CIPS L4m5 Commercial Negotiation · Free Practice Question Medium
Question 8
An automotive company purchases high quality steel to produce components. The steel is an important raw material and the contract value is enormous. They source the steel from oversea and contact some potential suppliers. One of the potential suppliers invites the procurement team to their premise for a new business opportunity. Should the procurement team accept the invitation?
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A
Yes, because the visit would increase the buyer's bargaining power
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B
No, because the travel would incur unnecessary costs
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C
Yes, because this is an opportunity to assess the supplier's capacity
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D
No, because negotiating over telephone is enough to collect information on supplier's capability
Reveal correct answer
Correct answer: C
Explanation
In the scenario, the value of contract as well as the importance of purchased item justify the procurement's travel. Visiting a supplier at their HQ or operational facility may facilitate the procurement team in assessing, albeit briefly, the culture of the organisation, how busy they seem and how staff engage with each other. A visit is a good opportunity to assess supplier's capacity.
LO 2, AC 2.2
Discussion
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