Project Materials

IMPACT OF NEGOTIATION IN ATTAINING PURCHASING OBJECTIVES

ABSTRACT

In this experiment, an attempt was made to determine the impact of negotiation on purchasing practices. This study highlighted the significance of negotiation in an organisation, as well as who and when negotiations should take place. Negotiation is critical for an organization’s effectiveness and efficiency in this purchase. Without competent bargaining, an organisation will be unable to carry out its purchasing activities efficiently. Negotiation is essential in purchasing and supply because it allows the system to function successfully. In order to obtain a fair and reasonable price for its purchasing activities, an organisation engages in bargaining. This project is organised into five chapters. Chapter one is an introductory study that defines and describes the nature of negotiating practice. Chapter two describes several authors’ perspectives on the subject matter or issue. The third chapter is about research methods, which discusses how the researcher arrived at her findings. The fourth chapter is about presentation and data analysis. Data are presented in tabular form and analysed using the basic percentage method. The fifth chapter draws a conclusion based on study findings and makes recommendations on how to improve negotiating practice in an organisation.

Chapter one

Introduction

The main purpose of any industrial activity is to design and make things that can be sold at a profit. This goal is achieved by the proper integration of what many management experts refer to as the five mis-machines: personnel, material, money, and management. Materials are now the lifeblood of industry; no industrial organisation can function without them.

They must be available at the appropriate time, in the right number, with the right quality, at the right price, and in the right location. Whether in a moment of inflation, price stability, or recession, purchasing supplies at the correct time can literally mean the difference between a company’s success and failure, therefore the right pricing is critical to any organisation, profit or non-profit.

Professional buyers determine the appropriate price that is fair and equitable for both buyers and sellers. Unfortunately, no single set of pricing rules or criteria exists for determining exactly what is fair and acceptable. To achieve the proper pricing, purchasers can use three primary strategies, which are:

1. Published pricing list

2. Competitive Buying

3. Negotiation.

When a buyer is dissatisfied with the price after using the published price list and competitive bidding, he turns to negotiation.

According to Chambers’ 20th Century Dictionary, negotiation is opposing the goal of mutual agreement. The Webster Dictionary describes it as conferring discussion or bargaining to reach an agreement in a business transaction. In the industry, bargaining is frequently mistaken with occurrence and rising selling.

While in government, it is typically seen as a corrupt method of competitively awarding contracts and providing covert favours.

According to Oyeoku (1993), negotiation is simply the process by which a representative of the buying and selling organisations attempts to obtain a precise agreement on all terms and conditions that result in the formation of a contract.

It entails a careful examination of all aspects of purchasing, reasonable debate, conferring and bargaining on each issue, and reaching a mutual understanding of what is best for both parties.

In successful negation, both sides win; yet, the winnings are rarely split equally. Invariably, one side wins more than the other; this is how it should be in business. “Superior” business skill equalled higher reward.

Negotiation is especially useful, though not always completely successful, in dealing with sellers who are sole sources of supply or with sellers who control multiple sources and behave in a monopolistic manner, in cases where costs are not reliably determined in advance, as in most research contracts, and in any contract for items that have never been made before, and there is no source alternative in negotiation.

The importance of purchasing negotiation is that it is a method used especially when the time of purchasing materials is too short, the money value involved is too low, the number of bidders is insufficient

they are not willing to compete, the specifications are not clear but vague, the supplier is a monopolist, and all of these situations exist or prevail, the buyer has no alternative but to negotiate, so negotiation is a practical technique arriving at a price to pay for