negotiation:

Collaboration (A): Actively working together enables both parties to find solutions that maximize joint gains and address the needs of both sides.

Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand rather than competing over positions, facilitating a solution that satisfies both parties' needs.

By emphasizing collaboration and problem-solving, the organization increases the likelihood of a successful, sustainable agreement that respects both parties' interests.

In the study guide, CIPS lists 5 stages of an negotiation:

The opening phase: confirm understanding and get the issues on the table. At this stage, both parties should check agenda, authority and create atmosphere conducive to agreement

The testing phase is an information gathering stage where the hypothesis and assumptions you have made in the planning stage can be tested and confirmed or disconfirmed

The proposing phase: Both sides may start making tentative proposals regarding their offering.

The bargaining phase: Both parties trade concessions; the preliminary stages are over and proposals move from being tentative and general to being more definite and specific.

The agreement and closing phase: both parties should seek agreement or if TOP does not have the final authority, some sort of acknowledgement of what key terms are should be sought.

In the context of aninternal IT project, the relevant stakeholders would be thosedirectly involved in decision-making and implementation.Senior managementoversees funding and strategic fit, whilesoftware developersensure technical support. The general public and pharmaceutical suppliers are external and not primary stakeholders in this scenario.

“Stakeholder identification must focus on individuals or groups directly involved or affected by the procurement. This includes internal sponsors, end-users, and technical staff responsible for delivery.”

(L4M5 Commercial Negotiation, 2nd edition, Section 1.5 - Internal and External Stakeholders)

Fixed-price agreements give buyers financial certainty, reducing exposure to supplier inefficiencies, cost increases, or inflation. The supplier bears the risk of cost overruns. While it doesn’t automatically improve quality or payment terms, it allows buyers to forecast budgets and manage risk effectively. This makes fixed-price contracts especially useful for projects with defined scopes, where costs are predictable. In contrast, cost-plus contracts keep the risk with the buyer and require constant monitoring of supplier costs, making them less attractive in terms of risk management.

Afixed price agreementprovides the buyer withcost predictability. Once the price is agreed upon, the buyer is insulated from any cost increases on the supplier's side. The supplier bears the risk of fluctuating input prices, which simplifies cost control and contract administration for the buyer.

“With a fixed price arrangement, the buyer is protected from future price increases and does not need to monitor the supplier’s ongoing costs. This is particularly useful for budgeting and forecasting.”

(L4M5 Commercial Negotiation, 2nd edition, Section 2.1 - Fixed Price Agreements)

To improve negotiation outcomes, seeking feedback from the supplier (1) and undertaking reflective practice (4) are recommended actions. Feedback from the supplier can provide insights into areas for improvement from the counterparty's perspective, while reflective practice allows the negotiator to evaluate their own approach, outcomes, and areas for growth. This approach aligns with CIPS's emphasis on continuous improvement in negotiation skills.

Distributive bargainingfocuses onmaximizing one's own gainat the expense of the other party. Common tactics includewithholding informationandcoercion. It is typically used in zero-sum negotiations where parties compete over a fixed value.

“Tactics in distributive bargaining include withholding key information, making extreme opening offers, and using pressure to achieve concessions. These are aimed at maximizing individual outcomes.”

(L4M5 Commercial Negotiation, 2nd edition, Section 3.5 - Tactics of Distributive Bargaining)

In integrative (win–win) negotiations, power is not used to dominate or coerce but to enable progress and overcome barriers. Power can help move negotiations forward when discussions stall on specific issues and can help address behavioural or attitudinal barriers that prevent collaboration. Maximising one side’s share of gains and coercion are characteristics of distributive or adversarial negotiations, not integrative ones. CIPS clearly differentiates the constructive use of power in integrative negotiations as a means to facilitate dialogue, encourage engagement, and unlock joint value, rather than to force submission or extract disproportionate gains.