L4M5 Commercial Negotiation - Practice Questions

Question 1

Which of the following are the most typical characteristics of integrative approach to negotiation? Select TWO that apply.

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Positional-based
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Claiming value
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Interest-based
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Short-term wins
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Creating more value

Question 2

Sumitomo Rubber Industries (SRI) is a Japan-based tyre manufacturer. In order to increase production, SRI is sourcing rubber from Southeast Asian firms. Which of the following micro factors are most likely to shift the balance of power to supplier? Select

TWO that apply

Select all that apply, then click Submit answer.

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SRI's purchase amount makes significant proportion of supplier revenue
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Costs of changing suppliers are high
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Rubber from different suppliers is virtually similar
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SRI sets up its own rubber plantation
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There are no close substitutes for rubber

Reference / correct answer:

Costs of changing suppliers are high

There are no close substitutes for rubber

: :

There are many factors that can influence the balance of power in a negotiation. These factors are classified into 3 levels:

Macro level: STEEPLE framework: social, technological, economic, environment, political, legal and ethical

Micro level: Porter's five forces:

Diagram

Description automatically generated

One-to-one buyer-supplier dynamics.

The question asks about the micro factors that increases supplier's bargaining power.

Among 5 answers, only 2 are likely to increase buyer's power:

There are no close substitutes for rubber: the buyer has to buy rubber, not any other material.

Costs of changing suppliers are high: buyer entails a large barrier if they want to switch supplier.

Other answers cannot be correct because:

SRI sets up its own rubber plantation: Buyer secures its own supply

SRI's purchase amount makes significant proportion of supplier revenue: Suppliers are reliant on buyer. If the buyer stops buying from them, they can face serious cash flow problems

Rubber from different suppliers is virtually similar: undifferentiated product would shift the power balance towards buyer.

Question 3

Which of the following should be done when undertaking a reflection activity on negotiation? Select TWO that apply.

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Identify areas in your skill set where you need to improve
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Gloss over areas where you need to improve your skills or performance
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Be overly modest about your contribution to the outcomes of negotiation D. Use generalised or ambiguous language when describing your strengths and development areas
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Be honest and objective about your skills

L4M5 – Commercial Negotiation