THE ROLE OF NEGOTIATION IN ATTAINING PURCHASING OBJECTIVES

posted on June 25, 2018

THE ROLE OF NEGOTIATION IN ATTAINING PURCHASING OBJECTIVES (A CASE STUDY OF NIGERIA BOTTLING COMPANY PLC OWERRI)

CHAPTER ONE

1.0 INTRODUCTION

The basic goal of any industrial activity is the development and manufacture of products that can be marked at a profit. This goal is accomplished by the appropriate blending of what many management authorities call the five mis-machines, men, Material money and management, material today are the life blood of industry. No industrial organization can operate without them. They must be at the right time, in the right quality, at the right quantity, at the right price, and at the right place. Whether in period of inflation, or price stability or recession, obtaining materials at the right place can literally mean the difference between a firm’s success and failure. Hence, the right price is prime importance to every buyer and seller. Unfortunately no single set of pricing principle or criteria exist for calculating precisely what constitutes a fair and reasonable price. Therefore to obtain the right prices, three basic methods can be used by buyers.

These are:-

Published price list
Competitive bidding
Negotiation.

When a buyer is not satisfied with the price after using published price list and competitive binding in resort to negotiation.

According to the chamber century dictionary “negotiation means to confer the purpose of mutual agreement.

The Webster dictionary defines it as “conferring discussing or bargaining to reach agreement in business transaction.’ In industry “Negotiation” is sometime confused with happening and dieseling while in government it is frequently visualized as a nefarious means of avoiding competitive bidding and of awarding large contracts to favored suppliers.

According to Oyeoku (1993) Negotiation is just but a process whereby a representative of buying organization and the selling organization attempt to reach precise agreement on all terms and conditions which makes a contact come into being. it involve all aspect of purchasing rationed discussion, conferring and bargaining on each aspect and the arrival at a common understanding of what is the best in the interest of both parties. In successful negotiation both sides win, the winnings are seldom equally divided. Invariably one side wins more than the other. This is how it should be in business”. Negotiation is particularly useful though not always fully successful, in dealing with seller controlling multiple source that behave in a monopolistic manner, in cased where cost are not reliable determine in advance, as in most research contracts and in any contract for items that had never been made before there is no alternative to negotiation.

The important of negotiation of purchasing is that it is a method used especially were the time of purchasing of materials is too short the money value involved is too low, the number of bidders is made adequate, they are not willing to compete, specifications are not clear but vague, the supplier is a monopolist, where all these situation exist or prevail, the buyer has no alternative than to negotiate. Hence, negotiation is a practical technique arriving at a price to pay for goods and service. On the other hand, materials management is a total concept involving an organizational structure, unifying into a single responsibility the systematic flow and control of materials from identification of the reed through customer delivery. Through negotiation, the materials functions of planning, scheduling, buying, stiring, moving and distributing of material are met. The objective is to contribute to increase profitability by co-operation of this function into a simple material management department with no doubt result in the reduction of operating cost.