Why Do Firms at Least Need a Representation in Markets Where They Do Not Have Physical Presence?

By | June 28, 2021

The world today is about globalization. Every company that knows of much higher profit margins when working in an international context – flow of services from low costs region to higher price point country, for example – has started or is in the process of extending its offering to different markets globally. Particularly after advent of the Internet, everything can be done remotely, which means there is no such need to be physically present in just every market the company provides its services in.

This article is focused on the aspect where a company does not have physical presence in a country they are providing services in. There are basically two alternatives – either be all through the Internet and manage every aspect of the operations (communication, support, billing, etc) online or the second option is to work through a representative in the target country.

The first alternative though may work well for purely online businesses, this option of working entirely remotely may not work well at all in more conventional business types involving, for example, physical products and across the table negotiations. http://newtimezone.com

Some issues with managing entire services/offerings remotely are outlined as follows:

1. Remote delivery can become problematic because the provider tends to be unaware of the cultural aspects of the target market. For example, a Chinese manufacturer, providing services to the East Coast in the U.S., may not even be adequately aware of how businesses function/interact there.

2. Clients have “no reliable” source to interact with. By reliable, I mean there is no such thing as face to face when a specific delivery fails. In other words, international service providers would hardly travel if an unacceptable situation occurs, such as data recovery problems in an IT department or product delivery acceptance issues for an importer.

3. Remote provisioning, when companies do not physical exist in the client’s country, would generally imply no localized banking to accept guaranteed payments in the form of checks. In a remote case, a provider generally receives its payments via an online processing company – PayPal, for example – or direct credit card charge. PayPal, for that matter, is primarily credit card driven too. Payment by credit cards means the provider can be charged back on the payments received even after 6+ months. This is a significant payment security issue for a product or a service exporter.

If a provider, however, works through a local representative in the target market, many benefits become instantly visible. Some of them are outlined as follows:

1. Work done through a representative in a foreign country would add a reliable intermediary that can quite effectively bridge communication gaps in a critical product/service failure situations.

2. Differences in timezone has always been a critical key issue for both provider and the client. For example, if the client company is in U.S. and the provider is situated in Malaysia, that would be 11 hours difference. 9am in New York will be 8pm in Malaysia. This clearing shows that work hours difference only adds to the issue of communication and support.

3. Understanding the client issue and solving it becomes much easier because of direct face to face communication, when needed.

4. Clients like to pay locally even though service providers may be remote and international. In the current security climate, international wires are not considered safe. Plus clients consider international transfers as providing zero chance of recovery in case the product/service delivery committed is entirely faulty. At least these clients have no means to recover large up fronts they make on contracts. Paying a local representative makes it much safer experience for clients/buyers.