Motives for and the management of countertrade in domestic markets

Abstract

The emergence and persistence of modern countertrade (CT) is attributed to many factors including circumventing credit and foreign exchange problems, surmounting barriers to otherwise closed markets, hiding price cuts or simply exporters' need to remain competitive. Because CT arrangements comprise bundles of buying, selling and financing contracts, explaining why firms conduct CT requires explanation of why a package deal is preferred to a set of component contracts. Examination of domestic CT stripped of "international ramifications" reveals the inherent rationale for CT as a desire to hide price discounts and to overcome cash shortages. Questionnaire data obtained from UK and Canadian firms broadly support this. If CT is worth undertaking, it requires effective management. The paper concludes by discussing the implications of CT for marketing strategy and planning.

US domestic barter: an empirical investigation

“…The few existing studies essentially focus on marketing and management aspects, and are based on questionnaire surveys of large companies involved in at least a barter deal, either domestic or international, or on direct interviews with representatives of the industry (Neale et al, 1992;Healey, 1996). Besides relying only on managers' perceptions and estimates of the barter phenomenon, these studies do not take into account retail barter.…”

Barter trading: An empirical investigation of management practices

“…For some companies, the danger may exist when they accept to trade in products that are not strategic. Neal et al (1992) cautioned companies to be more selective in deciding on the products to accept.…”

“…In general, good management practices are central for any business to be able to effectively take advantage of the opportunities and deal with the potential problems commonly associated with barter trade. Neal et al (1992) observed that in order to maximise on the opportunities that barter trade presents, commitment from top management is a must. Top management support can help establish a culture within an organisation that embraces barter trade.…”

“…These include having a dedicated barter trade coordinator; a separate barter trade department or make use of independent barter trade services providers. Neal (1992) observed that the choice on how an organisation should be structured in order to effectively deal with barter trade will depend on a number of factors including the company's objectives, available resources, scope, as well as frequency of barter trade.…”

Barter

“…Overall, reported business practices confirm the theory. One of the studies (Neale et al, 1992) identified only a very small number of the leading firms in the UK and Canada engaged in domestic countertrade, with the main motivations for participation being the desire to administer hidden price discounting and to circumvent short-term credit shortages.…”