11 Chapter II Literature Review II.1 Theoretical Foundation Parenting Theory Based on Goold et all (1998), to pull the judgments about fit together and rank a company’s business, it helps to summarize the assessments into a matrix. (see the graph “Parenting-Fit Matrix) Figure II.1.1 Parenting-Fit Matrix The horizontal axis of the matrix evaluates how well the parent company's characteristics align with the opportunities for guiding the business, while the vertical axis gauges the extent of mismatch between the parent company's characteristics and the critical success factors of the business. Each position on the matrix carries implications for the company's overall strategy.  Heartland Business This denotes a business in the same industry as the potential child company. Opportunities exist for the parent company to improve the business because it has the necessary resources and capabilities crucial for the acquisition target's success.  Ballast Business This signifies a business in the same industry as the future child company. However, there are no chances for the parent company to contribute value to the business because the target company already possesses the required skills for its success. 12  Value Trap This refers to a business outside the industry of the future child company. Opportunities do exist for the parent company to enhance the business since it has the needed resources and capabilities in areas crucial for the acquisition target's success.  Alien Business This also relates to business outside the target industry. The parent company has limited knowledge of the internal and external factors affecting the target business. Additionally, there are no opportunities for the parent company to add value to the business since the target company already possesses the essential skills for its success. Degree of Parent Company Control over Subsidiaries Degree of control can be distinguished into two categories: domination and influence. Here are the explanations for each (Sulistiowati, 2013):  Degree of Control as Influence The parent company only influences the strategic policies of the subsidiary, allowing the subsidiary to have autonomy in managing day-to-day operations.  Degree of Control as Domination The degree of control as domination by the parent over the subsidiary is when the parent company gives instructions that must be followed by the subsidiary, leading to the entire management of the subsidiary being directed towards the interests of the group company. The subsidiary appears to lose its autonomy to manage for its own interests. In other words, the subsidiary becomes increasingly dependent or even loses its independence when the parent company dominates its management because it becomes merely an instrument or shadow of the parent company. 13 In fulfilling its role, the parent company controls and coordinates its subsidiary companies within an economic unit. The control of the parent company over its subsidiaries can be seen in several aspects where the parent company allowed to: 1. appoint members of the board of directors and/or board of commissioners in the subsidiary; 2.