Subsidiaries. Daughter companies abroad.What are subsidiaries including benefits and drawbacks.How is the daughter company controlled and what relation does it have in term of mother companies.How are...

Running Head: DANISH COMPANY HAVING SUBSIDIARY IN USA 1
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DANISH COMPANY HAVING SUBSIDIARY IN USA 2
Subsidiaries
The other company either wholly or partially owns the subsidiary. When a company is
purchasing another company, another company becomes the subsidiary of the company that
purchased them. A subsidiary company is controlled by the other company called the parent
company. If the parent company is holding more than 100% of the ownership of the other
company, then it is called as the wholly owned subsidiary.
A holding company will have only ownership of the subsidiary, but it will not interfere
with the operations of the subsidiary. They will not have any operation of their own, unlike a
parent company. Parent companies are those companies that have operation control over the
subsidiary company. There are cases, the parent company set up the business in the foreign
country as a wholly owned subsidiary instead of acquiring the foreign established business to
continue their business operation in the foreign country.
Subsidiaries are mainly used by the large corporations to expand their business operation
in the foreign country. The subsidiary company will have the similar management style and
organization structure to that of a parent company. Both subsidiaries and parent companies are
separate entities, and both are independent. The example is Tridea Partners is a U.S. wholly
subsidiary of Columbus IT of Denmark (Columbus Global, 2017).
Columbus, IT is a Denmark-based IT company that provides Enterprise Resource
Planning (ERP) to various customers across the globe. They have acquired the Tridea Partners of
United States. Tridea Partners is providing Microsoft Dynamics Enterprise Resource Planning
(ERP) and the Customer Relationship Management (CRM) solution (Cox, 2017). Tridea is
having a strong hold in the business in the United States. The acquisition made Columbus IT is
the parent company, and Tridea Partner is the subsidiary company of Columbus IT.
Advantage of Subsidiaries
The subsidiaries provide a better market and access to the parent company to operate
their business in the foreign country. The parent company will have separate business operations,
and the subsidiary will act as an independent entity thus will not create more challenges to the
usiness operations of the company. It will reduce the overall conflict or trouble in the entire
usiness operation as both has separate management to control and monitor the business. As both
these companies are operating as separate entities, there will be no cultural problem or any other
issues that arise in operating the business in the foreign region.
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The subsidiary will operate the business as per the culture of the local country that will
esult in higher efficiency and lower level of internal conflicts. Another advantage is that
subsidiary will operate their business as per the direction of the parent company but
independently. The major advantage is that it will provide better control over the entire
operations of the business (Basu, n.d.). The advantage to the subsidiaries is that they obtain more
assistance from the parent company. There will be a strong network between the subsidiary and
the parent company.
As the parent company fully controls subsidiary, there is a better protection to the
intellectual rights. The parent company has the benefit of consolidating the financials of the
subsidiary companies that will result in improving the overall financial performance and
financial position of the parent company. They provide tax advantages to both these entities. It
gives access to the new market and provides a better position in the foreign country’s business. It
is a better way to expand the business as it eliminates more trouble that could arise from
operating a business in the foreign country.
Another advantage for the parent company is that they can effectively implement the
strategy and changes in all their business operations (Basu, n.d.). For instance, if Columbus
makes a strategic decision of extending their service to a new segment of the customer then the
subsidiary Tridea operating in the US will also implement the new strategic decision. It is easy to
implement various changes and crucial strategic decision in the subsidiary.
The parent company has an advantage of operating a diversified business using the
subsidiary so that it will not create any trouble in handling diversified business. It will enhance
the overall risk management efficiency of the well-diversified business. There are some cases
where the parent company established a supplier as their subsidiary that provides a vertical
integration and enhances the supply chain management of the company.
The parent company can reduce the overall risk exposure associated with the new venture
and in entering the new market. Any trouble in the business operation of US subsidiary then it
will not have any adverse impact on the Columbus business directly. It is the main advantage of
operating the business in subsidiary format. Similarly, Columbus has obtained more opportunity
and access to a better market in the United States.
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Disadvantage of Subsidiaries
There are various disadvantages associated with the subsidiary business operations. The
main disadvantage of the foreign subsidiary is the overall costs involved in the business. There is
a requirement for the huge amount of investment to establish the foreign subsidiary. There are
more difficulties and challenges when the parent company is acquiring the established foreign
company.
The existing company has different culture and organization structure that might become
difficult to coordinate with the existing parent company to establish a smooth business operation.
When both the companies are having specialized knowledge, then it creates more conflicts in the
decision making and implementation. The parent company is both legally and financially
esponsible for the decisions taken by the subsidiary companies. As subsidiary operating as a
separate entity any adverse decision made by them will adverse impact over the parent company
(Basu, n.d.).
For a company like Columbus IT, it is essential for them to integrate their business with
the Tridea Partners as both these companies are into the ERP and in providing various IT
solution to various clients across the industries. In this case, there will be more challenge to
integrate the business operation due to the difference in culture and language. Creating
integration in the business process is difficult.
Relationship between Columbus IT and Tridea Partners
Tridea Partners is a US company that has a stronger presence in the ERP and CRM
market. Tridea Partners has 29 employees, and they are headquartered in San Diego CA the US.
Columbus IT of Denmark acquired the Tridea Partners for $8.7 million (Cox, 2017). The Tridea
Partners is a small company, but they have penetrated well into the food and beverage industry in
the United States.
Tridea is specialized in providing the back office support and functions along with the
customer relationship management services to various companies from the food and beverage
industry. They are providing services to the life science industries. The main reason for the
acquisition is to expand the Columbus IT into the United States. It will provide a new market and
access to the Columbus IT (Cox, 2017).
The dealing between the Mother Company and daughter company is that Tridea Partner
will be renamed as Tridea Partner A Columbus Company. Columbus IT aims in expanding their
DANISH COMPANY HAVING SUBSIDIARY IN USA 5
usiness in an international market that made them acquire the IT Company that operates in the
same business segment of Columbus in the US. The mother company will get full control over
the Tridea Partner the daughter company and the mother company will retain all the knowledge
esources with them to ensure that they operate in an efficient manner.
There will be a consolidation of Tridea Partners financials with the mother company
Columbus IT as it is a wholly owned subsidy of them. The mother company will expand their
usiness operation to large...