What is a subsidiary in the context of business?

A subsidiary refers to a company that is controlled by another company, known as the parent company. In the context of business, a subsidiary often operates in a different location or country, which allows the parent company to expand its reach and tap into new markets. This structure facilitates global operations, enabling the parent corporation to leverage local knowledge and resources while maintaining overall control.

The relationship between the subsidiary and parent company often involves the parent owning a majority stake in the subsidiary, allowing it to dictate strategic decisions, policies, and practices. Consequently, the subsidiary is not independent and is typically bound by the parent company's objectives while also benefiting from its resources.

Understanding this relationship helps clarify the nature of international business operations and the strategic decisions involved in establishing such entities.