CIPS L4M4 (Responsible and Ethical Sourcing)
COMPLETE LATEST UPDATED STUDY
GUIDE
The five possible outcomes of negotiation
✔✔1. The buyer wins and the supplier loses
2. The supplier wins and the buyer loses
3. The buyer wins and the supplier wins
4. The buyer loses and the supplier loses
5. Neither the buyer nor the supplier wins (a compromise)
A competitive negotiation style
✔✔is based on being assertive and acheiving results, even if this
disadvantages the other party and the long-term relationship
A collaborative negotiation style
✔✔is an honesy and open style where the negotiator is focused on
finding a mutually beneficial outcome and fair solutions to any issues that
may be presented. This focuses on long term goals
An avoiding negotiation style
✔✔is one full of apprehension and often the negotiator does not pursue
their requirements. Relationships do not prosper and the outcomes rarely
benefit either party
Accommodating negotiation styles
✔✔are when the negotiator does not want to upset or offend the other
party and so they often concede their requirements to ensure harmony
,A compromising negotiation style
✔✔is one where the negotiator is happy to meet in the middle on
concessions rather than pushing for a win or backing down
The negotiation process
✔✔1. Preperation
2. Information exchange
3. Bargaining
4. Closing
Intra -company trading
✔✔Business conducted within a company , i.e between two departments
or locations
Centralised procurement
✔✔A structure where procurement for the whole organisation is carried
out by a centralised function often from one central location
Devolved/Decentralised procurement
✔✔a purchasing structure whereby individual locations are responsible
for their buying activity
Transfer pricing
✔✔the amounts of money payable between divisions of the same
organisation that have conducted business with each other
,Inter-trading
✔✔Trading between companies that are owned by different entities
OECD
✔✔Oraganisation for Economic Co-operation and Development
The purpose of the OECD (Oraganisation for Economic Co-operation
and Development) is to
✔✔regulate international tax laws
Advantages of transfer pricing arrangements
✔✔- Global tax bills can be reduced
- Simplifies internal accounting procedures
- Entire organisation can have fixed pricing on products/services
- Divisions can be easily evaluated based on spend
- Now physical money needs to be transferred between divisions
Disadvantages of transfer pricing arrangments
✔✔- Some countries' economies can be negatively affected
- Careful and strict monitoring is required to avoid tax evasion
- Sourcing locally may be more cost effective
- Negative effect on local economy
- Inter-organisational competition
International sourcing can be the following
✔✔- Standard product sourcing
, - Outsourcing
- Offshoring
Offshoring
✔✔The relocation of one part of a business, usually an operational
function, to another country in an attempt to reduce cost
Benefits of international sourcing
✔✔- Reduced costs
- Exposure to world class technology
- Availability of materials the may not be readily available in the home
country
- Improved quality
- Wider selection of suppliers available
Risks of international sourcing
✔✔- Extended lead times
- Importation/exportation rules and regulations
- Currency exchange fluctuations
- Payment methods and guarantees
- Cultural differences, language barriers and differing time zones
- Quality issues, different standards and ethical behaviour
- Logistical problems, ie incoterms and transfer of ownership
- Infringement of intellectual property rights
- Conflict harder to resolve
COMPLETE LATEST UPDATED STUDY
GUIDE
The five possible outcomes of negotiation
✔✔1. The buyer wins and the supplier loses
2. The supplier wins and the buyer loses
3. The buyer wins and the supplier wins
4. The buyer loses and the supplier loses
5. Neither the buyer nor the supplier wins (a compromise)
A competitive negotiation style
✔✔is based on being assertive and acheiving results, even if this
disadvantages the other party and the long-term relationship
A collaborative negotiation style
✔✔is an honesy and open style where the negotiator is focused on
finding a mutually beneficial outcome and fair solutions to any issues that
may be presented. This focuses on long term goals
An avoiding negotiation style
✔✔is one full of apprehension and often the negotiator does not pursue
their requirements. Relationships do not prosper and the outcomes rarely
benefit either party
Accommodating negotiation styles
✔✔are when the negotiator does not want to upset or offend the other
party and so they often concede their requirements to ensure harmony
,A compromising negotiation style
✔✔is one where the negotiator is happy to meet in the middle on
concessions rather than pushing for a win or backing down
The negotiation process
✔✔1. Preperation
2. Information exchange
3. Bargaining
4. Closing
Intra -company trading
✔✔Business conducted within a company , i.e between two departments
or locations
Centralised procurement
✔✔A structure where procurement for the whole organisation is carried
out by a centralised function often from one central location
Devolved/Decentralised procurement
✔✔a purchasing structure whereby individual locations are responsible
for their buying activity
Transfer pricing
✔✔the amounts of money payable between divisions of the same
organisation that have conducted business with each other
,Inter-trading
✔✔Trading between companies that are owned by different entities
OECD
✔✔Oraganisation for Economic Co-operation and Development
The purpose of the OECD (Oraganisation for Economic Co-operation
and Development) is to
✔✔regulate international tax laws
Advantages of transfer pricing arrangements
✔✔- Global tax bills can be reduced
- Simplifies internal accounting procedures
- Entire organisation can have fixed pricing on products/services
- Divisions can be easily evaluated based on spend
- Now physical money needs to be transferred between divisions
Disadvantages of transfer pricing arrangments
✔✔- Some countries' economies can be negatively affected
- Careful and strict monitoring is required to avoid tax evasion
- Sourcing locally may be more cost effective
- Negative effect on local economy
- Inter-organisational competition
International sourcing can be the following
✔✔- Standard product sourcing
, - Outsourcing
- Offshoring
Offshoring
✔✔The relocation of one part of a business, usually an operational
function, to another country in an attempt to reduce cost
Benefits of international sourcing
✔✔- Reduced costs
- Exposure to world class technology
- Availability of materials the may not be readily available in the home
country
- Improved quality
- Wider selection of suppliers available
Risks of international sourcing
✔✔- Extended lead times
- Importation/exportation rules and regulations
- Currency exchange fluctuations
- Payment methods and guarantees
- Cultural differences, language barriers and differing time zones
- Quality issues, different standards and ethical behaviour
- Logistical problems, ie incoterms and transfer of ownership
- Infringement of intellectual property rights
- Conflict harder to resolve
