May 2005 |
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Volume 04, Issue
1 |
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Main Feature |
What's in a name? For subsidiaries such as Jeppesen, an awful lot
Why do companies like Boeing elect to let acquired companies operate as subsidiaries? In general, subsidiary structures can provide benefits such as financial advantages and legal protection. Yet one key reason for establishing a subsidiary relationship is to retain the power of a brand. Because brands are built over time through reputation and customer experiences, they're valuable company assets. A strong, positive brand helps shape expectations of what kind of experience a customer will have when doing business with the company. It also melds public perceptions about a company and its products. Indeed, Boeing's 2000 acquisition of flight information services provider Jeppesen demonstrates why sometimes it's best to keep an acquired company's brand separate. With more than 70 years of performance, Jeppesen is seen as a leading provider of aeronautical information. Jeppesen President Mark Van Tine said Jeppesen has customers in all segments of aviation, and they operate virtually every kind of airplane flying. Jeppesen brand recognition spans the airline industry, business and general aviation, and the military as well. Putting the Boeing logo on flight navigational aids used by operators of other models could hurt the power of both companies' brands. In other words: Hypothetically, would the operator of an Airbus airplane be keen on using Boeing-branded items? "Because of this, the neutral position we maintain as a subsidiary maximizes the value we bring to The Boeing Company," Van Tine said. Other reasons companies in all industries may decide to keep an acquired firm as a subsidiary include
—Debby Arkell
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