Managers can completely control the daily business activities of subsidiaries in the target market and ensure that valuable technologies, processes and other intangible assets remain in the subsidiaries. At the same time, it can also reduce the opportunities for other competitors to gain a competitive advantage. In addition, the manager can maintain complete control over the output and price of the subsidiary.
If the company wants to coordinate the activities of all its subsidiaries, wholly-owned subsidiaries will be a very good entry mode. From the perspective of global strategy, companies can regard each country's market as a part of the interconnected global market. Therefore, having complete control over wholly-owned subsidiaries is more attractive to company managers who pursue global strategy.
A wholly-owned subsidiary refers to a subsidiary wholly owned or controlled by a single parent company.
The parent company can set up a wholly-owned subsidiary in two ways:
Set up a new company from scratch and build brand-new production equipment (such as factories, offices, machinery, etc.) );
Buy an existing company and use its equipment for your own use.