The Rise and Fall of The 'Keiretsus' in Japan

The Keiretsus could be classified into Horizontal and Vertical Keiretsus. Keiretsus organized around a bank, insurance, trading or manufacturing company were referred to as horizontal Keiretsus. Horizontal Keiretsus were usually headed by major banks, which infused capital into the affiliated units according to their need. The horizontal Keiretsus included the banks referred to as the 'Big Six' - Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa and Dai-Ichi Kangyo Bank (Refer to Exhibit I). The coordinator of a horizontal Keiretsu was the bank. The bank also monitored the performance of the firms affiliated to that Keiretsu. Firms affiliated to a Keiretsu cross-held shares (known as interlocking), and occasionally exchanged personnel...

In the 1970s, Japan started exporting heavy industrial goods and importing raw materials and fuels. But the country continued to be a closed economy keeping out foreign products, foreign capital and foreign management. Non-Japanese companies began to cry foul over the exclusionary trade practices in Japan. Without access to the national distribution system, foreign companies found it difficult to make a dent in the Japanese market. For example, cross-ownership between Japanese automobile manufacturers and their dealers acted as an obstacle to the entry of foreign players...