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NEGOTIATION
AS TOOL FOR EFFECTIVE MATERIAL PRICING
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
One of the
fundamental responsibilities of procurement function in an organization is
source selection. It deals with the entire process of how prospective suppliers
are being surveyed, evaluated and determine policies relating to those who can
most suitably meet the requirement of the organization, before they are being
considered for a buyer and supplier relationship. However, this assessment is
base on a number of essential instrument which price is one of the such.
Price in
general term refers to the amount offered for the purchase of an item. It can
also be value pay for obtaining something, it is quite crucial to purchasing as
price play vital role on the product manufacturing and its sales value.
Negotiation
among other relevant tools in sourcing selection function that purchasing
employ in making an organization to actualize their goals to arrive at a most
judgment on which suppliers are to be selected.
Negotiation
usually requires that the buyer have a face discussion with the suppliers in
order to arrive at a common understanding on essence of a purchase/sale contact
among which is price. Infact, price determination is the main focus of
negotiation.
In
negotiation, to determine purchase price buyers and supplier usually discuss
such element, as cost of production overhead market conditions. Speeds needs of
the buyer and supplier eventually arrive at a mutual price, that both deliver
the best value of item and at reduced cost to the buyer as well as favours the
supplier fair interest to ensure a continued supplier-buyer rapport.
This study
set out to investigate some related problems having to do with purchasing a
high item cost also looks at how negotiation as a tool for effective material
pricing can be deployed to determine the right price of supply.
1.2
STATEMENT OF THE PROBLEM
Most
problems associated with negotiation especially when the issues of price is the
pivot, buyers tend to overlook the variables that determine the price itself.
This most time leads to arriving at a very high price for the purchase or
contract.
Moreso, lack
of proper planning before approaching the negotiation table is very high
fundamental and essential for any successful negotiation. The other negotiation
exercise such as source of information and idea delivery time, quality of
suppliers, fair and reasonable deal. Hence, since negotiation comes before any
purchase or contract, what will happen to purchase without negotiation on
specification and at multiple effect on terms of payment etc.
Also the
negotiation must not over power by one part or one principles, dirty trick all
they lead to failure in the objective. One can derive benefit as solving
problem source for information learn some experience, quality fair and
reasonable price, control and relationship management.
1.3 OBJECTIVES OF THE STUDY
The objective of conducting this
research among others are as follows:
i) To identify objective of
negotiation.
ii) To identify the approaches of
negotiation.
iii) To identify the requirement for
negotiation.
iv) To determine the impact of
negotiation on material pricing.
1.4 RESEARCH QUESTIONS
In dealing
with the research question, the following question will be answered or
addressed:
i) What are the objectives of
negotiation?
ii) What are the approaches of
negotiation?
iii) What are the requirements for
successful negotiation?
iv) What are the impact of
negotiation on material pricing?
1.5 SIGNIFICANCE OF THE STUDY
The study
will be of benefit to the organization which the study is being carried an
investigation, and also it will serve as guide for relevant organization which
have similar departments or problems, also it will serve as reference to the
similar topic and serve as reference for further studies.
Also, it
will be beneficent to research in future, the organization also broaden the
knowledge of the researcher; it will also assist the research especially in
partial fulfillment of the requirements for the award of Higher National
Diploma in Purchasing and Supply, Kaduna Polytechnic.
1.6 SCOPE OF THE STUDY
The research
work will cover carious department with the store function and look at the
process at which negotiation and its effect on materials pricing in Peugeot
Automobile Nigeria Ltd. Furthermore, the research cover various departments
with the total population of 65 and with the sample size of 30-49 staff. It
will be carried out within department of procurement, administrative
production, quality control and material inspection unit as well as close
department.
Also, it
will look at requirement for successful negotiation and the method employed in
the conduct of negotiation also it will cover from 2010 – 2012 how they conduct
their negotiation and we will look into quality control.
1.7 DEFINITION OF TERMS
Negotiation:
This is a process of where people come together to reach an agreement.
Procurement:
This term is mostly used in the military organization as well as the public set
up mean purchasing, it is activity which involve logistic, buying,
transportation and distribution
Lead Time:
This is the period between placing an order to its fulfillment or delivery.
Expediting:
This is a continual progressing orders with suppliers to make sure that goods
are received on time.
Inspection:
This is a process whereby incoming items are examined so as to ensure that the
quality and quantity conform with specification.
Quality:
This is the standard feature of an item that make it different from item of the
same characteristics.
Effective:
This is the ability of producing a sound and successful result.
Purchasing:
This is the process of buying things or item especially for a company.
Price: This
is the amount of money to be paid for obtaining an item or items.
Suppliers: A
supplier can be individual or company whose sole business is to supply items
for people or companies.
Specification:
This is the detailed description of how an item is or should be.
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