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In this project, an attempt has been made to know the impact of negotiation in attaining purchasing practice. This research exposed the importance of negotiation in an organization and who and when a negotiation should be carried out. For an organization to function effectively and efficiently in this procurement, negotiation is very important to attain it. Without an effective negotiation an organization will not or cannot be able to carryout its buying activities effectively. In purchasing and supply, negotiation is vital because without it, it cannot function effectively. An organization enter into negotiation to get a fair and reasonable price in its buying activities. Companies in Nigeria have a relentless goal of keeping their procurement cost down as most of them depend solely on tution fees. In the past, companies would mostly look to make cost-savings from headcount reductions or internal re-organisation. Now they are increasingly turning to procurement and strategic sourcing as a means for cost reduction in procurement. The study examined the impact of effective negotiation in realization of procurement goals in Nigeria Bottling Company PLC. The research was conducted through the use of self-administered questionnaire to obtain primary data. The study had sample size of 206. Purposive sampling technique was used to select respondents that are involved in procurement for the area of the Study. Descriptive analysis and linear regression analysis were used in analyzing the obtained data. The results indicated that effective negotiation is a strong procurement strategy in Nigeria Bottling Company PLC and has a significant impact in realization of procurement goals. The study concluded that Nigeria Bottling Company PLC procurement goals are realizable with effective negotiation strategy.
1.1 Background to the study
The basic objectives in any industrial activity is the development and manufacture of products that can be marketable at a profit. This objective is accomplished by the appropriate blending of what many management authorities call the five mis-machines, men, material, money and management. Materials today are the life blood of industry, no industrial organization can operate without them. They must be at the right time, in the right quantity at the right quality, 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 literary mean the different between a firms success and failure, hence the right price is prime importance to every organization, profit or non-profit.
Professional buyers, interpret the right price that is fair and reasonable to both the buyers and sellers. Unfortunately no single set of pricing principles or criteria exists for calculating precisely what constitute fair and reasonable. Therefore to obtain the right prices, three basic methods can be used by buyers, these are:
1. Published price list
2. Competitive buying
When a buyer is not satisfied with the price after using published price list and competitive bidding he resort to negotiation.
According to Chambers 20th Century Dictionary, Negotiation means to counter the purpose of mutual agreement. The Webster Dictionary defines it as conferring discussion or bargaining to reach agreement in business transaction. In industry negotiation is sometimes confused with happening and rise selling. While in government it is frequently visualized as a nefarious means of a competitive building of awarding contract, surreptitious favour supplies.
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 contract come into being. It involves a thorough analysis of all aspect of purchasing rational discussion conferring and bargaining on each aspect and the arrival at a common understanding of what is the best in the interest of both side parties. In successful negation both sides win, the winning are seldom equally divided. Invariably one side win more that the other, this is how it should be in business “superior” business skill meant superior reward. Negotiation is particularly useful though not always fully successful in dealing with sellers who are sore source of supply or with seller controlling multiple source that behave in a monopolistic manner, in case where cost are not reliable determine in advance as in most research contract and in any contract for items that had never been made before, there is no source alternative in negotiation.
The important of negotiation of purchasing is the 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 inadequate, they are not willing to compete, specification 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 practical technique arriving at a price to pay for goods and services.
According to Chipiro (2009) the purchasing and supply activity of organisations is one which spans both internal service and business-to-business services. This is an important activity found in all organisations, public, private, governmental and charities and can be responsible for a large amount of spending. Such spending on, for example, materials components, facilities, subcontract capacity, IT equipment and supplies, consumables, stationery, travel and insurance can constitute a significant amount of money. Most organisations spend at least one-third of their turnover/income on the purchase of goods and services (Zenz and Thompson, 1994 and Killen and Kamauff, 1995).
To develop an effective purchasing strategy or sourcing strategy, first it is necessary to sit down to assess the details that you have to work with. These details will include the business’ or project’s objectives, the available and existing resources and supplies, the budget and the timeline. Through the assessment of these elements, the team would be able to start planning for an effective purchasing strategy that would be as custom-made as possible for the company; the key here is to make sure that every detail of the plan would contribute towards attaining the company’s established objectives and objectives. A good question to ask would be, “Why are we purchasing this equipment?” The answer must be in accordance with the company’s objectives.
Another key item that would be planned for during this brainstorming stage would be the choices of either making or creating the materials (or doing purchasing outsourcing) with the costs and sustainability being the major determining factor, and whether the existing company resources would be able to support the decision over a long period of time.
The representation of the strategic purchasing can be described in terms of its environment and structure, and what activities take place in the supply link. General performance indicators of the supply link in terms of time, quality, flexibility and cost are used to measure efficiency and effectiveness. The efficiency in the supply link explains how well the resources are utilized. Since resources are scarce, it is in everyone‘s interest in the organization to maximize the utilization of the resources. The effectiveness of the supply link explains how well the objectives are achieved (Arun and Linet 2005).
Therefore, the aim of this research was to examine the impact of negotiation in attaining purchasing objectives in Nigeria Bottling Company PLC.
1.2 Statement of problems
This entails the problems encountered during the course of this research. It is an attempt to look at the various problems facing the purchasing department in purchasing the right quantity materials at the right place, the problems are as follows:
i. Lack of competent staff: For materials to be purchased at a reasonable price, there is need for competent staff who understand the various methods of pricing. There is lack of good negotiation in the organization, therefore this reduces the success of negotiation.
ii. External circumstances: External forces also contribute the problems of the purchasing department. These are political, economic and social force.
iii. Unreliable suppliers: The reliability record level, this posses problem to the purchasing department.
1.3 Objective of the study
The general objective of this study is to identify the different methods of pricing and by so doing, state the importance of negotiation as one of the means of arriving at a price to pay for goods and services. It is also to highlight negotiation tactics and how effectively negotiation used in industries to purchase at the right price.
The following are the specific objectives of the study:
1. To investigate if purchasing has a role in the area of negotiation.
2. To make findings if purchasing department a separate entity or under another department.
3. To assess the department responsible for purchasing or purchasing.
4. To find out if the organization policy permit the buyer in purchasing decision
1.4 Research questions
To test this assertion requires collecting response from a group of question, bidden in various part of the questionnaires
1. Do you think purchasing has a role in the area of negotiation?
2. Is purchasing department a separate entity or under another department?
3. If you have no purchasing what department is responsible for purchasing or purchasing?
4. Does your organization policy permit the buyer in purchasing decision?
1.5 scope and Delimitation of the study
The research is on the importance of negotiation to purchase materials, management, however ideas, lectures, notes, data collected from the purchasing and supply department and from experience. This study is solely limited to The Nigeria Bottling Company
1.6 Limitation of the study
The researcher encountered a lot of problems in the cause of carrying out this study effectively and efficiently, prominent among them are:
i. Non- disclose of information: some of the staff of Nigerian Bottling Company, Owerri do not find it easy to disclosing their business particulars to aliens. Some of them saw it as a means of dividing their business secrete to outsiders, especially when it comes to finance and some saw it as a away of unmarking their inefficiencies and incapability.
ii. Inadequate finance: The researcher being a students and thus depends on relatives for financial assistance is greatly limited in their finance from the school to the industry under study in order to obtain relevant information needed. This is rather difficult and taking because of the huge transaction fare spent and the risk involved in roads in trying to get in touch with the purchasing managers who seemed not be appointment.
iii. Time constraints: Time contributed more to the problems. The researcher limited time was shared between scrambling from information, her regular pressing lectures and other academic works etc not withstanding these problems, the researcher was successful in getting information.
1.7 Definition of terms
1. Negotiation: This is legal/formal discussion between people who are trying to reach their agreement.
2. Quality: Feature of something good especially one that makes it different from something else.
3. Specification: It is a detailed description on how something is or should be designed or made.
4. Strategy: It is the basic plan of activities chosen to achieve an objective.
5. Tactics: It means plan which is implemented or the means to be used to ensure that the negotiation is able to follow the chosen strategy.
6. Competitive biddings: It represents one of the three methods through which buyers can determine the price to be paid for goods and services it purchases.
7. Purchasing objectives: Roles and functions of a purchaser
8. Negotiation techniques: It means the tactics and skills used by a purchaser in negotiation.
9. Negotiation tools: It is a guide on how to prepare and conduct in negotiation.
10. Price analysis: It means the process of examining and evaluating a proposed price with out evaluating its separate cost elements and proposed profit/fee.
11. Quantity: The number of goods or materials purchased
12. Price: These may include all the sacrifice made to acquire a given produce both monetary and non monetary.
13. Pricing: This is the activities involved in setting the price for which a product will be said.
14. BID: The executed document submitted by a bidder in response to an invitation for bids, a request for annotation.
15. Bidding competitive: The submission of prices by individuals or firms competing for a contract, privilege or right to supply merchandise or services.
16. Manufactured: The process of making a product suitable for use from raw materials by hand or by machinery.
17. Supplies: Items that are consumed or expanded in the course of being used.
18. Suppliers: Someone who is responsible for the buying or purchasing of materials or goods.
1.8 Organization of the study
The study is divided into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapt
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