Internet and Counter Trading

The Internet may become the most important venue for counter trade activities. Finding markets for bartered merchandise and determining market price are two of the major problems with counter trades. Several barter houses have Internet auction sites, and a number of internet exchanges are expanding to include global bartered.

Some speculate that the internet may become the vehicle for an immense online electronic barter economy, to complement and expand the offline barter exchanges that take place now. In short, some type of electronic trade dollar would replace national currencies in international trade transactions. This would make international business considerably easier for many countries because it would lessen the need to acquire sufficient US currency or other hard currency to complete a sale or purchase.

Trade Banc a market making service has introduced a computerized technology that will enable members of trade exchanges to trade directly online with members of other trade exchanges anywhere in the world as long as their barter company is a Trade Banc affiliate. The medium of exchange could be the Universal Currency proposed by the international reciprocal trade association (IRTA) an association of trade exchanges with members including Russia, Iceland, Germany, Chile, Turkey, Australia and the United States. The IRTA has proposed to establish and operate a Universal Currency clearing house which would enable trade exchange members to easily trade with one another by using this special currency. When the system is in full swing all goods and services from all participating affiliates would be housed in a single database. The transaction would be cleared by the local exchanges and settlement would be made using IRTA’s Universal Currency, which could be used to purchase anything from airline tickets to potatoes.

Proactive Counter trade strategy:

Currently most companies have a reactive strategy, that is, they use counter trade when they believe it is the only way to make a sale. Even when these companies include counter trade as a permanent feature of their operations, they sue it to react to a sales demand rather than using counter trade as an aggressive marketing tool for expansion. Some authorities suggest, however that companies should have a defined counter trade strategy as art of their marketing strategy rather than be caught unprepared when confronted with a counter trade proposition.

A proactive counter trade strategy is the most effective strategy for global companies that market to exchange poor countries. Economic development plans in eastern European countries, the Commonwealth of Independent States (CIS), and much of Latin America will put unusual stress on their ability to generate sufficient capital to finance their growth. Further, as countries encounter financial crises such as in Latin America in 1996 and Asia in 1998, counter trade becomes especially important as a means of exchange. To be competitive companies must be wiling to include some counter traded goods in their market planning. Companies with a proactive strategy make a commitment to sue counter trade aggressively as marketing and pricing tool. They sue counter trades as an opportunity to expand markets rather than as an inconvenient reaction to market demands.

Successful counter trade transactions require that the marketer accurately establish the market value of the good being offered and dispose of the bartered goods once they are received. Most successful counter trades result from not properly resolving one or both of these factors.

In short, unsuccessful counter trade are generally the result of inadequate planning and preparation. One experienced counter trade suggests answering the following questions before entering into the counter trade agreement : (1) Is there a ready market for the goods bartered? (2) Is the quality of the goods offered consistent and acceptable ? (3) Is an expert needed to handle the negotiations? (4) Is the contract price sufficient to cover the cost of barter and net the desired revenues?

Source: International Marketing

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