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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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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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


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

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.

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 - Next Page>>

1] "Can a Keiretsu work in America?" Harvard Business Review, September-October 1990.

2] Risaburo Nezu, "Carlos Ghosn: cost controller or Keiretsu killer?", April 2000.

3] Marie Anchordoguy, "A Brief History of Japan's Keiretsu," Harvard Business Review, July/August 1990.

4] Diane L. Manifold, "The Keiretsu in Japan's Economy," Chemtech, 1997.1


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