The idea of sister companies and subsidiaries are terms that are often used interchangeably. But it’s important to note that while these two concepts may be similar, they are not the same. Both sister companies and subsidiaries offer strategic advantages to a business. Both allow a business to maintain control over its operations while also expanding its core business activities. It’s important to understand the key differences between them to ensure that your business is choosing the right organization type for its goals. This blog post will examine the differences between sister companies and subsidiaries and discuss the various advantages and disadvantages of each. By the end of this blog post, you will have a better understanding of the differences between sister companies and subsidiaries and be better equipped to decide which type of organization is best for your business.
What is a subsidiary?
Any company that is owned by another organization is considered a subsidiary, also known as a daughter company. For instance, a sizable staffing firm may own a number of subsidiary firms, each of which focuses on temporary staffing in a different sector. The organization that owns the subsidiaries is a parent company. Depending on the organization, a subsidiary’s independence from its parent company and other subsidiaries varies, but typically, parent organizations make most of the major business decisions in their subsidiaries.
What is a sister company?
Sister companies are various companies owned by the same parent company. For instance, if a company owns several cereal businesses, each of those businesses is a sister business to the others. Over time, a lot of big businesses buy and merge with other businesses, giving rise to a lot of sister companies.
Organizations can also establish numerous subsidiary brands to form sister companies. One manufacturer of shoes might develop two distinct brands, one for adult shoes and the other for children’s shoes. These two brands may call each other sister companies.
Sister company vs. subsidiary
The primary distinction between sister businesses and subsidiaries is how they interact with their parent company and one another. While a company can be referred to as a subsidiary if a parent organization owns it, another company can be referred to as a sister company if the same parent organization owns both entities. The following is a list of some significant variations brought about by these organizational relationships:
Independence
The degree of independence that sister companies have from one another is frequently determined by their parents’ businesses. Sister businesses may carry out all of their operations independently of one another, rely on one another for certain functions, or have similar objectives. For instance, a multinational grocery store company may own a number of grocery brands that operate entirely separately from one another. The level of independence between the sister companies may also be diminished if the same multinational organization mandates that all of its companies run the same advertising campaign or promote the same item inside of their stores.
Additionally, parent organizations frequently control the degree of independence that subsidiaries enjoy. Although subsidiaries may occasionally operate completely independently from their parent company, more frequently, parent companies manage, advise, or oversee various aspects of their subsidiaries’ operational activities. For instance, a parent company may instruct its subsidiaries regarding the products they are permitted to sell, their prices, and their marketing tactics. Alternatively, parent companies may refrain from participating in operational activities and only direct their subsidiaries to implement a specific profit margin or sell specific products.
Collaboration
Although this is not always the case, parent organizations frequently ask sister companies to work together to achieve shared organizational goals. Promoting the parent organization’s brand or attempting to uphold the same mission or values are a few examples of these shared objectives. Sister businesses may also collaborate to market the same good or service. As an illustration, two sister baking businesses might both advocate using the same cooking oil in the recipes that their parent company creates.
Although the relationship is frequently more structured, subsidiaries and their parent organizations frequently work together. The parent organization typically initiates and facilitates any collaborations because subsidiaries are entities that are a part of the parent. For instance, a parent company might ask all of its divisions to work together to support a particular charity or cause.
Competition
In some circumstances, sister businesses may compete against one another in the same industry, while in other circumstances, they may be in completely different markets. For instance, an airline conglomerate company might own a number of airlines that fly to the same destinations and compete for the same clientele. An alternative would be for a public transportation conglomerate to own both a bus and train company, preventing them from directly competing with one another.
Usually, companies with subsidiaries don’t launch goods or services that directly compete with their daughter firms, though it can happen occasionally. Although subsidiaries may engage in competition with their parent company, any profits they make belong to the parent company as well. A parent company may find itself in direct competition with its subsidiaries’ products if it launches goods or services on its own without the support of a subsidiary brand. For instance, a multinational corporation that owns a subsidiary soap company might also introduce soap under their own brand that competes with the products of their subsidiary.
Examples of sister companies and subsidiaries
In relation to a parent company, the following are two examples of sister companies and subsidiaries:
Example 1
Thomas V. A multinational company called Whittenhouse owns subsidiaries in the dog food, cat food, and exotic animal food sectors. Although each of their brands runs separately from the others, Thomas V Whittenhouse creates marketing campaigns that include all of its brands. As an illustration, they just released a commercial for Thomas V Whittenhouse as the solution for all pet food needs. Additionally, the Thomas V. No matter what subsidiary brand the animal food package bears, it always bears the Whittenhouse logo.
Example 2
Southern Charm Plates and Double Crown Cutlery are sister companies. Recently, Kitchen Blast, their parent company, requested that they work together to create a dining set that features both of their products. Based on the prices of the set’s components, they intend to divide the proceeds from the dining set proportionally between the two businesses.
Difference between parents company, subsidiary company and sister company with a simple example
FAQ
What is a sister company called?
A subsidiary, subsidiary company, or daughter company is a business that is owned or managed by another business, also known as the parent business or holding business.
What is the difference between sister company and daughter company?
Any company that is owned by another organization is considered a subsidiary, also known as a daughter company. For instance, a sizable staffing firm may own a number of subsidiary firms, each of which focuses on temporary staffing in a different sector. The organization that owns the subsidiaries is a parent company.
What is a sister company example?
Sister company relationships Sister companies may produce different products and market to different audiences, making them very different from one another. For instance, American Express, Coca-Cola, and Exxon Mobil are just a few of the many subsidiary businesses that Berkshire Hathaway is the parent company of.
Is a subsidiary the same company?
A subsidiary in the business world is a business that is a part of another business, which is typically referred to as the parent company or the holding company. Having or controlling more than half of the subsidiary company’s stock, the parent has a controlling interest in it.
