BUSINESS ADMINISTRATION
STRATEGIC MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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To pay foreign tariffs in order to gain the right to sell products in that country
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To establish a controlling stake in a host country entry to manufacture or sell its products
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To purchase foreign products in order to diversify your revenue stream
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All of the above
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Detailed explanation-1: -A wholly-owned subsidiary is a company whose common stock is 100% owned by a parent company. Wholly-owned subsidiaries allow the parent company to diversify their product lines, streamline management, and possibly reduce risk. By its nature, a wholly-owned subsidiary has no obligations to minority shareholders.
Detailed explanation-2: -5. Wholly-owned subsidiary through greenfield venture. This entry mode means the firm owns 100% of the overseas entity, and your company will enter the new international market by establishing a completely new operation and legal entity.
Detailed explanation-3: -Companies primarily open foreign subsidiaries to establish a corporate foothold in a specific overseas economy, primarily to boost revenues, generate tax benefits and diversify company assets to better manage risk.
Detailed explanation-4: -A wholly-owned subsidiary is one whose 100% shares are held by 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.