Wednesday, April 24, 2019
Identification of Reasons for Preference of Wholly Owned Subsidiaries Essay
Identification of Reasons for Preference of in all Owned Subsidiaries Compared to IJVs - Essay ExampleThis paper illustrates that over the years international join ventures have been a successful mode of entry into the host country. It benefits the foreign companies forming the joint ventures with the local society in both ways. Firstly, the advantage of the local partners knowledge about the political remainss, competitive conditions, culture, and business system of the host country. Secondly, the benefit of development cost and risk sharing with the local partner. In some countries, these kinds of joint ventures are the only feasible market entry mode that is available to the foreign companies. On the contrary, the alone own footslogger is the most costly mode of entry into the overseas market. However, wholly owned subsidiary or rather setting up independent company owned by the parent company gives the full control to the company in terms of its operation handling and gai ning the whole profit from its operations. The companies who get hitched with this kind of entry mode should be prepared to bear the risk and cost associated with having its expanded operations in the overseas market. The companies in the past years thought that the joint ventures will give them the expertise to acquire a position in the market, but this was not as easy as the local partner tie down the new entrant to the direction of its operations in his own way. For instance, follow & Gamble failed in India where they entered the market through joint venture but succeeded in China through its wholly owned subsidiary. As the forecast states that China by 2050 would be a leading economic system followed by U.S and India, so now the companies feel that setting up their own company in these markets would be necessary for their survival as well as for sustained growth. With the influence of WTO, which now provides less childbed on foreign-owned companies in markets of China and India, many companies are now focusing on establishing their wholly owned subsidiary rather than going into any kind of international joint venture.