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Keiretsu
(redirected from Keiretsu system)

   Also found in: Encyclopedia, Wikipedia, Hutchinson 0.04 sec.
Keiretsu
A Japanese term describing a loose conglomeration of firms sharing one or more common denominators. The companies don't necessarily need to own equity in each other.

Notes:
This term has been in the news every now and then, especially when they talk about Silicon Valley. One example would be the close relationship between AOL and Sun Micro. The two firms don't have ownership in each other, but they work closely on various projects.


Keiretsu
A network of Japanese companies organized around a major bank. The term is also used outside of Japan to describe how a large corporation with many subsidiaries and associated firms can manipulate revenues. For example, firm A and B are controlled by firm C. Firm A is forced to buy its input from firm B at a high price. As a result, A is unprofitable and B is very profitable.

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While the pyramidal tier structure has long dominated the relationship between carmakers and parts suppliers throughout the world, the keiretsu system kept Japanese suppliers especially bound to OEMs because of cross shareholdings.
One of the biggest converts to openness is Mitsubishi--once the symbol of the secretive keiretsu system in which affiliated groups operate in an accounting fog.
The keiretsu system (wherein large Japanese companies own a percentage of their top suppliers) has been used for many years in Japan.
 
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