Pass the CIPS CIPS Level 4 Diploma in Procurement and Supply L4M5 Questions and answers with CertsForce

Connected stakeholders are those who, by contractual or commercial relationships, have a significant stake in organisation activity. As a general rule, connected stakeholder (with the exception of suppliers) have a low level of influence on procurement negotiations.

Examples of connected stakeholders are: suppliers, customers, bank where the organisation opens its account, shareholders.

Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, which is very useful from the perspective of procurement.

Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.

Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.

Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.

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

A negotiation performance review should focus on measuring outcomes against objectives, lessons learned, and evaluation of negotiator effectiveness. This ensures continual improvement and supports organisational learning. Pricing structures and alternative suppliers may have been reviewed earlier, but are not part of post-performance reflection. Travel expenses are irrelevant to negotiation learning. By focusing on objectives, learning, and performance, organisations embed best practice and prepare stronger strategies for future negotiations.

Acollaborative win-win approachfocuses on mutual benefit and long-term value creation. This strategy is especially effective in strategic partnerships where trust, information sharing, and problem-solving are emphasized over competition.

“The collaborative win-win approach aims to create outcomes where both parties gain. This strengthens the relationship and leads to sustainable agreements built on trust and transparency.”

(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Win-Win Negotiation Strategy)

A negotiating team can be as few as two people, and one person can play one or more of these roles:

As from the scenario, Jasmine will act as an observer and a scribe (or secretary).

When a buyer’s purchase represents asignificant portion of a supplier’s revenue, it increases the buyer’s leverage. The supplier has a vested interest in maintaining the relationship and is more likely to make concessions to preserve the account.

“Buyer power increases when the buyer represents a large portion of the supplier's total sales. This dependency increases the buyer’s ability to influence terms.”

(L4M5 Commercial Negotiation, 2nd edition, Section 2.3 - Bargaining Power Analysis)

Packaging is considered a variable cost because it fluctuates with the level of production or sales activity. Variable costs change directly in relation to the volume of output or service. In contrast:

Rent (A), Loan repayments (B), and Insurance (C) are fixed costs, as they generally do not vary with production levels within a certain range. These are recurring costs that remain constant over time, aligning with CIPS's cost classification in procurement.