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. Generally, representative offices are used by companies on foreign soil for sourcing of products.
Sometimes people confuse branches with these 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 this office in comparison to a branch since they 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 these offices extensively in countries with emerging markets.
It acts as a liaison between head offices and 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 this office can’t buy goods but it can purchase and keep a quantity of goods for trade fairs.
An American company opens an office in Ghana or Malaysia or any other country. 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.
Hence, this concludes the definition of Representative Office along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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