A foreign subsidiary, often referred to as a "daughter company, is a company owned by a parent company from another country. Read the complete definition.
A foreign subsidiary, often referred to as a "daughter company, is a company owned by a parent company from another country. It operates in one country but is legally separate. Top international companies have over 370,000 foreign subsidaries globally.
The foreign subsidiary must follow the local tax and employment laws of the country it operates in. It allows the parent company to expand globally and access new markets.
Setting up a foreign subsidiary offers several significant advantages for businesses:
Access to New Markets
A foreign subsidiary lets companies set up a legal presence in another country, allowing them to sell their products and services to local people. This creates new markets and can boost profits and brand visibility.
More Affordable Manufacturing
In some markets, setting up a foreign subsidiary provides access to lower costs for goods and labor. The overseas manufacturing infrastructure may offer cost-effective options for producing goods in bulk.
Access to Technical Skills
Foreign countries, particularly in Asia, offer advanced technology and technical expertise. A foreign subsidiary enables businesses to recruit a global team with diverse skills and knowledge.
Access to Local Knowledge
Establishing a legal entity in a foreign country allows businesses to build relationships with local partners and exploit their localized knowledge, leading to strategic joint ventures.
Increased Expansion Opportunities
Entering a new country can drive enhanced business growth and revenue, especially in cases where the domestic market is saturated with competition.
Streamlined Processes and Incentives
Setting up a foreign subsidiary offers great benefits for businesses expanding internationally. Some countries welcome foreign investment and provide streamlined processes, along with enticing incentives like tax benefits, special economic zones, and fewer restrictions on foreign ownership of companies. This means easier and faster incorporation for businesses.
A foreign subsidiary offers even more benefits, such as substantial growth opportunities, cost savings, and access to valuable resources. For companies aiming to explore new markets, boost profits, and gain a competitive edge worldwide, setting up a foreign subsidiary is a smart and strategic choice.
