Branch Essay

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A branch is a part of an organization that is located in a different geographic region than the parent organization. It is also called a branch office and is very similar to a subsidiary. Although it functions autonomously, it is an extension of the corporate headquarters. Authority is granted to the branch or subsidiary to perform the necessary duties to conduct the same business transactions that would normally be conducted at the corporate headquarters.

A typical branch is smaller than the corporate headquarters, but it performs all or many of the same functions. Companies that have branch offices are able to extend the organization’s reach into different geographic regions. Establishing a branch office allows the organization to extend its products and services into markets and customer segments far beyond the reach of the corporate headquarters. The additional geographic reach can extend the company’s business into different local, regional, or global markets. This allows the organization to conduct business, interact with customers, and perform many of its daily business activities in more than one market. Companies with flatter organizational structures and decentralized decision making will tend to use branch offices more than other types of organizations.

Although many organizations will establish a branch office, some industries tend to use them more than others. This can include companies that are in the mail and/or packaging and shipping industry. Organizations in this industry tend to have a lot of branches so customers can access their services locally. For example, some countries have a national postal service with numerous post office branches, or a shipping company will have numerous branch offices where customers can come to ship packages. Banks will also have branch offices in numerous locations so they can gain access to customer segments in different geographic regions.

In general, the branch office will have: (1) the authority to act on behalf of the organization and (2) the infrastructure that allows it to conduct normal business activities. Similarly, when a company wants to extend its operations into a foreign market, it will sometimes establish a branch office in that country. The branch will have a building, employees, and an infrastructure that allows it to conduct business on behalf of the parent company. It functions autonomously and typically has the authority to spend money, hire employees, and provide service on behalf of the parent organization.

Although a branch office is convenient for the customer and extends the company’s business activities into different geographic markets, it generally requires a lot of resources and can be quite costly. The parent organization has to set up a second location that requires many of the same resources as the corporate office, but on a smaller scale. This includes the cost of buying or leasing a building, hiring qualified personnel, and developing an infrastructure that is self-sufficient so that it can function autonomously.

The recent trend has been to reduce or limit the number of branch locations. Many organizations have long desired to limit the number of branch offices because of the costs associated with building and maintaining these offices, but the investment was necessary to extend the company’s business activities, and because some business activities required direct or face-to-face contact. However, recent technological improvements allow some organizations to have direct contact and conduct many of these same business activities without face-to-face interaction.

For example, many financial institutions conduct business with customers without face-to-face interaction. With online access and ATMs, these companies can open accounts, check credit, grant credit, transfer funds, and complete numerous other banking activities without having the customer come into a branch or corporate office. It is no longer necessary for a customer to go into a local branch office to complete a business transaction with their bank. In today’s environment, there are companies that conduct a lot of business without face-to-face interaction. These organizations do not have customers that access their services at a main office or branch—all or part of the interaction takes place online.

Although a branch is a part of the parent company, it is an autonomous entity that functions separately from the corporate or main headquarters. Branches can be in different local, regional, or global locations than the corporate office. They can perform all or many of the same duties as the main office, as they extend the company’s business operations. Because of the cost of maintaining a branch and recent technological improvements, most companies try to limit the number of branches that they have.


  1. B. Buchholz, “City To City: When Firms Branch Out,” ABA Journal (1991);
  2. Frierson, “Development Order Approving Establishment of a Representative Office,” Federal Reserve Bulletin (2006);
  3. Hazel J. Johnson, Bank Valuation Handbook: A Market-Based Approach to Valuating Banks & Bank Branches (Irwin Professional Publishing, 2005);
  4. Kolari, A. Zardkoohi, T. Santalainen, and A. Suvanto, “Branch Bank Operating Costs: Evidence From Savings Banks in Finland,” Applied Economics (1992);
  5. Potvin, “Opening a Regional Office—Not a Choice, A Necessity,” Public Relations Tactics (1999);
  6. Shirley Donald Southworth, Branch Banking in the United States (Southworth Press, 2007).

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