Multinational Business in Japan and South East Asia: Keiretsu inter-firm structure

Résumé du document

The keiretsu structure played a major role in the emergence of Japan as a leading global economic power after the World War II. But today, keiretsu structure has become an issue in debates concerning Japan's place in the international trading system. The keiretsu structure protected the companies from the vagaries of the market and helped them to grow. On the other hand, those companies had a less proactive approach in confronting the changes in the environment, and did not react on time. The purpose of this essay is to explain the keiretsu inter-firm structure which raised the Japanese economy, and to understand the decline of keiretsu and its position today. Keiretsu is written with two Chinese characters: "kei? meaning "system" and "retsu? meaning "line". In other words, it can be best defined as the framework of relationships that links banks, manufacturers, suppliers, and distributors. Also, the keiretsu structure cooperates with the Japanese government. Two forms of keiretsus are distinguished: financial or horizontal keiretsus known as the "Big Six", and vertical keiretsu which are suppliers or assembly firms such as Toyota and Matsushita. To understand the topic, we should underline historical and economical facts.

Extraits

[...] This has also led to a growing corporate acquisition industry in Japan, as companies are no longer hold up by their banks as they were before. They even started to associate with foreign companies in order to face competition. While the keiretsu still exist, they are not as centralized or integrated as they were before the 1990s. Consequences of the decline At the beginning of the 21st century, the very strengths of the keiretsu system that struck terror in American boardrooms are now huge liabilities. [...]

[...] Multinational Business in Japan and South East Asia: Keiretsu inter-firm structure I Introduction The keiretsus played a major role in the emergence of Japan as a leading global economic power after the World War II. But today, keiretsus have become an issue in debates concerning the Japan's place in the international trading system. The keiretsu structure protected the companies from the vagaries of the market and helped them to grow. On the other hand, those companies had a less proactive approach confronting to the changes in the environment, and did not react on time. [...]

[...] Horizontal keiretsu refers normally to trade or manufacturing companies. They are headed by major Japanese banks and include the "Big Six": Mutsui, Mitsubishi, Sumitomo and Fuyo evolved from the pre-war Zaibatsu; the other two are Sanwa and Daiichi Kangyo. Those keiretsus are linked by interlocking shareholdings, a common main bank, a General Trading Company supply relationships and participation in executive gatherings called shachokai.[6] According to the Japan Fair Trade Commission in 1992, almost 20% of Japan's capital was held by the and their subsidiaries. [...]

[...] Japan began its first phase of industrial development at that period, through the export of primary products and export of light industrial goods. During the World War Japan stayed neutral and that helped the zaibutsus grow. But in the late 1940s, the Allies dismantled the zaibatsu in order to penetrate the country.[3] The establishment of Ministry of International Trade and Industry (MITI) permitted to restore zaibatsus in a new form: the keiretsu.[4] The companies formed from the dismantling of the zaibatsu re-interlinked, the government encouraged shareholdings and close buyer-supplier relationships in order to form integrated alliances across many industries. [...]

[...] The capital market expanded and slowly, the financial advantage that keiretsu provided to its members start to diminish. The Japanese recession in the 1990s had profound effects on the keiretsu. The stock market meltdown, many of the largest banks were hit hard by bad loan portfolios and forced to merge or go out of business. Assistance from the government was not enough to revive them. This had the effect of blurring the lines between the keiretsu: Sumitomo Bank and Mitsui Bank, for instance, became Sumitomo Mitsui Banking Corporation in 2001. [...]