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ACQUISITION UNDER WHOLLY
OWNED SUBSIDIARIES
“Under International Entry
Strategies/Mode”
WHOLLY OWNED SUBSIDIARY
• A wholly owned subsidiary is a company whose common stock is
100% owned by another company, the parent company.
• Whereas a company can become a wholly owned subsidiary
through an acquisition by the parent company or having been spun
off from the parent company, a regular subsidiary is 51 to 99%
owned by the parent company.
• When lower costs and risks are desirable or when it is not possible
to obtain complete or majority control, the parent company might
introduce an affiliate, associate or associate company in which it
would own a minority stake.
ENTRYSTRATEGYOWNED IN
INTERNATIONALACQUISITION
• Exporting is the easiest, most cost effective and most commonly used
method of entering a new international market. Some businesses do not
actively plan to become exporters, they may simply start accepting orders
from overseas customers. However, many businesses are planned
exporters who wish to expand their international presence.
• Franchising is a form of licensing. As a franchisor or licensor, your business
effectively gives the licensee of franchisee permission to:
– Produce a patented product or patented production process.
– Use your manufacturing know-how.
– Receive your technical and marketing advice and know-how.
– Rights to use your trademark, brand etc.
ENTRYSTRATEGYOWNED IN
INTERNATIONALACQUISITION
• A joint venture is an arrangement between two or more (often competing)
companies to join forces for the purposes of investment with each having
a share in both the financial running and management of the business.
Joint ventures are usually an alternative to building a wholly owned
manufacturing operation and offer benefits such as:
– Capital outlay is shared.
– Reduced risk i.e. less government intervention if an alliance is formed
with an indigenous business.
– Closer control over production, marketing and other business
operations.
– Better local market intelligence provided by indigenous joint venture
partner.
ADVANTAGES
• The most important advantage is the operational and strategic control
that a parent company can exercise over its subsidiary.
• The level of control is likely to be higher for the first few months of a
subsidiary's operation.
• However, the level is likely to be lower for an acquired subsidiary with a
successful operating history.
• It is easier to establish common operating processes, especially when a
parent company sends its executives to manage its subsidiaries.
• There is less risk of losing intellectual property to the competition because
the parent can implement common data access and security protocols.
• Cost synergies are possible because a parent and its subsidiaries could use
common financial systems, share administrative services and develop joint
marketing programs.
• A parent company also controls the assets of its subsidiaries and can
invest these assets as it sees fit.
DISADVANTAGES
• Establishing a subsidiary is an expensive undertaking.
• Although acquiring a local company may facilitate market entry, the
parent company might overpay for the company's assets, especially
if there is a bidding war.
• It takes time to establish relationships with suppliers and
customers, although acquiring a local company with built-in
networks could speed up the process.
• It may be difficult to find skilled employees to work and manage
subsidiaries, and cultural barriers may prevent the integration of
parent and subsidiary operations.
• The parent company also bears all of the risk of its subsidiaries.
EXAMPLES
• Volkswagen Group of America, Inc., including
distinguished brands such as Audi, Bentley,
Bugatti, Lamborghini and Volkswagen, is a wholly
owned subsidiary of Volkswagen AG.
• Marvel Entertainment and EDL Holding Company
LLC are wholly owned subsidiaries of The Walt
Disney Company.
• Starbucks Japan is a wholly owned subsidiary of
Starbucks Corp.
Submitted by : NAMRTA SHARMA
BUPIN : 15PBA036

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Acquistion under wholey owned subsidaries

  • 1. ACQUISITION UNDER WHOLLY OWNED SUBSIDIARIES “Under International Entry Strategies/Mode”
  • 2. WHOLLY OWNED SUBSIDIARY • A wholly owned subsidiary is a company whose common stock is 100% owned by another company, the parent company. • Whereas a company can become a wholly owned subsidiary through an acquisition by the parent company or having been spun off from the parent company, a regular subsidiary is 51 to 99% owned by the parent company. • When lower costs and risks are desirable or when it is not possible to obtain complete or majority control, the parent company might introduce an affiliate, associate or associate company in which it would own a minority stake.
  • 3. ENTRYSTRATEGYOWNED IN INTERNATIONALACQUISITION • Exporting is the easiest, most cost effective and most commonly used method of entering a new international market. Some businesses do not actively plan to become exporters, they may simply start accepting orders from overseas customers. However, many businesses are planned exporters who wish to expand their international presence. • Franchising is a form of licensing. As a franchisor or licensor, your business effectively gives the licensee of franchisee permission to: – Produce a patented product or patented production process. – Use your manufacturing know-how. – Receive your technical and marketing advice and know-how. – Rights to use your trademark, brand etc.
  • 4. ENTRYSTRATEGYOWNED IN INTERNATIONALACQUISITION • A joint venture is an arrangement between two or more (often competing) companies to join forces for the purposes of investment with each having a share in both the financial running and management of the business. Joint ventures are usually an alternative to building a wholly owned manufacturing operation and offer benefits such as: – Capital outlay is shared. – Reduced risk i.e. less government intervention if an alliance is formed with an indigenous business. – Closer control over production, marketing and other business operations. – Better local market intelligence provided by indigenous joint venture partner.
  • 5. ADVANTAGES • The most important advantage is the operational and strategic control that a parent company can exercise over its subsidiary. • The level of control is likely to be higher for the first few months of a subsidiary's operation. • However, the level is likely to be lower for an acquired subsidiary with a successful operating history. • It is easier to establish common operating processes, especially when a parent company sends its executives to manage its subsidiaries. • There is less risk of losing intellectual property to the competition because the parent can implement common data access and security protocols. • Cost synergies are possible because a parent and its subsidiaries could use common financial systems, share administrative services and develop joint marketing programs. • A parent company also controls the assets of its subsidiaries and can invest these assets as it sees fit.
  • 6. DISADVANTAGES • Establishing a subsidiary is an expensive undertaking. • Although acquiring a local company may facilitate market entry, the parent company might overpay for the company's assets, especially if there is a bidding war. • It takes time to establish relationships with suppliers and customers, although acquiring a local company with built-in networks could speed up the process. • It may be difficult to find skilled employees to work and manage subsidiaries, and cultural barriers may prevent the integration of parent and subsidiary operations. • The parent company also bears all of the risk of its subsidiaries.
  • 7. EXAMPLES • Volkswagen Group of America, Inc., including distinguished brands such as Audi, Bentley, Bugatti, Lamborghini and Volkswagen, is a wholly owned subsidiary of Volkswagen AG. • Marvel Entertainment and EDL Holding Company LLC are wholly owned subsidiaries of The Walt Disney Company. • Starbucks Japan is a wholly owned subsidiary of Starbucks Corp.
  • 8. Submitted by : NAMRTA SHARMA BUPIN : 15PBA036