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Commercial Negotiation (L4M5)

Module purpose

On completion of this module learners will be able to identify approaches to successfully achieving negotiated commercial agreements with external organisations.

Module aim(s)

The creation of formalised agreements is a critical part of the success of any organisation. Those involved in procurement and supply activity will therefore be able to effectively negotiate with stakeholders and understand the methods associated with preparing and carrying out commercial negotiations. It enables the learner to analyse approaches to the negotiation of agreements made with external parties, how to prepare for them and what techniques are available to ensure successful outcomes.

Next steps

Starting a CIPS qualification programme means you will join the largest institute in the world for those working in procurement and supply. You can join as a student member online today. Once joined you can book your examinations online

Key Module Details

Icon showing the letter C, with CORE MODULE written below the circle.

Icon showing the number 60 and the word HOURS, with MODULE LEARNING TIME written below the circle.

Icon showing the letters OR, with OBJECTIVE RESPONSE EXAM written below the red-bordered circle.

Icon showing the number 6 and the word CREDITS inside a red-bordered circle.

Icon showing the number 1.5 and the words HOURS, with EXAM DURATION HOURS written below the circle.

Icon showing the number 60 and the word QUESTIONS, with IN THIS EXAM written below the circle.

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Learning outcomes, assessment criteria and indicative content

1.1 Analyse the application of commercial negotiations in the work of procurement and supply

1.1.1Definitions of commercial negotiation
1.1.2 Negotiation stages of the CIPS Procurement Cycle
1.1.3 Sources and the management of conflict that can arise in the work of procurement and supply
1.1.4Managing the negotiation team and the influence of stakeholders in negotiations

1.2 Differentiate between the types of approaches that can be pursued in commercial negotiations

1.2.1Collaborative, win-win, integrative and principled approaches to negotiations
1.2.2 Distributive win-lose, distributive approaches to negotiation

1.3 Explain how the balance of power in commercial negotiations can affect outcomes

1.3.1The importance of power in commercial negotiations
1.3.2Sources of power of the purchaser and the supplier and the impact on negotiations
1.3.3 Organisational power: comparing the relative power of purchasers and suppliers
1.3.4 Methods to improve leverage

1.4 Identify the different types of relationships that impact on commercial negotiations

1.4.1The relationship spectrum: the impact of negotiations on the relationship spectrum
1.4.2 Building relationships based on reputation and trust
1.4.3 Repairing a relationship

2.1 Describe the types of costs and prices in commercial negotiations

2.1.1Types of costs: direct and indirect, variable and fixed
2.1.2 Break-even analysis: cost volume profit formulae
2.1.3 Costing methods: absorption, marginal or variable and activity-based costing
2.1.4 Volumes, margins and mark-ups and their impact on pricing
2.1.5 Types of prices and their influence in commercial negotiations

2.2 Contrast the economic factors that impact on commercial negotiations

2.2.1Sources of information on micro and macroeconomics
2.2.2 The impact of microeconomics and market types on commercial negotiations
2.2.3 Macroeconomics and its influence on commercial negotiations

2.3 Analyse criteria that can be used in a commercial negotiation

2.3.1Setting objectives and defining the variables for a commercial negotiation
2.3.2 Setting targets and creating a best alternative to a negotiated agreement (BATNA)
2.3.3 Identifying the Zone of Potential Agreement
2.3.4 The bargaining mix
2.3.5 Positions and interests

2.4 Identify the resources required for a negotiation

2.4.1Choice of location
2.4.2 Developing the negotiation team and involving appropriate colleagues in negotiations
2.4.3 Alternative forums for face-to-face negotiations

3.1 Identify the stages of a commercial negotiation

3.1.1Defining the stages of a negotiation such as: preparation, opening, testing, proposing, bargaining, agreement and closure
3.1.2 Protecting relationships after the negotiation
3.1.3 How behaviours change during the stages of a negotiation

3.2 Assess negotiation approaches that can influence the achievement of desired outcomes

3.2.1The use of persuasion methods
3.2.2 The use of tactics to influence the other party

3.3 Compare the key communication skills that help achieve desired outcomes

3.3.1Types of questions
3.3.2 Effective listening
3.3.3 Push and pull behaviours
3.3.4 Non-verbal communication
3.3.5 The influence of culture and local practices on commercial negotiations
3.3.6 The use of emotional intelligence in commercial negotiation

3.4 Analyse methods and assess outcomes of negotiations to improve future practice

3.4.1The importance and role of reflection to improve negotiation performance
3.4.2 Assessing opportunities for improvement and development in commercial negotiation performance