Posted in Marketing and Strategy Terms, Total Reads: 776
Definition: Representative Office
A representative office can be defined as a business office that is established by a company in a foreign country or in a jurisdiction where the business is not yet licensed to operate to conduct marketing and other non-transactional operations.
Sometimes people confuse branches with representative offices but they are totally two different entities. If a company opens up a branch in an area it is allowed to conduct activities like selling and buying goods, signing contracts, rendering services and building things while a representative office cannot buy or sell things and can’t even offer services for that matter. However it is easy for a company to establish a representative office in comparison to a branch since representative offices are not used for actual business and therefore countries consider less incentive for them to be regulated. A branch office has considerably more authority than a representative office to conduct business in an area. Mainly companies in developed countries use representative offices extensively in countries with emerging markets.
Generally, representative offices are used by companies on foreign soil for sourcing of products, as a liaison between head offices and representative offices in different countries and also for quality control. A representative office also does research for commercial information and provide it to the parent office. This office can also conduct market research to understand the market beforehand if the company is planning to introduce a product in concerned market. A representative office also has the freedom to market goods at trade fairs and even exhibit samples of goods in trade fairs as well as their offices. Though a representative office can’t buy goods but it can purchase and keep a quantity of goods for trade fairs.
For example; a company opens a representative office in Ghana. The office can just contact customers and also can enter into contracts on behalf of its foreign parent but can’t buy or sell goods by itself.