The Rise and Fall of The 'Keiretsus' in Japan
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Case Code: ECON012 Case Length: 14 Pages Period: 1980 - 2003 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.400 Organization : Keiretsus Industry : Microfinance Countries : Japan Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Structure of the 'Keiretsu'
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...
Advantage 'Keiretsu'
Out of the six major Keiretsus that emerged post World War II, four were the erstwhile 'Big Four' Zaibatsus, viz. Mitsui, Mitsubishi, Sumitomo, and Fuyo (formerly Yasuda), and the other two were the Dai-Ichi Kangyo group and the Sanwa group. In 1990, 182 companies which were leaders in the fields of banking, insurance, electronics and telecom were affiliated to one Keiretsu group or other. The large firms subcontracted work to small and medium sized enterprises in Japan. Small-to-medium sized enterprises (SMEs) employed about 80 percent of the total labor force in Japan in 1990...
The Decline of the 'Keiretsu'
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...
Exhibits
Exhibit I: The Big Six Keiretsus
Exhibit II: Cross-Shareholding of Keiretsus (%)
Exhibit III: Reciprocal Shareholding of Mitsubishi Bank (1974)
Exhibit IV: Intragroup Business Relationship In Keiretsu (%)
Exhibit V: Spread of a Keiretsu through Various Industries
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