Countertrade

In: Business and Management

Submitted By kdancetheatre
Words 9057
Pages 37
CounterTrade
University of Phoenix
MGT 448
April 17, 2011

Since the beginning of civilization, trade has existed. For thousands of years, nations have traded silk, spices, precious metals as well as animals. As centuries pass, trade between nations has advanced in terms of products. Today, nations deal in trading countless types of products including electronics, liquor, and military equipment. One type of trading among nations is known as countertrade. Countertrade is an association between two parties in which goods and/or services are traded for goods and/or services as an alternative to money. These parties can be between companies as well as countries. For example, a large company in Europe can trade a local product as a form of payment to another company in the United States for a particular American product. If a nation’s currency is not exchangeable or no good overseas, they may offer a commodity or other product in place of cash (Gonzales, 2011).

One of the most familiar events involving countertrade was between global soft drink giant, Pepsi and the former U.S.S.R. who had limited access to foreign currency due to its communist ideology. In 1972, Stolichnaya Vodka was used as payment to Pepsi by the Soviet nation for shipping syrup to the U.S.S.R. Pepsi became the first foreign product sold in the U.S.S.R. Because of this incident, Pepsi now has the marketing rights of all Stolichnaya Vodka in the United States (West, 1996).

There are six major models of countertrade most commonly found in the form of barter, counterpurchase, offset, switch trading, compensation or buyback, and clearing account arrangements. Barter is one of the most common models of countertrade. Simply put, in a barter transaction, goods are exchanged for goods and money is not involved. In some other occasions, exported goods will only be supplied once…...

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