Explanation:
Establishing a foreign subsidiary allows a parent company to expand its operations internationally, offering a presence in local markets. However, it involves navigating complex legal and regulatory requirements in the host country.
Practical Example of a Foreign Subsidiary:
A U.S.-based tech firm establishes a subsidiary in India to tap into the local market and take advantage of the skilled workforce. The Indian subsidiary operates under Indian laws, though it is owned by the U.S. parent company.
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