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CHAPTER ONE

INTRODUCTION

1.1            BACKGROUND OF THE STUDY

In practice as well as academic literature, the fundamental essence of resources is to add value. It is generally believed that the lower the cost of production the greater the potential for profit. However, today’s manager are more interested in maximizing of managers utility and at the end result to profit which means that the value of any organization can best be added by either raising the value of output (sales) or lowering the cost of input.

Negotiation is basic to human nature; it takes place anytime to or more parties meet to settle a matter. The ability to negotiate is one of a purchasing function as purchasing cannot be executed without negotiation because it provides and offers purchasing manager the finest opportunity to improve their company’s profit.

To negotiate is to make efforts toward minimizing unnecessary and unjustified increment in cost as it provides legitimate and ethical means for which the buyers and sellers give and take to the sole aim of making the organization profitable. However, in other to ensure the effective use of time, information and appropriate power to affect manage conflict and satisfy needs we negotiate.

Negotiation is a method by which people settle differences. It is a process by which compromise or agreement is reached while avoiding argument. In any disagreement, individual understandable aim to achieve the best possible outcome for their position (or perhaps an organization they represent. However, the principles of fairness, seeking mutual benefit and maintaining a relationship are the key to a successful outcome.

Specific forms of negotiation are used in many situation: international affairs, the legal system, government, industrial disputes or domestic relationships as example. However, general negotiation skills can be learned and applied in a wide range of activities.

Profitability is the state or condition of yielding a financial profit or gain. It is often measured by price to earnings ratio.

This may be assessed before entering into a business or it may be used to analyze a venture that is currently operating. To determine profitability, it is necessary to assess the price of goods or services being offered the several things that needs to be considered when price is established.

This refers to amount of product and services produced within a certain time frame or from a certain amount of materials by the organization.

Profitability is the primary goals of all business ventures. Without profitability the business will not survive in the long run. So measuring current and past profitability and projecting future profitability is very important. Profitability is measured with income and expenses. Income is money generated from the activities of the business. For example, if crops and livestock are produced and sold, income is generated. However, money coming into the business from activities like borrowing money does not create income. This is simply a cash transaction between the business and the leader to generate cash for operating the business or buying assets.

Profitability refers to the potential of a venture to be financially successful. This may be assessed entering into a business or it may be used to analyze a venture that is currently operating. Although it may be found one set n of factors is not likely to be successful or has not been successful, it may not be necessary to abandoned the venture. It may instead be feasible to change operational factors such as pricing or cost.

When there is constant or abundant cash flow, it can be difficult to determine profitability. It is easy for a person to make the mistake of linking numerous incoming and outgoing transactions with profit. Spending and receiving money, however, does not mean a business is in a health financial state.

To determine profitability, it is necessary to access the price of the goods or service being offered. There are several things that need to be considered when prices are established. This includes variables costs such as fuel, labour and inventory, and it also includes fixed costs such as mortgage, repairs, and taxes.

1.2     Statement of the Problem

Most organization lack highly professional negotiates who have the fundamental skill for negotiation looking at the subject matter. It will be clear to note that there are certain fundamental questions that must be or will be asked by various person, individual etc which is very important for the actualization of the overall objective of an organization. This is because most organization today are facing problems of management of an organization basic on employs unqualified personnel to performs the task of the role of a professional negotiator.

However, insufficient time to clearly identify and frame the problems or issues to be resolved and negotiated. It will be clear to note here that time is the first step to any negotiation because of the step or phase is not property addressed they it is quite that the rest will unravel.

More so, irregular appraisal of a situation is another problem as a result of the fact that is people or negotiation stated needs are dramatically different from their actual needs. It will likely lead to a deal in negotiation.

Lack of basic  techniques used in negotiation is a problem faced by organization because they lack the basic procedure/approach on how to carry on negotiation process thus usually leads to failure when negotiation business.

Duplication of efforts which will lead or resulted in increased costs as workers had to work overtime to meet their quotas.

Also the problem of improper understanding of what negotiation is all about and the role it plays in ensuring profitability in an organization makes negotiation difficult because in unprofessional find it difficult to appreciate  the function of negotiation in business success deals.

However the problem of unethical behaviours of management personnel in an organization negotiation difficult due to the gains/profit that may be achieved by individual when they are not honest during the process of negotiation.

Effective of negotiation in an organization affect the organization dealing because some organization set a boundary limit  for their negotiator on which they cannot go beyond when negotiating.

1.3     Objective of the Study

The major objectives of this research work is to determined how proper application of negotiation is going to bring buyers and suppliers together in an attempt have a common approach in other to ensure profitability through a far deal in organization. Other objectives are:

a.     To determine the method/techniques adopted by organization in performing effective negotiation.

b.     To determine the objectives organization seek to achiever through negotiation

c.      To identify factors responsible for poor negotiation in an organization.

d.     To identify the problem encountered by organization during the process of negotiation.

e.      To determine the impact of negotiation on profitability in an organization.

1.4     Significance of the Study

This research work is find out the ways in which negotiation is carried out in an organization and also the possible problem to be encountered during negotiation process in material procurement and recommended solution to such problem.    

The work is an opportunity for the researcher to compare the theoretical aspect of purchasing with the practical aspect in order to determine how theories relate with practice of negotiation.

The study also will benefit those who face problem of managing negotiation especially, lectures, student and professional.

The study is for the fulfillment of one of the requirement of the award of post graduate diploma certificate in procurement and supply chain management. It is also the writers contention that thus project work serve as a reference to knowledge  for any student wishing to undertake similar study for their project work.

1.5     Scope of the Study

This study focuses on the effect of the role of negotiation in organization profitability.

The study will cover the purchasing department, maintenance department, Package department, Store department and production department of the organization.

1.6     Research Question

The following research question would be answer in the course of these studies they are as follows:

a.     What is the method/techniques of negotiation?

b.     What are the objective that organization seek to achieve through negotiation?

c.      What are the factors responsible to poor negotiation in an organization?

d.     What is the problem encountered by organization during the process of negotiation.

e.      What is the impact of negotiation on profitability?

1.7     Definition of Terms

Negotiation: This referred to the planning analyzing and receiving of information used by both buyers and sellers in order to reach a compromise acceptable agreement in the transaction of business.

Negotiator: A negotiator is a representative of an organization who is given the finest opportunity to improve his/her company’s profit and obtain recognition.

Adversarial Negotiation: This referred to distributive or win-lose negotiation. It is assumption that through creative problem solving one or both parties can gain without the other loosing since the other party is regarded as a partner.

Tender: This is a purchasing procedure whereby potential suppliers are invited to make a firm offer for the price and terms which to acceptance will be the basis of the contract.

Procumbent: This is the act of obtaining material and services, this is the combination or checking requirement securing and analyzing quotation.

Purchasing: The process of procuring right quality of materials at the right time in the right quantity from the right source and at right place.

Specification: Is a statement providing detailed description of requirement laid down for material component process or service.

Profitability: It refers to the potential of a venture to be financially successful. This may be assessed before entering into a business or it may be used to analyze a venture that is currently operating. Although it may be found that one set of factor is not likely to be successful or has not been successful, it may be feasible to change operational factors such as pricing or costs.


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