Explain five circumstances under which an organization may adopt counter-trade as a sourcing method for its materials requirement. (10 marks)July 2020

Counter-trade refers to a type of trade in which goods or services are exchanged directly, rather than using traditional currency. There are several circumstances under which an organization may adopt counter-trade as a sourcing method for its material requirements:

1. Limited access to foreign currency: An organization may adopt counter-trade if it has limited access to foreign currency, either due to economic sanctions or other restrictions. Counter-trade allows the organization to obtain needed materials without having to exchange currency.
2. Difficulty in finding buyers for certain products: An organization may adopt counter-trade if it has difficulty finding buyers for certain products, either due to a lack of demand or competition. Counter-trade allows the organization to exchange these products for materials it needs, rather than selling them for a low price or not being able to sell them at all.
3. To build relationships with strategic partners: An organization may adopt counter-trade as a way to build relationships with strategic partners, such as key suppliers or customers. Counter-trade can create mutual dependence and strengthen the relationship between the two parties.
4. To diversify sources of supply: An organization may adopt counter-trade as a way to diversify its sources of supply, particularly if it is reliant on a single supplier or region for its materials. Counter-trade can allow the organization to obtain materials from other sources, reducing its dependence on any one supplier or region.
5. To enter new markets: An organization may adopt counter-trade as a way to enter new markets, particularly if it faces barriers to entry due to economic or political factors. Counter-trade can allow the organization to access these markets by exchanging its products or services for materials it needs.