Keiretsu

In: Business and Management

Submitted By ksenialt1990
Words 6330
Pages 26
Keiretsu
Translated literally, it means headless combine
Keiretsu is a Japanese word which, translated literally, means headless combine. It is the name given to a form of corporate structure in which a number of organisations link together, usually by taking small stakes in each other and usually as a result of having a close business relationship, often as suppliers to each other. The structure, frequently likened to a spider's web, was much admired in the 1990s as a way to defuse the traditionally adversarial relationship between buyer and supplier. If you own a bit of your supplier, reinforced sometimes by your supplier owning a bit of you, the theory says that you are more likely to reach a way of working that is of mutual benefit to you both than if your relationship is at arm's length.
American trade officials, however, disliked Japan's keiretsu because they saw them as a restraint of trade. Jeffrey Garten, once under-secretary of commerce in charge of international trade and then dean of Yale School of Management, said that a keiretsu restrains trade “because there is a very strong preference to do business only with someone in that family”.
Despite its government's disapproval, corporate America liked the idea. Jeffrey Dyer wrote in Harvard Business Review in 1996 that Chrysler had created “an American keiretsu”. The company's relationship with its suppliers, which were reduced in number from 2,500 in 1989 to 1,140 in 1996, had improved to such an extent, claimed Dyer, that “the two sides now strive together to find ways to lower the costs of making cars and to share the savings”.
Related items * Idea: InnovationOct 15th 2009
Related topics * Harvard Business Review * United States * Asia * East Asia * Japan
At about the same time Richard Branson, founder of the UK's Virgin group, wrote in The Economist: “At the centre of our…...

Similar Documents

Koito

...The Japanese corporate governance system differs vastly from the US system. Discuss corporate governance issues that may arise under the Japanese Keiretsu system from the perspective of a).financiers, b). Owners, c). Suppliers, d). Employees. Corporate Governance System in Japan (1) Definition of Corporate Governance Corporate governance deals with the agency problem: the separation of management and finance. This basic agency problem suggests a possible definition of corporate governance as addressing both an adverse selection and a moral hazard problem. The traditional definition of corporate governance was such a narrow view as Shleifer and Vishny (1997) mentioned that the ways in which the suppliers of finance to corporations assure themselves of getting a return on their investment. Recent trend, however, express doubts on the definition that solely focuses on shareholder value. EPA (1998) shows the constituents of corporate governance as follows: Table 1: Constituents of corporate governance Stakeholders | Interest | Desired Management | Shareholders | Maximize profitsAsset protection | Profitable managementSound management | Investors | Efficient investment | Exploitation of profitable investment | Creditors | Protection of receivables | Sound management | Main bank | Corporate growth | Sound managementPursuit of productivity growth | Employees | Pay raiseSecure employment RelationshipPromotion | Profitable managementSound......

Words: 1839 - Pages: 8

A. Analyze Whether a Keiretsu Network, a Virtual Company, a Vertical Integration, or a Different Supply Chain Strategy Should Be Adopted.

...Task 3 A. Analyze whether a Keiretsu network, a virtual company, a vertical integration, or a different supply chain strategy should be adopted. Identifying a strategy is the first step in a supply chain management strategy so that is where we start. There are many options when selecting a strategy that will work best for our market and each strategy has advantages as well as disadvantages. No matter what type of strategy we chose we will face the same main question of if we should make the parts for our product or buy them. By choosing to make them we would chose a vertical integration strategy where we buy the suppliers and take over the management of more or perhaps all of the supply chain. This strategy could lower our cost of each product but we would take on more risk in owning the additional infrastructure as well as losing flexibility in changing the product by changing suppliers. In my opinion we would only want to use this strategy if we could not find suitable suppliers that we could be assured could meet our desired quantities and quality. Another option would be a sort of hybrid called a Keiretsu network where we would help fund our suppliers or work very closely with them and in turn be part of a network that is interdependent and works together to achieve the best result for all. This seems like a clear winner but again depending on the level of commitment to the suppliers we lose flexibility and take on added risks if the supplier fails. In turn...

Words: 4103 - Pages: 17

Christianity

...their persistent B. of P surplus (this is only addressed indirectly). Example 3 The question: 4. Analyse the importance of the part played by the Distribution System in preventing import penetration in the Japanese economy. A student conclusion It is true that the distribution system is very complicated in Japan and has lots of levels which are unnecessary and it does deter not necessarily prevent foreign companies exporting into Japan. The main problem is of course the strong Keiretsu links and the Japanese culture which is built in to the Japanese distribution system also prevents companies which aren’t ‘Japanese thinking’ from entering the market. These distributors also tend to belong to trade associations that exclude foreign imports NB The student’s essay covered the following topics: the complexity of the distribution system the effect the large number of different levels has on would-be importers the effects of distribution Keiretsu the influence of Japanese culture and the role played by trade associations. Comment Not bad, does summarise most of the preceding arguments, however, does not refer directly back to the question asked - i.e. should have ended up with some kind of statement of the ‘importance’ of the distribution system. It is also very poor writing style to just leave the paragraph hanging in the air like that. Example 4 The assignment task: ‘Many attempts to explain Japan’s economic......

Words: 1105 - Pages: 5

Wgu Supply Chain Task 2

...support, the adoption of one of the following strategies by the power tool company: a Keiretsu network, a virtual company, a vertical integration, or a different supply chain strategy. An efficient supply chain is fundamental to the success of any organization. The expense of the supply chain is usually an organizations largest cost therefore implementing a strategy that effectively minimizes costs while maintaining product quality is an effective way to increase profits. The best way to minimize costs and maximize product quality is to adopt a lean operations strategy that includes just in time (JIT) initiatives. Central to the JIT technique is continuous problem solving. JIT requires that items and materials are ordered only when needed minimizing inventory. When inventory is minimized wasted costs in layout, quality, and procurement are easily spotted and immediately dealt with. With JIT very few suppliers are chosen creating large commitments to the organization. The suppliers should also use JIT and offer their expertise in design and quality control to the supply chain. Since the owners of the power tool company are willing to own or invest in any component of the supply chain I would recommend they initiate a Keiretsu. A Keiretsu is a company coalition which includes few key suppliers and secondary suppliers. The power tool company would support key members of the Keiretsu through ownership or loans. The suppliers are assured stability and a long term......

Words: 2877 - Pages: 12

Honda Motor Company Ltd.

...The “keiretsu” system in Japan has been described as having advantages and disadvantages. Does Honda have a keiretsu (answer: no, not really)? What are advantages of a keiretsu? Discuss the case of Nissan: their keiretsu is breaking up under ownership of France’s Renault. What do you think this means for Japanese buyer-supplier relationships in the automotive industry? Keiretsu is a type of business group in Japan and is a set of companies with interlocking business relationships and shareholdings. Honda’s keiretsu differs from others in Japan because there is legitimate competition. Advantages of keiretsu: * The mutual stockholding among the group members improves their stability. * Helps transfer technology * Organization of overall business procedures * Internal financial market functions * Evidence of continuous improvement and environmental activities * Machine efficiency – for example if a manufacturer has older machinery in use, they will need to invest in new equipment in order to manufacture to the standards of quality required by Honda of its suppliers * To stop crisis and struggle with foreign competitors. * Fast action to information is crucial to modern business. A keiretsu provides fast access to daily updated information for their companies. The possession of relevant information gives a keiretsu a big advantage over its competitors. * Longer-term agreements between group’s companies. Disadvantages of......

Words: 1610 - Pages: 7

Jct Task 3

...discuss ways to make this business run smoothly and make us money. A. Recommend the adoption of a business strategy: a. Keiretsu Network. B. Discuss metrics for measuring performance of the supply chain. C. Discuss three issues that could complicate the development of an efficient integrated supply chain. b. Local optimization c. Large lots d. Bullwhip effect D. Recommend two tactics or methods which are opportunities for effective management in an integrated supply chain. E. Explain the actions that should be taken to mitigate one clearly identified possible risk for each of the following areas. e. Process f. Control g. Environmental F. Recommend a hierarchical functional organizational structure. h. Discuss what departments might be included in the operations function of the company. G. Discuss strategic operations management discussions related to three concepts that would support the implementation of the company’s mission and strategy i. Quality j. Location k. Maintenance H. Recommend actions to improve cost effectiveness for each of the following. l. Manufacturing facility m. Supply Chain A. When we started to looking at a business strategy for JB Power Tools, we looked at a few different options. These options were a Keiretsu network, a virtual company, and a vertical integration. A virtual company strategy is a company that uses computer and......

Words: 3089 - Pages: 13

Keiretsu

...Maruti dominated the Indian passenger car industry from the very first year and still does so. The company has never seen a 2nd spot in its entire age even after the industry was flooded by Japanese, US and German automobile giants. The company understood the uncertainties and environmental forces surrounding the business operations and acted proactively to keep itself stable. MSIL huge amount of part localization1 and has been the de facto for its success in this competition intense market. Also the MSIL core operations are very much dependent on raw material and intermediate products (70 % of turnover) which create a lot of uncertainty regarding the resources. In this uncertain environment, Maruti has adopted different strategies in line with resource dependence Theory2. In the following few paragraphs we will discuss some Inter-organizational strategies used by MSIL for managing resource dependencies (Figure 1.1). These strategies are formal as well as informal. Figure 1.1 Explains strategies of resource dependence theory and their sub strategies. Resource Dependence Strategies :- 1. Reputation: Maruti, s esteemed reputation has always helped it to be in the good books of its vendors, suppliers and customers. Maruti has done this by timely payment of bills, equitable profit sharing, sustainable growth and high quality service. This informal method had helped and will help MSIL to retain its Number 1 Spot. 2. Co-optation: Maruti in the recent years have......

Words: 308 - Pages: 2

Adfsadf

...So as you can see Japanese keiretsu and Korean Chaebols are deeply embedded in both countries' industrial organization and the business system. For my part, I'm going to talk about do these institutions still exist in a meaningful way. So first, start with Japanese keiretsu, there are two types of groups which are horizontal and vertical. As Janet mentioned earlier before. Horizontal keiretsu is a business network, composed of entities and industries, normally centred around a bank and trading companies. So when we look into today's horizontal keiretsu model, their purpose is strictly distribution of goods around the world, which helps incorporate keiretsu companies in other nations; and sign contracts with other companies to supply commodities used for Japanese industry. This shows that group can generate "smooth performances" with stronger firms serving to assist weaker firms. Moreover, close relationships with banks and other group such as insurance companies provide the firms with ready access to financing and reduce the need to carry reserves of long-term debt or liquidity. This closely connected set of financial stakeholders also open the firms to wide-ranging scrutiny, which reduces risk for creditors, network shareholders, and transaction partners. While a vertical keiretsu are composed of a major industrial corporation and its suppliers in a particular industry. The benefits on this vertical group membership is that they provides suppliers with a......

Words: 585 - Pages: 3

Koito Manufacturing, Ltd.

...10216081 Question 1 Many economists argue that the keiretsu system has been a formidable impediment to the entry of Western companies into the Japanese market. However, the absence of liberal market competition may preclude Japanese firms from implementing more cost-effective sourcing strategies at the global standard. Furthermore, it is often argued that the keiretsu system has been partly responsible for the decade-long recession: while there was need for quick changes, the negative features of the keiretsu form of governance maintained the economic slump. The interdependence of suppliers, unproductive cost management and top-down decision making based upon continuity and consensus all contributed to the decade-long recession. We will now discuss the corporate governance issues that may arise, seen from different perspectives. a) From the perspective of financiers. Financiers are always looking for the best investment possibilities. The keiretsu system can make it difficult for (individual) financiers to invest in the best possible option. This is because of the fact that a keiretsu will not allow foreign or alien companies into their system. On the other hand, when the leading company of the keiretsu needs money, financiers can more or less be obliged to invest: the money is invested in a bad project and possible profits are lost (Kawai, 2009). b) From the perspective of owners. One of the key features of the keiretsu system is member cross-ownership. These owners are......

Words: 3660 - Pages: 15

Business

...company. You want to form a keiretsu. What would be the advantages and disadvantages of the keiretsu, and what kinds of enterprises would belong to your keiretsu? Keiretsu is a Japanese term to describe suppliers who become part of a company coalition (Heizer & Render). This technique has been implemented successfully by many large Japanese manufacturers as a form of vertical integration (Heizer & Render). Essentially forming long term partnerships with their suppliers. This supply chain strategy emphasizes vertical integration, which is defined as “developing the ability to produce goods or services previously purchased or actually buying a supplier or distributor” (Heizer & Render). In a software development company, this can be quite advantageous. Instead of developing the software and then paying another company to transcribe the software to a CD, the company itself could have a long-term agreement with the CD Company to do business with them. Doing this allows the software company to know its manufacturer more intimately and build a relationship that is based on an expectation of quality. There could be some disadvantages to this agreement though. The participating companies may get lazy and start supplying an inferior product, which could cause lost business from the consumer finding a better quality option. The forming of the keiretsu would hopefully prevent this from happening, but it is still a possibility. Forming a keiretsu could be......

Words: 1978 - Pages: 8

With Reagard to the Rise and Rise of Virgin Conglomerate!.!.!

...Contents ACKNOWLEDGEMENT ……………………….. ……………………… EXECUTIVE SUMMARY ………………………………………………. 1. PROBLEM STATEMENTS 1.1 How did they do it????...................................................... 1.2 How does being a decentralized organization affect the well-being of employees…………………………………………….. 1.3 Keiretsu………………………………………………….. 2. REVIEW OF LITERATURE 3.1 Structural design of organizations………………………. 2.1.1 Define a hybrid structure ……………….……… 2.2 Placing a substitute value on a brand name- Brand Franchising 2.3 Differenciate between a Transactional and a Transformational leader 2.4 Assets and Liabilities 2.5 Distribution of empowerment – Decentralization 2.6 Interlockig business partnerships 3. ALTERNATIVES 4.2 Design, structure and practices of Virgin………………… 3.1.1 A heirarchy with no rigid control, freedom to authorize 3.1.2 Types of departmentalization 3.1.2.1 Customer based……………………… 3.1.2.2 Location based………………………. 3.1.2.3 Product based………………………... 3.2 Define a leader with vision, openness and relentless thinking capacity 3.3 Encourage, welcome, embrace, discuss and let know 3.4 A store/ IDEA BANK that works as a reception for novelty. 3.5 Nullify the threat of losing market share, cooperate with many buyers or suppliers 4. IMPLEMENTATION 5. CONCLUSION 6. REFERENCES ACKNOWLEDGEMENTS I have taken effort into the......

Words: 2631 - Pages: 11

Nec Case

...Keiretsu Membership, Firm Size, and Corporate Returns on Value and Cost∗ Xueping Wu† , Piet Sercu‡ and Charles Chen§ First draft: November 1998; this version: October 2000 ∗ Jun Yao and Shu-Chuen Chong provided helpful research assistance. The authors thank Kathryn Dewenter, Amar Gande, Larry Goldberg, Ser-Huang Poon, Kazunori Suzuki, and other participants at the 1999 WFA and 2000 EFA Conferences and workshops at HKUST, K.U.Leuven, and Strathclyde; and Yasushi Hamao, Nancy Huyghebaert, Shuhe Li, Xijia Su, Linda Van de Gucht, and Cynthia Van Hulle for useful discussions or comments that have substantially improved content as well as presentation. All remaining errors are the authors’. † City University of Hong Kong, Department of Economics and Finance, Tat Chee Avenue, Kowloon, Hong Kong. Tel: (852) 2788 7577; Fax: (852) 2788 8806; email: efxpwu@cityu.edu.hk. ‡ (Corresponding author) KU Leuven, Graduate School of Business Studies, Naamsestraat 69, B3000 Leuven; Tel: +32 16 32 6756; Fax: +32 16 32 6620; email: piet.sercu@econ.kuleuven.ac.be. § Department of Accountancy, City University of Hong Kong; Tel: (852) 2788 7909; Fax: (852) 2788 7002; email: accpj@cityu.edu.hk. Abstract We test how keiretsu membership affects the Fama and French (1999) required IRR on value (or cost of capital) and the IRR on cost (or return on investment), 1974-95, of all listed non-financials in Japan. Rather than computing point estimates from aggregate data,......

Words: 19106 - Pages: 77

Governance

...Koito Case Study Submitted by Weichao on March 12, 2011 Category: Business and Economics Words: 7841 | Pages: 32 Views: 160 Report this Essay 1. The Japanese corporate governance system differs vastly from the US system. Discuss corporate governance issues that may arise under the Japanese keiretsu system from the perspective of a) financiers b) owners c) suppliers and d) employees. A Japanese keiretsu is effectively a system of cooperation among various stakeholders. From the Japanese point of view, corporate governance includes maximization of long-term corporate value for shareholders and accountability to all the stakeholders, particularly shareholders (Corporate Governance Committee of Japan 1997). This model appears more attractive than the Anglo-Saxon corporate governance model since it takes social benefits into account. However, it must be noticed that the workability of this model relies on a flawless functioning of the market economy, which is not always the case in Japan (ibid). The later paragraphs will discuss in detail the corporate governance issues related to the Japanese keiretsu system in relation with financiers, owners, suppliers and employees. a) Financiers As shown in Exhibit 8 – Ownership Structure of Major Japanese Automotive Assemblers (1989), banks in Japan usually hold a substantial portion of equity in borrowing companies. The Japanese model is often perceived as efficient since it encourages information flow between firms and their......

Words: 7863 - Pages: 32

Keiretsu Network Strategy

...After reviewing all of the requirements of Investor Group A as well as multiple supply chain strategies it is recommended that a Keiretsu network is implemented. By employing the Keiretsu network strategy the group of investors not only owns the production facility but also have the opportunity to invest in and/or own suppliers to ensure the lowest costs. The Keiretsu network is the best choice for Investor group A because it is part collaboration part purchasing from a few suppliers and part vertical integration. It combines the benefits of using few suppliers such as suppliers having a large commitment to the buyer and more likely to have a better understanding of the broad objectives of the manufacturer and the end consumer. The Keiretsu network provides an assured price structure, predictable inventory and delivery schedules as well as clear quality and performance standards. A stable environment such as this close cooperation between the supplier and the manufacturer can lead to quality improvements, continual product development and reductions in cost. As stated before vertical integration is a component of the keiretsu network, with vertical integration the manufacturer has the ability to produce supplies that were previously purchased or to actually buy a supplier. Advantages of this would be inventory reduction and scheduling, cost reductions, and adherence to quality standards. The strategy of using many suppliers and playing them against one another is a......

Words: 2205 - Pages: 9

Bankruptcy Prediction the Case of Japanese

...investigates if bankruptcy of Japanese listed companies can be predicted using data from 1992 to 2005. We find that the traditional measures, such as Altman’s (J Finance 23:589–609, 1968) Z-score, Ohlson’s (J Accounting Res 18:109–131, 1980) O-score and the option pricing theory-based distance-todefault, previously developed for the U.S. market, are also individually useful for the Japanese market. Moreover, the predictive power is substantially enhanced when these measures are combined. Based on the unique Japanese institutional features of main banks and business groups (known as Keiretsu), we construct a new measure that incorporates bank dependence and Keiretsu dependence. The new measure further improves the ability to predict bankruptcy of Japanese listed companies. Keywords Bankruptcy risk measure Á Accounting information Á Option pricing theory Á Japanese listed companies Á Bank dependence Á Keiretsu JEL Classifications G15 Á G33 1 Introduction When a company falls into bankruptcy, its stakeholders lose some or all the value they invested in the company. From an investor’s point of view, it is important to M. Xu (&) School of Accounting and Finance, The Hong Kong Polytechnic University, Kowloon, Hong Kong, China e-mail: afxuming@inet.polyu.edu.hk C. Zhang Department of Finance, The Hong Kong University of Science and Technology, Kowloon, Hong Kong, China 123 Bankruptcy prediction 535 assess a firm’s likelihood of bankruptcy so that the bankruptcy risk......

Words: 13066 - Pages: 53

Dolph Lundgren | Spanish Translation | Télécharger I Feel Good Film Complet Torrent Francais