A Critical Analysis Of Negotiation As A Vital Tool To Effective Buying In A Construction Company (A Case Study Of Bulletin Construction Company, Ilorin, Kwara State)
The research topic is a critical analysis of negotiation as a vital tool to effective buying in a construction company, a case study of Bulletin Construction Company, Ilorin, Kwara State. The research is divided into five chapters. Chapter one contains introduction stage, historical background, statement of the problem, scope of the study, limitation and constraints, setting of hypothesis and definition of terms. Chapter two contains review of various related literatures by different authors and the research and development, processes of negotiation and objectives. Chapter three deals with research study, the instrument or tools that were used for collecting data, research population and sample size, sampling procedure employed and statistical method sued in analyzing the data. Chapter four contains presentations of data and its analysis, and the proof of hypothesis. Chapter five contains summary of findings, conclusion and recommendations.
1.1 Background of the Study
By no means can all purchases and suppliers matter be dealt with by correspondence and telephone. It is therefore a necessity that face to face counters sometimes take place to resolve problems and differences which ID be overcome by negotiation.
This research work looks at negotiation as an important tool in ensuring effective buying in a construction company.
It is important to recognize that the primary task of purchasing manager in fulfillment his role of maintaining suppliers is through effective negotiation.
The purchase manger should be a specialist in satisfying the needs of the company by seeking suitable sources of supply and negotiating to secure the best terms and service possible negotiation is necessary whenever it is require reconcile two or’ more different opinion in order that action “may be initiated continued in mutual agreed condition.
It is very important that all buying and selling transaction leave both parties satisfied and hence negotiation is not forcing and unwilling acceptance.
Though negotiation is complex and costly, but it is use for primarily for naira value purchase. For high Naira value purchases, where five criteria which dictate competitive bidding prevail. Though competitive bidding is only used to narrow down the number of supplier which implies dealing with a few successful bidder.
1.2 Aims and Objectives of the Case Study
The aims and objectives of carrying out this research work is divided into two: The primary and secondary objectives. The main aim which is the primary objective of carrying out this research work is in the partial fulfillment of the requirement for the award of National Diploma (ND) in Purchasing and Supply. Awarded by the department of Purchasing and Supply, Institute of Finance and Management Studies.
The second objective is to identify various contributions of purchasing department of Bulletin Construction Company, Ilorin, Kwara State towards the organization survival.
1.3 Statement of the Problem
Negotiation with suppliers is one of the most important functions of purchasing department. The success or failure of an organization depends largely on the effectiveness and efficiencies of the buyers to negotiate with suppliers on terms and conditions of the contract such as price, quality, delivery services etc. However investigations have shown that the purchasing departments of the company are not given free hand to operate in the procurement of materials for the organization. Though the role of buyer in any organization is to contribute immensely to the profitability and realization of objectives of the organization. But during the economic recess the market becomes unsuitable a fluctuation in prices. A very good example is what is happening currently in Nigeria with reference to deregulation of Naira as a result of which purchasing power of Naira was drastically reduced.
The activities of buyer in this situation become need with
- What Procurement procedure could be applicable for this situation? And this could include any of the following
- Speculative purchase
- Hand to mouth purchase
- Spot purchase
- Time budgeting of purchase
- How to obtain the right quality and quantity of goods at the right times?
- How can (he right or fair price could he achieved?
- How could the right materials or goods he gotten from this right source or location?
1.4 Scope of the Study
The research work will cover a broad area in purchasing operation and procurement procedure in organization.
It entails the following specific area which the research would like to emphasize upon in the course of writing the project. These include contract negotiation supplier relationship and others, buyer’s role in negotiation, objective of negotiation, creating conducive environment during the course of negotiation. In consolidation with the above areas the research or will give various definition of terminology used in the course of the project work.
1.4 Limitation and Constraints
The researcher encountered numerous problems during the course of carrying out this research work; some of the problems include the following. The uncooperative attitude of personnel of the commercial department of the organization who felt reluctant in the first instance in providing necessary and required information to the researcher not until a letter of identification was produced.
Among other limitation and constraint, to this research work includes financial .constraint, limited text book and journal related to the topic and time available for the research work which hard compelled the researcher to combine academic programme and at the same time carry out the research.
1.5 Setting of Hypothesis
Hypothesis is a tentative guess postulated for the purpose of assisting the researcher in directing his thinking towards the solution to the research problem.
In carrying out the research, the researcher will use both null (Ho) and alternative (HI) hypothesis to find out whether negotiation is a vital tool to effective buying.
- Ho, proper negotiation does not necessarily lead to effective buying in a construction company.
- HI, proper negotiation is inevitable to effective buying.
1.6 Historical Background of the Case Study
Bulleting Construction Company limited is a duly registered company. In corporate in Nigeria in 1989, the company which is owned by both indigenous and foreign partners has operated responsibility with the lanes of Nigeria.
The company’s head office is in Ilorin the Kwara State Capital with branch offices all over the Federation from Kogi State to Deltal State, from River State to Bauchi state and making further rapid cursion into other state of the Federation.
As a responsible specialized corporate entity with a group of highly responsible indigenous and foreign technical crew, the company has had the honour of handling numerous construction Works both within and outside the state. The company future is very promising as this can readily be assessed through its many tangible and intangible assets.
Despite the present economic downturn in the country which has forced many organizations out of the business the company still forging ahead with work force about (679) six hundred and seventy nine workers, of this number (674) six hundred and seventy four are Nigerians.
However, the staffs of the company are well pay and motivated hence the company has contributed into small measure to social economic development ‘Nigeria.
This analysis has become imperative to show the Nigerian government that Bulletin Construction Company is a well established responsible corporate body operating within the frame work of the Nigeria law.
1.7 Definition of Terms
1) Purchase Order:
This is the document used by purchasing department to request for the supply of certain items from the vendor or supplier.
2) Competitive Bidding:
This is used for standard items in which the quotation will requested from the vendor.
Is a person authoritatively appointed to represent a company for negotiation he must be skilful and have a broad business experience.
Is a process of planning reviewing and analyzing used by a buyer and a seller to reach acceptable agreement or compromise. These agreement and compromise include all aspect of the business transaction not just price.
An outside supplier of raw material who suppliers equipment or services needed in operation of an organization
Is a continuous managing process that is responsible for the anticipation, identification and the provision of goods and services that are required by an organization with the objective of helping it to increase its profitability.
This is the document which describes in details the requirements to which the supplier or services must conform.
8) Spot Purchase:
Is the purchase that is made on impulse.
9) Hand to Mouth Purchase:
The buying of the exact quantity of materials needed only with out stocking.
5.o Summary of Findings, Conclusion and Recommendation
5.1 Summary of Findings
In the course of this research work, the researcher was able to know the importance of negotiation towards effective buying in the construction companies.
The researcher was able to gather valuable information with the use of Researcher was able to gather valuable information with the use of questionnaire and also through the aid of personal interview with some key personnel in the organization.
The researcher was able to know some problems confronting t5he purchasing department of the organization and other problems that hampered effectiveness of negotiation in the construction company.
Investigation revealed that the purchasing department was not a adequately staffed with skilled and knowledgeable personnel’s, and required qualification. One can imagine a situation whereby the purchasing department is headed by a commercial manager who is an accounting by a professional. Hence, one always except a situation where by purchasing supervisor and commercial manager have to argue for several hours to arrive at an issue which is not supposed to have taken place where the two are matter between professional colleagues.
The researcher was able to identify that purchasing department are not given free hand to carryout its operation efficiently and effectively.
Also, investigation revealed that the organization understudy is affected by inflationary trends in their procurement activities. Also the effects of foreign exchange market make it impossible for the organization to meet target over some years. As a result of which the organization cannot extend its operation trend beyond nine states of the federation in order to satisfy those limited states without detriment to quality of the company’s project and also to meet the demand of people satisfactory.
Also, one cannot overlook the effect of current deregulation of currently in this country over some years on the company’s purchases and procurement activities. Some purchase order issued to company’s vendor’s shortly before deregulations were returned. This was as a result of the effect of this deregulation on the supplier and the materials to be subjected to recognition. And the organizations have to carryout purchase research so as to know current price of materials and the effect of deregulation of currency on such materials.
Further investigation revealed that the organization was able to achieved good quality of materials supplied to the organization and other supplies as a result of efficient and effective negotiation by the purchasing department of the organization, as a result of which the company was able to maintain its good name and image.
In the course of this research work, the researcher was made to realized that the use of negotiation helps for right helps to ensure that right materials are delivered at the right time from the right source to ensure continuity in project without delay to ensure that they confirm to the right quality and quantity as specified in the order.
The purchase department has operated under difficult situation, so far, but has nevertheless proved the important of negotiation as a vital tool in effective procurement activities. However level of achievement of the purchase department can be greatly enhance if an organization of the department is carried out as recommended and outline below. If the company take, seriously the recommendation and staff development and local spare parts production, it operation will be less dependent on foreign exchange.
Hence the company will be less worried about the adverse effect of a deregulation market or an unstable foreign exchange marked.
Furthermore, if the staff is given appropriate and proper training and well motivated, the company will certainly reap the fruit of higher productivity. Higher profit would also be assured,
The problem confronting the construction company with regards to its procurement activities nave been highlighted above. So, also are the problems inherent in the negotiation activities of the company. It is my believe that the following recommendations, if followed will greatly help in the achievement of efficiency and effectiveness in the organization.
i. Reorganization of the Purchasing Department:
The department should be completely re-organized it should be headed by an experienced are qualified personnel. In particular he/she must hold a degree or HND in purchasing and supply from a reorganized institution of higher learning.
A minimum experience of five (5) years must be stipulated. Two (20) of those years must at least have been spent in a construction industry. He/she must be a member of chartered in institute of purchasing and supply management. (CISPM) or national institute of purchasing and supply management (NEPSM).
The head of purchasing department should be designated director of purchase and suppliers and should have wide power to enable him gain authority over the department. His status should be at part with directors like the technical director, the contract director e.t.c he should have the need to operate with freedom and independence, subject only to control checks. He should have the last say in price negotiations and be responsible directly to the managing director. The director of purchasing and supplies should have under him two (2) units: – the physical store unit and the ledger store unit. These should be headed by HND holders with a minimum of two (2) years of working experience assisted by a member of ND holder, store assistant (WASC holder) and store attendants.
ii Construction Equipments
Construction equipments and major spare parts are usually ordered for broad after initial negotiation by representative of the company who normally go abroad for this purpose. It is recommended that henceforth, such trips should include the director of purchasing and supply in its team to enhance the level of negotiation and ensure favorable pricing.
As regard spare and replacement parts the company should endeavor to set up a machine unit to carryout the production locally, of some of the spare parts needed. This suggestion if taken, will not only help develop indigenous technology, it will also result in the conservation of foreign exchange.
Moreover, the adverse effect of an unstable foreign exchange market and deregulation currency market will be greatly lessened.
iii. Market Survey:
The purchasing and supply department should be encourage or directed, as part of its schedule of duties to undertake frequent periodic market survey alert the management according. The briefing of the management should be weekly or fortnightly.
iv. Method of Purchasing:
When purchasing materials other methods then negotiated should be considered. This is more important at this point in time when we have economic recession in the country. Such other methods include:
- Competitive Bidding
- Published Price List e.t.c
v. Staff Development:
It is recommended that staff development should be made an important policy at the company. The important of having well trained and properly qualified staff in position of responsibility cannot be over emphasized. The training could have any of the following forms:
- In service training
- Practical training etc.
There is no doubt that such well trained staff will be more belonging to the company and also be motivated to work to his best of abilities.
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