The structure of major companies in Japan, known as keiretsu, is steeped in tradiꦺtion and relationships. A keiretsu is an interdependent group of companies, each with its own banking partner, manufacturers, distributors, and supply chain partners.

The roots of the keiretsu organizational structure can be traced as far back as the 1600s and well into the Industrial Revolution in the 19th century. However, it wasn't until after World War II that the keiretsu model became the dominant partnership network that drove modern Japanese business.

The Zaibatsus

Japan's corporate governance system dates back to the 1600s. It began as small, family-owned enterprises formed in various prefectures across Japa꧒n, each specializing in a distinct industry♋.

As the world entered the 澳洲幸运5官方开奖结果体彩网:Industrial Revolution, zaibatsu evolved into larger and more powerful 澳洲幸运5官方开奖结果体彩网:holding companies. Zaibatsu translates to English as "monopoly."

Post World War II Breakup

When൲ the U.S. occupied Japan and rewrote the Japanese constitution after World War II, it eliminated zaibatsu holding companies and the Japanese governmental pol💮icies that permitted them to operate.

The rationale for their breakup centered on the monopolistic, undemocratic nature of zaibatsus. The holding companies were accused of buying politicians in exchange for contracts, exploiting the poor in their pricing mechanisms, and creating dysfunctional 澳洲幸运5官方开奖结果体彩网:capital markets, all to perpetuate their own existence.

Japanese companies needed a new organizational structure. They reorganized as keiretsus, which translates to "lineage" or "grouping of enterprises" in English. Management would structure their companies with either a 澳洲幸运5官方开奖结果体彩网:horizontal or 澳洲幸运5官方开奖结果体彩网:vertical integration model.

Under a zaibatsu, the largest industrial groups allowed banks and trading companies to be the most powerful aspects of each of the cartels and sit at the top of the 澳洲幸运5官方开奖结果体彩网:organizational chart. These banks and t𝓰rading companies controlled all financial operations and the distribution of goods.

In their early years, the original founding families were in full control of all operations.

The Modern Keiretsu Model

Modern Japanese corporations still have banks and trading companies at the top of their organizations. However, 澳洲幸运5官方开奖结果体彩网:shareholders have r✅eplaced the f🌸amilies that once controlled the cartels.

Despite the horizontal model, vertical integration is still a part of the structure. All of Japan's six car companies belong to one of the big six keiretsus, as do all of Japan's major electronics companies.

Horizontal Keiretsus

Mitsubishi is a typical Japanese horizontal keiretsu. At t🦄he top🅰 sits the Bank of Tokyo-Mitsubishi with Mitsubishi Motors and Mitsubishi Trust and Banking making up the core group.

Providing insurance toღ everyone is the Meiji Mutual Life Insurance Company while the trading company for the Mitsubishi keiretsu is Mitsubishi Shoji.

The company's purpose is to facilitate the global distribution of goods. They may seek new markets for keiretsu companies, help incorporate keiretsu companies in other nations, and sign contracts with other companies around the world to supply 澳洲幸运5官方开奖结果体彩网:commodities that are used in Japanese industry.

As you've no doubt noticed, many companies within this keiretsu have "Mitsubishi" as part of their name.

Modern Vertical Keiretsus

Vertical keiretsus are a group of companies within a horizo🌟ntal keiretsu. Automobile giant Toyota is one such company.

Toyota's success is dependent on suppliers and manufacturers for parts; employees for production; real estate for dealerships; steel, plastics, and electronics suppliers for cars, and 澳洲幸运5官方开奖结果体彩网:wholesalers.

All of the ancillary companies needed to provide these needs operate within the vertical keir♛etsu of Toyota but are members of the larger horizontal keiretsu, although they sit much lower on the organizational 🐬chart.

Without Toyota as the anchor company, these companies might not have a purpose for their existence. Toyota exists as a major keiretsu member because of its history and its relationships with major horizontal members dating back to the 19th-century silk export business.

Keiretsus and Interlocking Relationships

Banks regularly owned a small percentage of their keiretsu members' stock, and members owned a portion of the bank's stock. This formed an interlocking relationship, especially if the member company borrowed from the horizontal member bank. Interlocking relationships allowed the bank to monitor borrowings, strengthen relationships, monitor customers, and help with problems such as supplier networks.

This arrangement limited competition within the keiretsu and prevented company 澳洲幸运5官方开奖结果体彩网:takeovers by outsiders of the keiretsu. These early arrangements would later lead to the supply of workers by keiretsu firms and a 澳洲幸运5官方开奖结果体彩网:board of directors that would come directly from the keiretsu. All businesses involved need to ensure business sustainability within the keiretsu. But while some may see the success of keiretsu, others see problems.

The Pros and Cons of Keiretsus

Th๊e limited competition within the keiretsu may lead to inefficient pra෴ctices.

Because a keiretsu company knows it can readily access capital, it could easily take on too much debt and overly risky strategies. On the other hand, the reduction of costs due to dealing with intra-keiretsu firms can increase efficiency within the 澳洲幸运5官方开奖结果体彩网:supply chain.

The automobile keiretsus' invention of the 澳洲幸运5官方开奖结果体彩网:just-in-time inventory system, which has been adopted globally, is a prime example.🐠

Information sharing within the keiretsu is another argument for increased efficiency. Information is shared among customers, suppliers, and employees. This leads to quicker investment decisions and a better-informed community. However, critics argue that keiretsus, due to their size and complexity, are slow to adjust to market changes.

Japan's Troubled 1990s

The economic crisis that hit Japan in the laꩲte 1990s forced some of its companies to compete for price and quality by♏ using market-based systems instead of keiretsu relational arrangements.

In fact, they had to look outside the keiretsu to obtain financing. With the major horizontal banks reporting profit losses. Japanese companies sought financing outside the keiretsu and began drawing on the bond and 澳洲幸运5官方开奖结果体彩网:commercial paper markets.

The Bottom Line

For the first time in recent Japanese history, Japanese keiretsus found t🔜heir first crack in the 1990s, resulting in a lo🙈osening of traditional standards.

澳洲幸运5官方开奖结果体彩网:Globalization and technology are other aspects 🌠that have forced Japanese companies to open to competition by identifying new customers, increasing the efficiency of orders, and researching new markets.

The ᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚmajor question that remains: Is this a permanent solution, or will the keiretsu evolve into another new e🐓ntity—much as the zaibatsus morphed into keiretsus in the mid-20th century?