Question

definition of the commercial subsidiary and industrial subsidiary?

Answer 1

Solution -

A subsidiary is defined as a company which is controlled by another company, which owns more than 50% of stocks of this company or at times even 100% of stocks where such a subsidiary is classified as a fully owned subsidiary.

Now before diving deep into the definition of commercial and industrial subsidiary we must note that the subsidiaries are put in place in the corporate world to derive specific benefits for the parent company. These benefits are in the form of synergy advantages such as

• Tax benefits
• Business development
• Manufacturing or operational advantage
• Logistic supremacy

Commercial Subsidiaries - These are those subsidiaries that are controlled by the parent company for business development purposes. Commercial Subsidiaries are intended to provide an advantage on the marketing aspect of the parent company and at times are opened to implement specific marketing strategies for the parent company. For instance Nike Inc. has a subsidiary in India known as Nike India Private Limited which was established to market the Nike products in India and to assist Nike in implementing their market development strategy.

Industrial Subsidiaries - These are those subsidiaries which are established and controlled by the parent company to provide an advantage on manufacturing and operations. These companies generally conduct some part of operations for the parent company and provide advantages on cost and efficiency. For instance Ramco Industries Group has many subsidiary companies that provide for the raw material to the parent company. This assists in smooth and cost effective operations and provide Ramco Industries with a cost advantage on its competitors due to such optimization upstream.