This document summarizes a case discussing whether Kenwa Hindustan Ltd (KHL) should become a subsidiary of Kenwa International (KI). KI currently owns a 40% stake in KHL and wants to increase it to 51%, which would make KHL a subsidiary. The advantages discussed are access to KI's resources, brand, technology, and funding during recessions. However, disadvantages include losing autonomy, having to cut costs in ways that impact employees, and the risk that KI could close KHL if growth is not sustained. After discussing the implications, the group advises KHL's management to agree to become a subsidiary but maintain influence through their remaining 26% stake. They provide an alternative of adopting a

1. Being Subsidiary – a bliss or
misery?
By:-
Ritesh sood
Rashmi srivastav
Bharat Sharma
Safique

2. Case facts
This case talks about Kenwa International (KI) and Kenwa
Hindustan Ltd (KHL) .
 KI was present in India with a name of Kenwa Co. in 1970’s
with a stake of 70% but was asked to reduce its stake to 40% or
shut down its function in India by FERA.
 Then KI left and KHL started functioning in India with a stake
of 60% and was able to manage the business somehow after KI
left
 Today after liberalization India has growth opportunities so KI
wants to increase its stake to 51% and KHL to be its subsidiary
 characters Mr. Nagpal the MD of KHL & Ted Hunte vice
chairman of KI

3. • KI demands KHL to be subsidiary or it will sell its stake.
• KI showed its interest in KHL being its subsidiary earlier
also after liberalization but Nagpal was able to convince
board not to agree
• this time KI warned of selling its stake
• KI mentioned various advantages for KHL to be a
subsidiary like
1. use of Kenwa which will help you acquire priority market
status globally
2. source from central purchase pool
3. Use of the latest technology
• Mr. Nagpal was able to see many ill effects of being a
subsidiary & was not in favor of it

4. Implications for KHL being a associate now
to becoming a subsidiary
 access to centralized pool of resources
 KHL would get all the resources which it requires in long run
to be successful
 Kenwa’s a brand name that will give KHL a chance to cater to
global market & improve its equity
 In case there is recession then KHL would not face danger of
shutting down its operations as they will get the funds from KI
to keep operating
 KI would advertise heavily as they launch new products so to
cover the cost they will do cost cutting which would lead to
employees being fired or paid less , leading to decrease in
employees morale.

5.  Individual decision making power of KHL would be lost
(exporting to Sri Lanka and Bangladesh not possible if parent
Co. not interested)
 Due to rationalize process KHL would have to produce those
product which fall under parent Co. product portfolio.
 KHL was cost competitive which was an advantage for the
company over foreign players but as subsidiary it would be lost
 The R&D department of KHL would be axed or not be allowed
to function the way they did once KHL becomes a subsidiary

6. Should KHL allow KI to increase its
stake ? And its consequences
As a group we decided YES KHL should allow KI to Increase its
stake
Consequences
Positive
 A brand name that will give them the platform to go global.
 Better management guidance to the management @ KHL
 Availability of latest technology for which other wise KHL
would have to pay heavy royalty fees

7. Negative
 KHL may have to over rule the option of catering to global
market
 Cost cutting may be done on the cost of employees
 KI showed interest in KHL because of growth in India But if
they are unable to sustain the growth then they might close the
unit
 Pool resources from central process and lose cost
competetiveness

8. Advice to the management on
current situation
 KHL should become a subsidiary to KI is our advice to the
management .
It will help them in different ways
 At time of recession
 Against foreign players
 Advanced technology
Management still will hold the power to question and to stop
KI from making changes in the working process As KHL
would have 26 % which required to do so.

9.  In case if there is still some doubt to be a subsidiary then
management could adopt the globalization cum multi domestic
strategy.
 They would be facing some challenges
1. complexity and differentiation
2. Need for integration
3. Knowledge transfer

10. THANK YOU