Local agent

From CEOpedia | Management online

Local agent is person appointed by another - the principal - to act on his or her behalf, usually to negotiate a contract between the principal and the third party. Agents are paid commission on the sales that they make, based on a percentage value (Cambridge Business English Dictionary, 2011, p. 22).

The agent is obliged in particular to provide all information relevant to the principal and to follow his instructions justified in the given circumstances, as well as to undertake, in the scope of conducted cases, activities necessary to protect the principal's rights. The agent - the recipient of the order - is a party to the agency contract, in which he undertakes, within the scope of his business, to perform specific activities on behalf of or on behalf of the principal, with adequate remuneration. The agent's main duty is to act for and in the interest of the principal, which will allow him to conclude contracts with clients. As an example, it should be pointed out that these activities may consist in particular of: searching for potential contractors and acquainting them with the profile of the activity giving the order to the entrepreneur or collecting and presenting offers. However, the agent's representative duty is to conclude contracts with clients on account and on behalf of the principal (Article 760, 2019, p. 153).

Other type of local agent

From the point of view of consumer rights, three types of agents can be distinguished in insurance. These are of course insurance agents, insurance brokers as also multiagents (Borkowski A., 2012, p. 48):

  • An insurance agent is an entrepreneur who has an agency contract with the insurer. Through an agency contract, the agent undertakes, to permanently mediate, for remuneration, when concluding contracts with clients for the principal or the entrepreneur to conclude them on his behalf. The agent is obliged to be loyal to the principal.
  • In contrast to the insurance agent, the relationship between the insurance broker and the person seeking insurance coverage is regulated. The main difference is the different location of the insurance broker. It works on behalf of the seeker of insurance coverage. An insurance agent may conclude more than one agency contract and therefore represent insurers offering products that offer similar or the same insurance coverage.
  • Multiagents are insurance agents who work for two or more insurance companies. They represent the insurer operating on the basis of an agency contract.

Agent and multi-agent

Terms of agent and multi-agent are used by many people who work in closely related areas but do not have one universal definition. Some attributes of agent are similar in many literatures (Chitsaz M., Seng W., 2013, p. 222):

  • Autonomy: Agents accomplish their aim without the direct interposition of human, control over their actions and internal state.
  • Social Ability: Agents cooperate with other agents.
  • Pro-activeness: Having ability to exhibit goal directed behaviour by taking the initiative.
  • Robustness: Be prepared to learn and to recover from failure.

The other properties of agent which relate to its context are mobility, veracity, benevolence, and rationality.

Examples of Local agent

  • Real Estate Agent: A Real Estate Agent is a local agent that works for a principal, such as a homeowner, to negotiate and sell a property. They typically receive a commission on the sale of the property that they negotiated.
  • Insurance Broker: An Insurance Broker acts as a local agent for clients to negotiate and purchase insurance policies. They receive a commission based on the insurance policies they sell.
  • Travel Agent: A Travel Agent is a local agent who works for a travel agency or tour operator to arrange travel packages and bookings for their clients. They are paid a commission based on the sales they make.
  • Freight Forwarder: A Freight Forwarder is a local agent that works on behalf of a principal, such as a shipper, to arrange the transportation of goods from one place to another. They are typically paid a fee based on the services they provide.

Advantages of Local agent

A local agent is a great asset to any business, as they can provide a number of advantages. Some of the advantages of using a local agent include:

  • Access to a larger network of potential customers. A local agent can increase the visibility of a company’s products and services in the local area, giving them access to a larger customer base.
  • Established relationships. If a local agent has been working in the same area for a long time, they may already have established relationships with customers and other businesses in the area, which can be beneficial for the business.
  • Knowledge of the local market. A local agent is likely to have a good understanding of the local market and can provide valuable insights into customer needs and preferences.
  • Lower costs. Hiring a local agent can be more cost-effective than hiring a full-time staff member, as they are usually paid on a commission basis.
  • Improved customer service. A local agent can help to ensure that customers in their area receive the highest level of service, as they are more in touch with the local market.

Limitations of Local agent

Local agents can be limited in a variety of ways. These include:

  • Limited knowledge of the product or services - Local agents may not have a comprehensive understanding of the product or services that they are selling, which can lead to misunderstandings between the customer and the principal.
  • Limited range of contacts - Local agents may not have access to a wide range of potential customers or contacts, meaning they are unable to promote their services to a wide range of potential buyers.
  • Limited reach - The geographic area in which a local agent can operate is often restricted, meaning they may not be able to reach customers in other parts of the country or world.
  • Limited resources - Local agents may not have access to the same resources as larger, more established companies, meaning that they may not be able to provide the same level of customer service.
  • Limited understanding of local laws and regulations - Local agents may not be familiar with the local laws and regulations governing their products or services, meaning they may not be able to provide the same level of advice or assistance to customers.

Other approaches related to Local agent

A local agent is often seen as the best approach when it comes to establishing a presence in a foreign market, as it provides a direct link between the foreign market and the business. However, there are other approaches available in order to gain access to foreign markets, such as:

  • Distributorship Agreements - where an agent is appointed to distribute and sell a company's products in a foreign market.
  • Joint Ventures - where two or more parties work together to establish a company, pool resources and share profits.
  • Franchising - where a company grants the right to another party to operate a business using the company's brand name and resources.
  • Licensing - where a company grants the right to another party to use its trademark, technology, brand name, patent or other intellectual property.
  • Exporting - where a company’s products are sold directly to customers in foreign markets.

In summary, there are a variety of approaches available for gaining access to foreign markets, with the local agent approach being one of the most popular. Each approach has its own advantages and disadvantages, and the most suitable approach for a company will depend on its particular objectives and resources.


Local agent — recommended articles
Sole agent — Sole distributor — Direct export — Sales agent — Mercantile agent — Direct writer — Placement fee — Commercial agent — Sub agency

References

Author: Kamila Nosalska, Małgorzata Maziarz, Paulina Korpała

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