The Rise and Fall of The 'Keiretsus' in Japan
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Case Details:
Case Code : ECON012
Case Length : 14 Pages
Period : 1980 - 2003
Pub Date : 2004
Teaching Note :Not Available
Organization : -
Industry : Microfinance
Countries : Japan
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ECON012) click on the button below, and select the case from the list of available cases:
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"The keiretsu structure and the close relations prevailing between Japanese
industry and government minimize the risk of investment for Japanese
executives to a level far below that faced by their American counterparts."
-Kenichi Ohmae in 1990.1
"The Nissan merger masterminded by Renault is a clear reflection of the
weaknesses in the Japanese management system, which not so long ago had been
revered by western business gurus"
-OECD Observer in 2000.2
Introduction
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Keiretsu refers to the framework of relationships
among Japanese companies that was organized around a common bank for
their mutual benefit after the World War II.
The Keiretsu structures cooperated with and received strong support from
the Japanese government. In the late 1980s, Keiretsus contributed 17% of
the total sales and 18% of the total net profits of all Japanese
businesses. The Keiretsus employed five percent of Japan's work force.3
According to the Japan Fair Trade Commission, in 1992, almost 20% of
Japan's capital was held by the big six Keiretsus and their
subsidiaries.4 |
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There were wide ranging business links between small and
medium-sized manufacturing firms in Japan and the Keiretsus, which meant that
the Keiretsu structure left its imprint at all levels of the Japanese economy.
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The Keiretsu structure helped the companies
affiliated to a Keiretsu to maintain long-term business relationships
with their partners. The long-term relationship between different
companies helped each of them to share resources and increase their
competitiveness especially in the export market, which provided the
revenues that helped the Japanese economy to grow during the post-World
War II period.
The companies affiliated to a particular Keiretsu always had each
others' long term interests in mind when they undertook any activity,
and each of them derived great advantages through this relationship.
Each company owned equity in the other member companies of a Keiretsu. |
The Rise and Fall of The 'Keiretsus' in Japan
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