Be aware of the terminologies:
A company is any entity engage in the exchange of goods or services in order to earn a profit. A good is a tangible item and service is non-tangible item. A company becomes parent company when it acquires some small firm or formation of subordinates. Parent companies head offices are companies home. Corporations prefer to have their head office at parent companies home country. Sometimes companies go mergers to enter into a new world of consumers. A merger is the union of two or more firms; the parent company offers their stockholders to exchange the share, or other financial instruments for another company.
Reasons for the unions:
Corporations are joining frequency. If corporations are in a strong position in term of cash, they acquire their small competitor to become a market leader and a joint firm, and also a reason to reach the customer effectively and efficiently. By this, they can increase their supply and as well as the profits. The control of all the departments is from the parent companies home which is the head office, as well.
Corporations are public limited firms in which people can invest and own shares of it. The shareholder can also be part of operations and also they are profit sharing partners with the parent companies home office. Sometimes corporations create their subordinates to be more effective, in term of production or supplying of product, and also take an edge over the competitors. All the firms have to report at parent companies home office, because it is the main office.
Entering into new markets:
Companies do unions to enter into new market segment. When they feel the need to go to another country to operate a new market section, but their companies home remains in their parent country. Sometimes companies do union because they know, entering into a market which is already mature enough is not easy, and they will be requiring extra skills and expertise which they can get from the local people. They always control from their parent country in their companies home. New markets can open the doors for many more segments, firm and unions.
The subsidiary is better than a merger:
In subsidiary, the parent company owns the majority of shares. The parent company also manages the subsidiary company, from companies home. In this, the parent company manages the same organizational structure, because the corporations do it to enter into new markets. Because, Corporations do not have sufficient knowledge about new market in which they recently entered.
As far as the decisions and the activities of the subsidiary organization are concern, the controlling of it is from companies home; which is always in the parent companies home country.
Mostly parent company required recognition in the new market by using the name and the reputation of the subsidiary company. Goods and service offered by the subsidiary company can be different from the parent company. In that condition, mergers are not requiring. The subsidiary is better than a merger, while thinking to enter in the new market.
