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65 Cards in this Set
- Front
- Back
Discuss resourcing considerations when organising a negotiation with an external organisation
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Explain the importance of setting objectives and defining variables when preparing for a commercial negotiation. |
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Outline the risk that exchange rates present when negotiating for an international purchase |
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From a buyer’s perspective, outline the impact of FOUR different market structures on commercial negotiations |
- Perfect Competition - Monopolistic competition |
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Identify THREE macro-economic factors and explain how each can influence a commercial negotiation. |
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Suggest FIVE sources of information on macro-economic factors. |
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Explain, using examples, how a purchaser might define the variables required when preparing for negotiation.
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Explain how a purchaser might establish a range of acceptable positions for the negotiation of variables. |
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Explain FIVE sources of information that a buyer might use to understand micro economic factors that affect negotiations.
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Explain TWO ways in which changes in the macro economic business cycle might impact on commercial negotiations. |
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Explain the following TWO approaches that a supplier might use when calculating its costs prior to a negotiation.
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1. Marginal costing: uses only the variable cost to produce a unit. Fixed cost are not included.
2. Absorption costing: calculates total cost of producing unit. As well as the variable costs, a fair allocation of fixed costs are included, plus a markup. |
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Explain THREE reasons why a procurement organisation might attempt to analyse a supplier’s cost structure when preparing for a commercial |
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Examine FIVE resources required for an effective face-to-face negotiation meeting. |
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Suggest FIVE points that should be considered when preparing for a telephone negotiation compared with a face-to-face negotiation. |
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Describe FIVE costs that should be considered when calculating the lifecycle cost of an item, apart from the purchase price of the item. |
* maintenance costs* operational costs* disposal costs* fuel costs* servicing costs* training costs* disposal costs |
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List all stages of the procurement cycle |
1. Specifcation 2. Define contract terms 3. Source the market 4. Appraise suppliers 5. invite quotations or tenders 6. Analyse responses and select 7. Negotiate best value 8. Award contract 9. Contract/Supplier Management 10. Identify Needs |
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Using Examples, explain the difference between direct and indirect costs. |
Direct costs: * Direct materials: paper, ink, glue* Direct labour: production employees labour costs* Direct expenses: payable royalties* e.g oil used in machinery* Salaries* Also known as overheads |
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Name and draw the kraljic matrix |
1. Leverage: cost/price management, multiple suppliers, supply abundant2. Non-critical: Functional efficiency, local suppliers, supply abundant3. Strategic: long term availability, established global suppliers, supply scarce4. Bottleneck: cost management and secure supply, global suppliers, supply scarce |
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List the market-driven pricing approaches |
Price volume 2. Penetration pricing 3. Market skimming 4. Contribution pricing 5. Promo pricing 6. Price discrimination 7. Competition pricing |
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What is mark up? |
profit/cost |
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What is margin? |
profit/selling price |
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What is contribution? |
revenue - variable costs |
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What is break even point? |
fixed costs / (selling prices - variable costs) It is the point where the qty covers cost to make neither a profit or a loss |
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What are the types of cost based pricing? |
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Why are cost based pricing approaches limitied? |
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What are the factors in a buyers decison on price? |
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What is the difference between price and cost? |
Price is what the seller chargers.
Cost is what the buyer pays for to aquire and utilise the goods. |
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What is 'Cost behaviour' |
The way in which the costs of an output are affected by flucuations in the level of activity. Either volume of production of level of sales. |
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What is the High-Low method? |
When costs are a mix of fixed and variable you need to determine the fixed element. Use the high-low method to do this.
Based on looking at the total cost when activity is at a high level and compare to when it was at a low level. |
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Describe the main approaches to costing |
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What are the reasons for wanting profit? |
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What is the margin of safety? |
the differnece between the planned sales level and the breakeven point. The margin of safety is often expressed as a % of the planned sales |
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What are the range of matters to be negotiated and agreed in relation to price? |
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What are the three types of pricing agreements in contracts |
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Why are fixed price agreements advantageous for the buyer? |
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What are some sources of macro economic data to support negotiations? |
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Describe the two key micro economic concepts? |
1. Market mechanism: the relationship between supply and demand and how price effects both
2. Market structure: the degree of competition in the market and the different types of markets |
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What is purchasing research and what are the basic aspects when entering a negotiation? |
the systematic study of all relevant factors that affect purchasing goods and services. In relation to a sourcing exercise three basic aspects inclide: 1. Demand analysis 2. vendor analysis 3. supply market analysis |
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What are the sourcs of information or micro economic factors? |
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Relating to the Market Mechanism, that are the factors influencing demand? |
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Relating to the Market Mechanism, that are the factors influencing supply? |
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What is equilibrium price? |
Where the supplier wants to sell at the same price the consumer wants to buy |
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What is the price elasticity of demand? |
The sensitivity of demand to changes in price
The more elastic the more demand will increase when you lower price and demand will decrease if you raise price.
Measured as %change in qty demanded / %change in price
if elasticity is > than 1 change in price will lead to a significant change in revenue
if elasticity is < than 1 changes in price will have less effect on demand |
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What are the four basic market structures? |
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What are the market conditions for perfect competition? |
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What are the market conditions for monopoly? |
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What are the market conditions for monopolistic competition? |
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What is an oligopoly and what are the market conditions for it? |
A small number of large producers dominate the market.
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What are the porters five forces? |
1. Potential new entrants 2. substitute products 3. buyer power 4. supplier power 5. competition/rivalry |
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How does macro-economic factors affect procurement? |
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What are the four main phases of a business cycle? |
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What are the five key questions in preparing for a negotiation? |
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What is the bargaining mix? |
the total pachage of isses on the agenda for a negotiation.
A large mix can mean a lengthly negotiation however also allowes more possible groupings for trade-offs between issues |
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What are SMART objectives? |
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What is the difference between 'positions' and 'interests' in integrative bargaining? |
Positions are the parties 'stances' e.g. opening bid, target point.
Interests are underlying needs, values, wants and concers of why they want what they want |
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What do parties in conflict base the strategies on according to Lewicki et al? |
1. Interests: what they need 2. Rights: who has legitimacy or fairness 3. Power: who can excercise most influence |
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What are the different interests are work in a negotiation according to Lewicki et al? |
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What are the elements involved in the defintion of presenting issues? |
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This a number of protocol issues in negotiations? |
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What are the six main resources required to support a negotiation? |
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What are the advantages of conducting a negotiation on 'home ground'? |
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What are the advantages of using teams in negotiations? |
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What are the reasons for using teams? |
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What are the disadvantages of teams? |
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What factors distinguish a telephone negotiation from face to face? |
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