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AN APPRAISAL
OF EFFECTIVE NEGOTIATION AS A TOOL FOR THE ACHIEVEMENT OF PURCHASING OBJECTIVES
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The basic
goal of any organization or industrial activities is the development and manufacture
of products that can be marketed and maximizes profit and make profit. This
goal is accomplished by the appropriate blending of what many management
authorities calls the for (5) m’s which are machine, man. Material, money and
management, material organization. No industrial organization can operate
without them; they must be available at the right time in the right quantity at
the right price and at the right place.
Whether in
period of inflation, or price stability or recessim, obtaining material at the
right price can literally mean the difference between a firms, success and
failure. Hence the right price is of importance to every organization, profit
or non profit.
Therefore to
obtain the right price, there are (3) three basic method which can be used by a
buyer,
These are;
1 Published
price list
2
Competitive bidding
3
Negotiations
When the
buyer is not satisfied with the price after using published price lists and
competitive bidding, he resorts to negotiation. According to the chambers 20th
Century Dictionary “NEGOTIATION” means to confer for purpose of mutual
agreement the Webster dictionary defines it as conferring, discussing or
bargaining to reach agreement in business transaction.
According to
Oyeoku, (1993), negotiation is just but a process whereby representatives of
the buying organization and selling organization attempt to reach precise
agreement on all terms and conditions which make a contract come into being. It
involves a thorough analysis of all aspects of purchasing in each aspect and
the ritual as a common understanding of what is best in interest of both
parties. In successful negotiation both sides win, the wining are, seldom
equally divided. Invariably one side wins more than the other. This is as it
should be in business.
The
importance at negotiation to purchasing is that it is a method used especially
where 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 complete specification are not clear but vague, the supplier is a monopolist
where all these situation exist or pretrial, the buyer has no alternative than
to negotiation. Hence, negotiation is a practical technique arriving at a price
to pay for goods and services.
One the
other hand, material management is a total concept involving an organization
structure, unifying into a single responsibilities of systematic flow and
control of material from identification, the material functions of planning,
scheduling, buying, storing, moving and distribution of material are met.
The
objective is to contribute to increase profitability by coordinate achievement
of least total material cost through common responsibility of these knowledge
of materials and their uses. The co-ordination of these function into a simple
materials management department will no doubt result in the reduction of
operating costs.
Mobil
producing Nigeria unlimited (MPN) is the second largest oil producer in
Nigeria. It started operation in the country in 1955 as Mobil exploration
Nigeria incorporated. (MEIN) in December 1961 after unsuccessful exploration
efforts in the former western and northern regimes, MEIN was granted two
offshore oil prospecting license (opis) in the eastern region. In early 1964
MENI made its first discovering. The prospecting license where converted to
four oil mining license in 1968 and by the end of that year a total of 50
exploratory wells and 15 appraises wells had been drilled.
On June 16,
1969, mobil producing Nigeria incorporated to take over and continue the
business of MENI early in 1991. in compliance with the requirements of the new
company’s and allied matters decree No. 19 of 1990 company’s name became Mobil
producing Nigeria unlimited. (MPN) MPN began producing of crude oil on February
15 1970 in the offshore area of the eastern region.
In February,
1985 after 15 years of production, MPN hit ONE BILLION BARREL MAKE made the two
billion barrel mark. In April 1990, MPN structure another land mark when along
with its joint venture partner, the NNPC it signed was agreement for about 900
million us dollars with international lenders to develop and produce its OSO
field condense reserves, estimated at about 500 million barrels.
The
company’s over all contribution towards the country’s economic and social
development has followed closely in the male of its production growth. It was
in recognition that it won together with its parent and sister companies. Mobil
Oil Corporation and Mobil Nigeria Plc. The 1985 Honor award of the Nigeria
American Chamber of commerce, the honour award of the society of occupation
health physicians of Nigeria (SOPHON).
1.2STATEMENT
OF PROBLEM
The detailed
analysis of contribution of negotiation to the profitability of an organization
with regards to its external and internal environment will include the
following problems.
i Lack of
specialist in the field of purchasing has reselected to the incompetence and
inefficiency of the buying by the buyer of designed item or material.
ii Multiple
sourcing which acts as increased security sometimes becomes uneconomical.
iii The
imposition of high import duties on purchasing aboard and the need to exploit
alternative source of supply posed a lot
of uncertainties to the profession.
iv Another
problem that is associated with this study is buying out material which takes
large percentage of the organization revenue.
v Another
problem is that purchasing as a management function has been treated with
neglect by management in an organization companies and industries.
vi There is
tendency of fever and often larger sources of supplier.
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