This essay will briefly analyse the main concepts and theories on pricing methods as well as countertrade on an International marketing scope for an organisation; looking at how price arrangements can affect a particular market going into a overseas market; we also taking into consideration other factors that appears to be relevant to the concept above which includes cultural differences, country's political regime as well as main aspects which are mostly related to inflation, taxation and currencies fluctuation impacting the International marketing strategies. Therefore if we look at the counter-trade concept used by firms and compare to the conventional pricing arrangements we can draw a discussion which will be explained through this coursework by comparing few models and using companies that are Internationally recognised in order to attempt explaining the disadvantages on countertrade;
The concept of counter-trade can be defined as a recently important development of trade in which part of the transaction of exchanging good and services might not involve any sum of money. What can be called as a barter which therefore can be explained as the direct transaction without any parts being paid for it. According to (EIU, 1984) an important factor to be considered in Counter-trade is the fact that not matter what transaction has taken place they tend to consider the currency exchange to be balanced. (Grimwade N, 2004)
Counter-trade can benefit both parts but is necessary to remember that sometimes can be a quite complex to be used as a form of pricing for International markets; According to Ghaury & Cateora 2000; counter-trade knowledge is essential for International pricing strategy as well as for the staff to be aware and to be trained in order to understand the difference of types of transactions that might occur within an organisation. The economic relationship within the last twentieth century, evolved with the shortage of the dollar, as well as the protectionism policies the trade environment has been compromised by trading conflicts regarding sensitive industries e.g.: agriculture. Therefore the GATT (General Agreement on Tariffs and Trade) has been developed by the trading environment in order to create a better relationship between trading and multinational negotiation. (Hillman A, Ethier W, 2008, pp.295)
Strategies of counter trade
Recession and competitive pressure in the global world connected to the emergence of large, long-term potential markets have intensified both the incentives and the opportunities for counter-trade. According to Alexandrides & Bowers 1988 have identified two "strategic policies" categories among counter-trading firms: Company advantage policy; where the objective is to achieve short-term sales. Mutual advantage policy; where the primary focus is on the needs of customers and, in particular, and the developmental goals of the "host country".� Within the categories identified, four variants describe the approach of firms to counter-trade: Defensive Companies with a defensive counter-trade strategy do not counter-trade at all instead they make many counter-trade type arrangements with buyer countries. These companies will avoid any contractual counter-trade requirements, but they make it clear to the country that they will respond in some way for the sale. Passive Companies with passive counter-trade strategies regard counter-trade as a necessary evil. They participate in counter-trade at ad hoc basis, on minimal level. Some companies operate this way because they have product influence, while others follow the passive strategy because of disinterest in counter-trade." Reactive Companies with proactive strategies have made a commitment to counter-trade. They use counter-trade aggressively as a marketing tool, and are interested in making trading an active and profitable part of their...