CHAPTER ONE
1.0 INTRODUCTION
The basic goals in any industrial activity is the development and manufacture of products that can be marketable at a profit. This goal is accomplished by the appropriate blending of what many management authorities call the five mis-machines, men, material, money and management. Materials today are the life blood of industry, no industrial organization can operate without them. They must be at the right time, in the right quantity at the right quality, at the right price and at the right place. Whether in period of inflation, or price stability or recession, obtaining materials at the right place can literary mean the different between a firms 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 both the buyers and sellers. Unfortunately no single set of pricing principles or criteria exists for calculating precisely what constitute fair and reasonable. Therefore to obtain the right prices, three basic methods can be used by buyers, these are:
1. Published price list
2. Competitive buying
3. Negotiation
When a buyer is not satisfied with the price after using published price list and competitive bidding he resort to negotiation.
According to Chambers 20th Century Dictionary, Negotiation means to counter the purpose of mutual agreement. The Webster Dictionary defines it as conferring discussion or bargaining to reach agreement in business transaction. In industry negotiation is sometimes confused with happening and rise selling. While in government it is frequently visualized as a nefarious means of a competitive building of awarding contract, surreptitious favour supplies.
According to Oyeoku (1993) negotiation is just but a process whereby a representative of buying organization and the selling organization attempt to reach precise agreement on all terms and conditions which makes a contract come into being. It involves a thorough analysis of all aspect of purchasing rational discussion conferring and bargaining on each aspect and the arrival at a common understanding of what is the best in the interest of both side parties. In successful negation both sides win, the winning are seldom equally divided. Invariably one side win more that the other, this is how it should be in business “superior” business skill meant superior reward. Negotiation is particularly useful though not always fully successful in dealing with sellers who are sore source of supply or with seller controlling multiple source that behave in a monopolistic manner, in case where cost are not reliable determine in advance as in most research contract and in any contract for items that had never been made before, there is no source alternative in negotiation.
The important of negotiation of purchasing is the it is a method used especially were 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 are not clear but vague, the supplier is a monopolist, where all these situation exist or prevail, the buyer has no alternative than to negotiate, hence negotiation is practical technique arriving at a price to pay for goods and services.