THE EFFECT OF STRATEGIC NEGOTIATION IN MATERIAL PROCUREMENT( A CASE STUDY OF 37 MILITARY HOSPITAL)

CHAPTER ONE

Introduction

1.1 Background of the Study

            The settings in which procurement managers operate are crucial for both public sector organisations and private enterprises. Organisations must consider their production costs in order to comprehend the current challenges facing the negotiation planning process. Public services must manage tight budgets, which are made worse by specific circumstances like the COVID-19 pandemic (Andrea, 2019).

Organisations engage in supply and procurement activities that cover both internal and business-to-business services, according to Cerquides & Sanchez (2009). This is a crucial task that is carried out by all types of organisations, including governmental, nonprofit, and public ones. It can result in significant financial outlays. Spending like this on things like supplies and equipment for IT, buildings, travel, insurance, consumables, stationery, and equipment can add up to a sizable sum of money. The majority of businesses use at least one-third of their revenue or turnover to pay for products and services (Ayantoyinbo and Oguntola, 2018).

Such expenditures can add up to a significant amount of money when it comes to IT supplies and equipment, buildings, travel, insurance, consumables, stationery, and equipment. Most companies use at least one-third of their turnover or revenue to cover the cost of goods and services (Arora, Arora, and Sivakumar, 2016). Many organisations in Nigeria do not take negotiation planning very seriously. The evidence that is currently available shows that some organisations, particularly in large projects, conduct post-qualification instead of negotiation planning to ascertain whether tenderers have the legal capacities and capabilities to carry out the intended contracts. These inclinations to undermine the fundamentals of negotiation preparation are linked to inefficiencies that jeopardise the wellbeing of the relevant institutions (Ackah, 2017).

Practically speaking, the results of the procurement audit exercises that were carried out indicate that negotiation planning is not given more weight. A reported audit finding, for instance, revealed that the military hospitals lacked the manpower and funding necessary for effective and efficient negotiation planning procedures. This led to the termination of contracts worth Shs. 2.1 billion and Shs. 421 million, respectively, and their eventual delay (Grega et al., 2019). It is possible to characterise the representation of strategic procurement in terms of the supply chain's operations, environment, and organisational structure. Efficiency and effectiveness are assessed using the supply link's general performance indicators, which include time, quality, cost, flexibility, and flexibility. How well the resources are used is explained by the supply chain's efficiency. Given the scarcity of resources, it is imperative for the organisation to optimise resource utilisation for the benefit of all. How well the goals are met is explained by the supply link's effectiveness (Ayantoyinbo and Oguntola, 2018; Benito, 2007). Despite the presence of literature on the role of strategic negotiation on material procurement in diverse organizations, there is a dearth on how this is done in the military hospitals. It is based on this background that the present study seeks to examine the effect of strategic negotiation in material procurement: a case study of 37 military hospital.

1.2 Statement of the Problem

            Low-cost acquisition of high-quality raw materials, components, or completed goods is viewed by organisations as a crucial procurement function (Schiele, 2007). Nonetheless, the highly competitive and dynamic market environment of today forces all kinds of organisations to be more inventive in bringing new goods and services to market quickly and necessitates a high degree of flexibility in order to satisfy shifting client demands (Doll et al., 2010; Roh et al., 2011). A sustained competitive advantage is becoming less likely to originate from one or two domains of expertise. Instead, it stems from exceptional practises connected to the overall business processes in critical strategic areas. The nature of goods and services is becoming more complex, and the life cycle of products is getting shorter, as the market environment becomes more turbulent with rapidly changing customer requirements. Shorter product life cycles and increased product complexity necessitate a broad range of cutting-edge services and component parts, which increases the difficulty and expense of procurement. In certain industries, procurement accounts for 70% or more of the total cost of goods sold, so management must prioritise strategic procurement (Barragan et al., 2003; Ryals and Rogers, 2006). As a result, the conventional back office purchasing function has developed into a more interorganizational and cross-functional business process. Thus, from being a transaction-based practise for the majority of business firms, procurement is increasingly becoming a key strategic organisational process (Carter and Yan, 2007; Porter and Kramer, 2011). Studies reporting the effect of strategic negotiation on the procurement of materials in military hospital is scarce. Therefore, the present study will be examining how strategic negotiation can affect the procurement of materials in 37 military hospital.

1.3 Research Questions

            The following research questions will guide the present study;

1. To what extent does strategic negotiation affect the procurement of materials in military hospitals?
2. To what extent does finances affect the procurement of materials in military hospitals?
3. To what extent does government policies affect the procurement of materials in military hospitals?
4. Is there a significant relationship between strategic negotiation and procurement of materials in military hospitals.

1.4. Aims/ Objectives of the Study

            The main aim of this study is to examine the effect of strategic negotiation on the procurement of materials in military hospital. Other objectives of the study include;

1. To determine the effect of strategic negotiation on the procurement of materials in military hospital
2. To ascertain the effect of finances on the procurement of materials in military hospital
3. To examine the effect of government policies on the procurement of materials in military hospital
4. To find out the relationship between strategic negotiation and procurement of materials in military hospitals.

1.5 Research Hypotheses

            The following will be hypothesized in the present study;

Hypothesis one

H0: There is no significant effect of strategic negotiation on the procurement of materials in military hospital

H1: There is a significant effect of strategic negotiation on the procurement of materials in military hospital

Hypothesis Two

H0: There is no significant relationship between strategic negotiation and procurement of materials in military hospitals

H1: There is no significant relationship between strategic negotiation and procurement of materials in military hospitals.

1.6 Scope and Limitation of the Study

            This study is limited to the effect of strategic negotiation in the procurement of materials specifically in military hospitals. The participants that will be used in this study will only be restricted to on 37 military hospitals.

            The limitations that are like to occur in this study are;

1. Small sample size: The participants is like not to have enough respondents that can provide an external generalization of result.
2.  Non-challant attitude of the respondent: Some respondent are likely not be participating in the study due to personal reasons thereby affecting the outcome of the study.
3. Response bias: The respondents maybe providing responses that are not true their intention just to cover up who they are or what has been going on at the hospital.

1.7 Significance of the Study

            This study will be of significance to the management and staffs in military hospitals, other organizations be it private or public, researchers and the general populace by highlighting the effect of strategic negotiation in the procurement of materials.

            First, the findings of this study will help the military hospitals to save more money for other development and staff progressive training as a result of the savings they made from using strategic and effective negotiations in procuring materials for the hospital.

            The findings of this study will help other organizations know the importance of utilizing effective negotiation plans to procure materials for their usage without having to spend more money on a material that has a lesser price tag.

            The findings of this study will help the general populace to know how effective adopting negotiation can help them procure their personal good with lesser money thereby allowing them to save more.

            The findings of this study will fill the dearth in literature and act as a source of reference to other researchers who may be interested in a study of this nature in other geopolitical regions.

CHAPTER TWO

2.0 Literature Review

2.1 Theoretical Framework & Conceptual Framework

2.1.1 Theoretical framework

            The theory that will be adopted for this study is the Agency theory. According to Eisenhardt (1989), agency theory aims to explain the agency relationship, which is characterised by one party (the principal) assigning tasks to another party (the agent), who then completes those tasks. Relationships of this kind may give rise to two issues: first, the principal's and the agent's goals and desires may not align, and second, it may be challenging for the principal to confirm the agent's actions. A general theory of the principal-agent relationship, which can be applied to buyer-supplier, employer-employee, and other agency relationships, is the focus of principal-agent researchers. Agency theory is especially useful when dealing with challenging contracting issues. These include circumstances where there is a significant goal conflict between the principals and the agents and enough outcome uncertainty to cause the theory's risk implications to materialise (Eisenhardt, 1989). In his discussion of the theory's underlying presumptions, Eisenhardt also brings up the question of how principals come to know agents in long-term relationships, when outcome-based contracts might not be as necessary. This might be more true for procurement in the private sector, where tendering is not necessary and there are fewer rules than in the public sector. Private companies are allowed to maintain long-term connections with consulting firms and software developers. According to Jones (1995), long-term partnerships with vendors may eventually result in increased efficacy since the stability of the partnership depends on managing goal conflicts.