1. In order to expand the business scale and scope. Companies use additional investment to buy shares of other small companies and turn these small companies into their own subsidiaries, which can not only make the subsidiaries act according to the development plan of the parent company and achieve the purpose of expanding the business scale of the parent company, but also make use of the subsidiaries to engage in other projects and conduct business activities in other regions or countries, thus expanding the business scope of the parent company rapidly.
2. Realize industry control and make yourself in an advantageous position in the competition. If a company wants to be in a favorable position in the competition, it should not only increase its own economic strength, but also control other companies in the same industry within the scope permitted by law, so that they can obey their own business planning or market strategy and prevent and reduce their own struggles and injuries. Letting other companies become their own subsidiaries is the most effective means of control.
3. Independent accounting by subsidiaries, self-financing, and diversification of business risks. According to the law, the company should be liable for its debts with all its property. If the parent company entrusts the original business projects to its subsidiaries, and the subsidiaries, as legal persons, are only responsible for the debts with their own property, then the bankruptcy of individual subsidiaries will not have a significant impact on the parent company and other subsidiaries.
In addition, some small companies often want to become subsidiaries of large companies. Because the parent company is often a powerful big company, small companies can't compete with it. If you can become a subsidiary of the company, you can get help and support from the parent company in terms of capital, technology, raw materials and market, and at the same time, you can establish close cooperative relations with other subsidiaries through the parent company, thus effectively improving the profitability of the subsidiaries.