Negotiation as A Cost Reduction Technique In Material Procurement at Nigerian Bottling Company Plc Kaduna Plant
CHAPTER ONE
Objectives of the Study
The objective of conducting this research among others are as follows:
- To identify objective of negotiation.
- To identify the approaches of negotiation.
- To identify the requirement for negotiation.
- To determine the impact of negotiation on material pricing.
CHAPTER TWO
Literature Review
This helps to examine the various contribution made by authors in relation to negotiation as it help towards effective materials pricing. Current literature is reviewed here as they tend to provide a broad view of the subject matter.
Negotiation
Monczka, Trent and Handfield (2001) sees negotiation as the process of formal communication either face-to-face or via electronic means, where two or more people come together to seek mutual agreement about an issue or issues.
The negotiation process involve the management of time information and power between individuals and organization who are independent.
Each party has a need for one of the other yet recognize that concession are often required to satisfy that need without willingness to compromise most negotiation result in deadlock or a failure to agree.
Lysons and Farrington (2006) sees negotiation as any form of verbal communication whereby the participant seeks to exploit their relative strength of bargaining position to achieve explicit or implicit objective within the overall objective or purpose of seeking to resolve the identified areas of disagreement. He further said in others, proper negotiation involves the following:
- Communication between the parties involved.
- Parties seeking to influence their relative strength i.e. trying to capitalize on openings and propositions as to have advantage over the negotiating partner.
- Parties having implicit and explicit objective which may mean they both want to transact at a better price and still maintain their organizational interest.
- The purpose or objective of negotiating is to collaborate so as to resolve identified discrepancies. In the purchasing, such discrepancies usually centered around price, terms and condition, insurance, mode of payment etc.
Thus negotiation could be either be a “win-win” or “win-lose” basis, the former is based on partnership as both parties seek to satisfy each others interest amicably, while with latter, one of the parties must have an advantage at all cost.
CHAPTER THREE
Research Methodology
This chapter constitutes the different tools used in collecting data, hence a brief of research method used as Area of study, research design, population of the study, sample and sampling technique, instrument for data collection and procedure for administering and analyzing data.
Area of Study
The study was carried out at Peugeot Automobile Nigeria Plc located at Kakuri Industrial Layout, Kaduna South, Kaduna. The research made use of the following departments: procurement, production, inspection/receiving and administration unit, reason for the choice of these units is that are directly involved.
Research Design
In view of the topic of the study, the research made use of survey research method, survey research is directed studying population. Due to large size of the population, it provides information which base on sound decision and also give accurate assessment of the characteristics of the whole population. Moreso, it is due to interpret integrate and synthesis data and print to implication and interrelationship.
CHAPTER FIVE
Presentation of Data and Analysis
This chapter will attempt to present the various data collected from the administered questionnaires and also attempt to quantify the responses to the research question that guided the study.
Presentation of Results
The presentation below shows the reactions of respondents to each question in a tabular form, the researcher administered 30 questionnaires and it was fully answered and returned.
CHAPTER FIVE
Summary, Conclusion and Recommendation
This chapter is concerned with the summary of procedure, discussion of finding, conclusions, implication of the study, recommendations and suggestion for further study.
Summary of Procedures
The main purpose of this study is to examine negotiation as a tool for effective material pricing. In order to achieve the purpose of the study, the chapter one of this research work laid a solid background of the study, including the statement of problem, objectives, scope, significance and operational definitions, definition of key terms, concept and abbreviations used in the course of the study.
In addition, critical review of related literature is presented in chapter two of this work, this covers meaning of term negotiation as define by numerous authors, objectives of negotiation, sources of negotiation power, the adequacy of cost or price analysis etc.
This review provides insight into the nature of the variable under study. The third chapter of this research work discusses the methodology of data collection. It consist of the research area, research design, population and sample size etc in addition, the chapter four present the analysis the data collected from sampled respondents.
A survey to the research questions, have led to several findings, one of the important finding of the study shows that there is certainly a relationship between negotiation and achieving the right material price. The current emphasis of the company is to undertake further research with a review to meet challenges of the future through negotiation.
Discussion of Findings
In the course of the study, many interesting findings have been made this include:
The study found that an organization that operates a complete purchasing department consisting of various purchasing activities under a purchasing manager will be too broad to be effectively handle.
It was also discovered that the application of computers in purchasing activities have proved very useful as some organizations sell through order book.
The study also found that local sourcing is sometimes problematic in that ascertaining the quality of supplier is often difficult as most local suppliers are involved in dubious activities due to lack of technical know-how, inadequate funds and the zeal to become the organizational customer.
More so, the current economic situation poses a serious threat to its existence due to the problem of low consumer demand and consistency in fiscal policy and monetary policies of the government that have negative impact in the practice.
Finally, the study found that there is no proper purchasing research by those handling negotiation which ought to serve as a sound basis for negotiation.
Conclusion
The research work has attempted to analyze the nature of purchasing activities as it affect proper and efficient negotiation in Peugeot Automobile Nigeria (PAN) Ltd Kaduna, couple with the opinions sampled from various authors literatures as regards negotiation. A process, techniques, objectives, styles and functions. It is apparent that many companies needs to overhaul their purchasing procedures in general and negotiation in particular.
Since purchasing determine what to be bought into the organization quality wise etc it is therefore necessary, it should be given full responsibility for its activities to contribute effectively to the profitability of the organizations.
The findings of this research work sought to bring out the weakness of the purchasing unit in negotiation and such the research believes addressing such issue on time will go a long way to curb the difficulties being experienced by the purchasing unit as not independent.
Toward this end, a critical analysis of most manufacturing firm will reveal that materials constitute nearly the bulk of organizational resources. Therefore effective negotiation in line with organizational objectives can only achieve a fair result to the company if handled by a competent procurement officer.
Implication of the Study
Based on the findings of the study, the following implication were observed.
- It was observed on the objective of negotiation that it improved quality, relieved fair price, timely delivery with continuing relationship.
- It was also found that planning for negotiation is a crucial management function otherwise the company will be at a loose side.
- It was reveal that issue of price should not be a focus of negotiation, if not the buyer would overlook the variables that determine the price itself.
- It is observed that achieving the right price in negotiation is not the ultimate objective in settling for planning of negotiation.
Recommendation
Based on the findings of the study, the researcher came up with the following useful recommendations for proper implantation by the company.
- The management of PAN should create a purchasing unit to be managed by trained personnel in this regard, graduates of purchasing and supply from reputable higher institution should be recruited.
- The management should embark on training and development programmes, seminars, workshops to educate their staff on the subject matter “Negotiation” as a tool in achieving effective material pricing.
- All materials related activities should be merged from material management concept so as to check wastages. Here, the material manager coordinates while the purchasing unit is allowed to run its affairs in conformity to organization’s objective.
- Negotiation should cover other aspect such as insurance, specifications, term of payment, mode of payment, delivery data etc and not only price because negotiation provides an avenue where issues of disputes should be amicably settled and relationship established if possible on “win-win” basis.
- Follow up of order should be intensified as a means of ensuring prompt delivery and should be under the responsibilities of the centralized purchasing department coordinated by the purchasing officer.
Suggestion for Further Studies
Despite the critical review of vast literature on this topic, the potentiality of the topic could further be explored by future researcher as new interest area could be uncovered.
Thus, the uncovered areas are fertile ground that subsequent researchers can explore and come up with vital and proper research work which can help the organization regarding negotiation as a tool for effective material pricing.
REFERENCES
- Bailey, P.E, Farmer, D. (2001). Purchasing Principle and Management. 6th Edition, London: Prentice Hall.
- Dobler, D.W. & Starling, S.L. (2003). World Class Supply Management. 7th edition, Boston: McGraw Hill Irwin.
- Hassan, M. (2008). Purchasing for the Tyro. Kaduna: Aziki Global.
- Lyson, K.E. Farrington, B. (2006). Purchasing and Supply Chain Management. 7th edition, London: Prentice Hall Pearson Education.
- Monezka, R.M, Trent, R.J. & Handfield, R.B. (2002). Purchasing and Supply Chain Management. 2nd Edition: Australia: Thompson Learning.
