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Published on 22 Oct 2012 | Viewed 213 times
Barter as a Commercial Instrument
At various points in my career, I was involved in business proposals that included elements of barter. In some cases, they were about counter-trade (for example, fertilizer in exchange for tractors); in others they were about off-sets (free staff travel in exchange for discounts on aircraft purchase). Sometimes these discussions led to commercially viable transactions; often they did not.
There are many reasons why barter can be commercially challenging. Among them are considerations such as tax implications; identifying and managing counter-parties; setting undesirable precedents in the market; upsetting other customers and potential to create a ‘grey’ market.
Therefore it was interesting to read in the Financial Times (October 11th, 2012) that barter has seen a resurgence in Western markets since the onset of the recession. Given economic conditions, the shortages of cash, the difficulties of reducing stock or forecasting demand, it is perhaps not surprising that organizations have moved to exceptional methods to clear inventory. The process has been facilitated by the growth of intermediaries and the use of networked technologies that allow faster and more diverse matching of supply and demand. This expansion of the potential market also removes some of the historic concerns, since the supplier can be more specific about conditions of sale (for example, the nature of the eventual customer or the location in which goods will be used).
As this medium matures, it is likely to become an increasingly viable alternative to traditional sales techniques. It may allow not only faster and safer disposition of unwanted goods or excess inventories, but could in many cases offer entry to emerging markets where cash or financing is in short supply. It represents another area which will require strong commercial and contracting skills, to ensure full evaluation of the opportunity, its realization and potential consequences.
Perhaps it is time for a new IACCM training module!
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