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• Since the parent company on its own looks after the entire operations of foreign subsidiary, it is
not required to disclose its technology or trade secrets to others.

Limitations

The limitations of setting up a wholly owned subsidiary abroad include:
• The parent company has to make 100 per cent equity investments in the foreign subsidiaries.
This form of international business is, therefore, not suitable for small and medium size firms
which do not have enough funds with them to invest abroad.
• Since the parent company owns 100 per cent equity in the foreign company, it alone has to bear
the entire losses resulting from failure of its foreign operations.
• Some countries are averse to setting up of 100 per cent wholly owned subsidiaries by
foreigners in their countries. This form of international business operations, therefore, becomes
subject to higher political risks.