A phrase that is not uncommon to hear in the business world is ‘sister company’. Perhaps you’ve heard it mentioned in an article you read online, or maybe you’ve heard it tossed around the office. Although it may sound like a confusing phrase, it’s actually much more simple then it sounds.
However, although this is common to hear, not everyone is aware of its meaning. So, what is a sister company? How does it operate? Let’s take a look.
Before we launch into sister companies let’s take a look at how they come around. A subsidiary can either be an already pre-existing corporation that a parent company acquires or a new corporation that a parent company creates to gain the attention of more consumers.
Subsidiaries are often referred to as daughter companies. Subsidiaries run as independent legal entities. Parent companies have the ability (and benefit from) both losses and gains between subsidiaries for an effort that will, ultimately, lower their overall taxable revenue.
Sister Company Definition
A sister company is defined as two or more companies that have the same parent company. Now, although they have the same parent company that isn’t to say that they operate the same or are even in the same industry.
Sister companies can have the same parent company and yet sell different products or services. Or, they are in the same industry and can be competitors.
Although they have the same parent company they run entirely on their own as separate companies. The two companies operate entirely on their own and, if they are in different industries, they don’t even acknowledge each other in the business world at all.
However, on the other hand, when they are in the same industry, there can be a rivalry. Usually, the parent company will then impose separate branding strategies to separately distinguish the two companies. This not only helps to boost both business sales but also gives them a separate marketing brand.
Although sister companies usually operate solo and appear to be entirely separate to consumers, there are rare circumstances where the sister companies may do something unexpected; join forces.
This usually means that the two, although not entirely teaming together, will perhaps join marketing desks or offer each other special offers. For instance, if one of the companies needs the other services then it’s not uncommon for it to offer its products at a discount to the other company.
Examples of Sister Companies
Sister companies aren’t always as obvious as you may think. The world is filled with famous businesses that are sister companies and you may never have even known that they were connected. From the outside, these brands look entirely separate and many people would never even guess that they’re connected.
Here are a couple of examples of sister companies.
The Volkswagon Group
The Volkswagon group consists of twelve different brands from seven European countries. Now, all of these brands are entirely different and independent. They have different characters and operate entirely separate from the others. But they do all have one thing in common; they’re sister companies.
Gap stores are spread across the nation and well known to thousands of citizens. But few know that Gap.inc happens to be the parent company to many other businesses out there. Ever heard of Old Navy? How about Banana Republic? Gap.inc is the parent company to both of those, along with many other popular retail chains. All of these companies have developed their marketing niche and appear to not be connected at all from the outside.