1.0 Introduction
The basic goal of any industrial activity is the development and manufacture of products that can be marketed at a profit. This goal is accomplished by the appropriate blending of what many management authorities called the five M's – machine, man, material, money and management, materials today are the life blood of industry.
No industrial organization can operate without them. They must be available at the right time, in the right quality, at the right quantity, at right price and at the right place. Whether in periods of inflation or price stability or recession, obtaining materials at the right price can literally mean the difference between a firm 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 the both the buyer and seller, unfortunately no single set of pricing principles or criteria exist for calculating precisely what constitutes a fair and reasonable price.
Therefore, to obtain the right price, a buyer can use three methods.
These are:
- Published price list
- Competitive bidding
- Negotiation
When the buyer is not satisfied with the price after using published price list and competitive bidding he resorts to negotiation. According to the chambers 20th century dictionary “NEGOTIATION” means to confer for the purpose of mutual agreement.
The Webster dictionary defines it as conferring, discussing or bargaining to reach an agreement in business transactions.
In industry, “NEGOTIATION” is sometimes confused with happing and price chiseling while in Government it is frequently usual zed as a nefarious means of avoiding competitive bidding and of awarding large contracts surreptitiously to favoured suppliers.
According to Oyeoku (1993) negotiation is just but a process whereby representatives of the buying organization and the selling organization attempt to reach precise agreement on all terms conditions that make a contract come into being. In involves a thorough analysis of all aspects of purchasing, rational discussion, conferring and bargaining on each aspects and the arrival at a common understanding of what is best in the interest of both parties.
In successful negotiation both sides wins, the winning are seldom equally divided. Invariably one side wins more than the other does. This is as it should be in business “superior business skills merit superior rewards”. Negotiation is particularly useful though not always fully successful in dealing with sellers who are a sole source of supply or with sellers controlling. Multiple sources that behave in a monopolistic manner.
In cases where costs are not reliably determinable in advance, as in most research contracts and many contracts for items that have never been made before. These are no sound alternative to “NEGOTIATION”.
The importance of negotiation to purchasing is that, it is a method used especially when 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 is are not clear but vague, the supplier is a monopolist- where all these situations exist or prevail, the buyer has no alternative than to negotiate.
Hence, negotiation is a practical techniques arriving at a price to pay for goods and services.
On the other hand, material management is a total concept involving an organizational structure unifying into a single responsibility the systematic flow and control of material from identification of the need through customer delivery. Through negotiation, the material functions of planning, scheduling, buying, staring, moving and distributing of materials are met.
The objective is to contribute to increase profitability by co-ordinate achievement of least total material cost through common responsibility and knowledge of materials and their uses. The co- ordination of these functions into a simple material management department will no doubt result in the reduction of operating costs.
1.1 Background of the Study
Mobile producing Nigeria unlimited (MPN) is the second largest oil producer in Nigeria. It started operating in the country in 1955 as Mobile Exploration Nigeria Incorporated (M E N I). In December 1981, after unsuccessful exploration efforts in the farmer western and northern regions, (M E N I) was granted two offshore oil prospecting licenses (O P L S) in then eastern region. In early 1964 M E N I made its first discovery, the prospecting licenses were converted to four oil-mining licenses.
In 1968 and by the end of that year 50 exploratory wells 15 appraisal wells has been drilled. On June 11, mobile producing Nigeria was corporate to take over and continue the business of M. E. N. I. Early in 1991, in compliance with the requirements of the new companies and allied matters decree No 19 of 1990, the company's name became mobile producing Nigeria unlimited (MPN). M P N began producing of crude oil on February 15, 1970 in the offshore area of then Eastern region the areas are now in Akwa Ibom state.
In February 1885, after 15 years of production M P N unit one billion barrel mark. Ten years later specifically in May 1995, M P N made struck another landmark when long with its point venture partner, the NNPC. It signed loan agreements for about 900 million US dollars with international lenders to develop and produce its 080 field condensate reserves, estimated at about 500 million barrels.
The company's overall contribution towards the countries economic and social development has followed closely in the wake of its production growth. It was in recognition of its contribution that it won, together with its parents and sisters companies – mobile oil corporation and mobile Nigeria plc, the 1985 honour award of the Nigeria – American chamber of commerce. M P N was also the first corporate citizen to win the honour award of the society of occupational health physicians of Nigeria (S O P N O N).
In 1989, M P N won the Energy press award for making notable contributions to the growth of Energy journalism in Nigeria and for pacesetting relationship with the media and thus emerged the first corporate body to win the award. While purchasing its business objectives, N N P C, Mobile joint venture also assist in various communities' development projects and participates in the cultural life of the country.
In 1993, MPN initiated the four-year community action programme for community and has enhanced the company's relationship with the communities, mobile has contributed to the development of human resources in Nigeria, it currently award 450 scholarships annually to Nigeria students studying in institutions of higher learning .The awards are competitive and all Nigeria students are eligible.
1.2 Statement of Problem of the Study
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 quality material at the right price.
1.2.1 Lack of Competent Staff
For material to be purchased at a reasonable price there is need for competent staff, who understands the various methods of pricing. There is lack of good negotiators in this organization; therefore this reduced the success of negotiation.
1.2.2 External Circumstances
External forces also contributed to the problems of the purchasing department, these are political, economic and social forces.
1.2.3 Unreliable Suppliers
The reliability record of some suppliers fell below the required level, this poses problems to the purchasing department.
1.3 Purpose of the Study
The purpose of this research is to look at
- The different method of pricing are published price list, competitive bidding, and negotiation.
- The importance of negotiation against the other methods of pricing
- The bargaining strategies used by the industries and how effective they are used.
- The effect of the non-used of negotiation in the purchasing of goods.
1.4 Objectives of the Study
The 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 is used in industries to purchase at the right price.
1.5 Research Question
To test this assertion requires collecting responses from a group of question bidden in various parts of the questionnaires
- Do you think purchasing has a role to play in the area of negotiation?
- Is purchasing department a separate entity or under another department?
- If you have no responsible for purchase or procurement?
- Does your organization policy permit the buyer in purchasing decision?
- If you have purchasing department, what rank is the boss of the department?
1.6 Scope of the Study
The research is on the importance of negotiation to purchasing and materials managements. However, ideas are deducted from many text books, journals, newspapers, lecture notes, data collected from purchasing and supply department and from experience.
1.7 Limitation of the Study The researcher encountered a lot of problems in the course of carrying this study effectively and efficiently prominent amongst them are:
1.7.1 Non Disclosure of Information
Oil industries in the east particularly in the port Harcourt metropolises, do not find it easy disclosing their business particulars to aliens. Some of them saw it as a means of divulging their business secrets to outsiders, especially when it comes to finance and some saw it also as a way of unmarking their inefficiencies and in capabilities.
1.7.2 Inadequate Finance
The researcher being a student and thus dependent on relatives for financial assistances is greatly limited in his finance toply firm school to the industry under to obtain relevant information needed. This is rather difficult and tasking because of the huge transportation fare spent and the risk involved in roads in trying to get in touch with the purchasing manager who seemed not to be keeping appointments.
1.7.3 Time Constraint
Time contributed more to the problems the researcher encountered. Limited time was shared between scrambling for information, her regular pressing lectures and other academic works, etc. notwithstanding these problems, the researcher succeeded in getting the information's required.
1.8 Definition of Terms
Negotiation:
It's just but a process whereby representatives of the buying organization and the selling organization attempt to reach precise agreement, on all terms and conditions which make a contract come into being. It involves a through analysis of all aspects of the purchases, rational discussions, conferring and bargaining on each aspect and the arrival at a common understanding of what is best in the interest of both parties.
Negotiator:
Spend a lot of tome studying and perfecting in the application of this techniques
Strategy:
concerns the planning and directing to achieve ones objective.
Bidding:
This involves a request for bids from potential suppliers with whom the buyer is willing to do business with. In evaluating the bidders, the bidder with the lowest price is awarded the contract.
Competitive:
This is s widely acclaimed form of purchasing is mostly used in local, state and federal government purchasing. It represents on of the three methods through which buyers can determine the price to be paid for goods and services it purchases.
Producing:
- Goods to make things to be sold especially in large quantities manufacture factory the produces microchips also mass produce not at making product.
- Make naturally to grow or make something as part of a natural process. If a town or country produces.
- Something with a particular skill or quantity.
