STRATEGIC TRADE CREDIT

This study explores the economic importance of trade credit (TC) and the contribution it makes as a competitive device that adds value to companies. It uses empirical models of the determinants of TC decisions to investigate ways in which TC can be used strategically to gain/maintain competitive advantage. TC constitutes one of the biggest assets firms are likely to have and thus TC management is a very important function in businesses. TC management is often considered as a short-term issue. However, this analysis contents that, if given the importance it deserves, TC management can be an important factor in corporate strategy and if used pro- actively can be a potential for competitive advantage. TC can be used strategically as a marketing tool to attract new/large customers and build a long-term relationship with them, gain greater market share, create cost and operating efficiencies and enhance corporate image. This thus study explores the contribution TC makes as a competitive tool to add value to firms.