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What is a Sister Company?

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  • Written By: Mary McMahon
  • Edited By: Nancy Fann-Im
  • Last Modified Date: 20 November 2016
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A sister company is a company with close affiliations to another company with a separate name and personnel. Both companies are owned by the same parent and are considered subsidiaries of the larger company. While some subsidiaries are not closely related and may have limited interactions with each other, others can have a close connection, and are examples of sister companies. It is possible for any number of companies to have this kind of relationship.

In a simple example of how sister companies work, a large corporation could have 10 subsidiaries in different industries like food, shipping, and manufacturing. The companies within each sector might be sister companies. The company could own a chain of bar and grilles under the ABC brand, and another restaurant group under the XYZ brand. The two chains might be affiliated, rather than operating entirely separately. This can attract customers loyal to one brand, encouraging them to try another because they like the services offered by the original brand.

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Each sister company has its own personnel and branding. It is accountable to the parent company but can operate largely autonomously when it comes to making purchasing decisions, designing packaging and facilities, and so forth. Companies with a sister relationship to each other can run cross-promotions, encouraging customers of one to visit the sister company as well. They are usually careful to avoid operating in competition, targeting slightly different markets or operating in different regions to provide complete coverage of a given nation or state.

Products and services offered by sister companies can vary considerably. They may offer different tiers of products and services to appeal to different kinds of customers, one way to avoid causing conflict between subsidiaries. Their sister company relationship can allow for more industry clout, as they can do things like negotiating collectively for contracts, or lobbying together for changes in industry standards and policies.

The fact that sister companies are owned by the same parent is not always immediately obvious. In some cases, the company's mission statements and informational disclosures may include a discussion of each sister company as part of a larger parent. In others, it may be necessary to dig to find out who owns the companies and to learn more about the nature of their relationship. For parent companies, there can be advantages in not branding their subsidiaries with their name, like attracting consumers who may be trying to avoid the parent company, or might be attempting to visit more independent businesses.

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john1478
Post 3

I used to work for a large food corporation. We specialized in processed and snack foods. We wanted to expand into the organic food market, so we made a company that specialized in organic food our sister company. We hoped that this business relationship would attract customers who liked eating healthy and organic foods.

We were overambitious in our attempt to make our foods more appealing to health conscious consumers. We started offering whole grain and organic versions of our original snack foods, hoping that it would encourage people to still choose these foods even though they wanted to eat healthier.

The sales of our newly revised products did really well, but we cannibalized the sales of the

new company we had acquired. By doing this, we defeated the entire purpose of our new business relationship.

I told this story to say that when dealing with sister and parent companies, it is important that these companies do not end up competing with one another for sales. The companies should instead be complements of each other.

Testy
Post 2

@Farah1 - I understand where you are coming from, but I am going to have to disagree with you. I think a company has more to gain than lose when they share with the public who their sister companies are. It allows them to further expand on their resources, and their customer basis.

I think the number of people who shop at large chains far outweigh the number of people who do not. Even those people who do not like the fact that large corporations exist, still end up shopping at these stores because of their convenience and low prices.

Even if companies lose customers by becoming a sister company to a large chain, the number of customers that

they gain from this relationship will be greater. In the case where the sister company has a well known brand, which is the case most of the time, then any company that it is tied to can use this brand to attract more customers.

Thank you to the author for writing this article. I think it is very informative.

Farah1
Post 1

I think it is more beneficial for a company not to disclose its subsidiaries or sister companies than to make it widespread common knowledge. In doing so, you allow each company to establish its own name and reputation, independent from other companies it made me legally tied to.

This can be especially helpful for companies who want to attract customers who do not like shopping at large chains. For example, if company B, a midsized regional chain was in fact owned by company A, a large international chain, then customers might be turned off by this. A lot of large chains are seen as dominating monopolies by those who like to support small and medium sized businesses. As a result, company B would be seen as just another part of that monopoly.

Companies have more to potentially lose than gain when they widely display the other companies that they may be tied to.

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