What is a wholly-owned subsidiary and what are the benefits of it?
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.
1. To capitalise on low-cost labour
2. To avoid high import taxes
3. To reduce the high costs of transportation to market
4. To gain access to raw materials
5. Means of gaining market entry