Keiretsu

(redirected from Keiretsu system)
Also found in: Dictionary, Encyclopedia.
Related to Keiretsu system: Keireitsu

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.

Keiretsu

In Japan, a number of independent but related companies centered on and financed by a single bank and/or a joint stock company. That is, the institution (and no other) provides financing for companies in the keiretsu. There are two main types of keiretsu. A horizontal keiretsu is essentially a diversified conglomerate; that is, it may have companies in several, completely unrelated industries so as to reduce the risk of loss if one industry or other has a bad year. A vertical keiretsu, on the other hand, is more centrally controlled such that companies in the same keiretsu provide all steps on the supply chain. For example, a mining company may sell a metal to a refinery in the same keiretsu, who then sells it to an auto company, who then sells cars to consumers. In Japan, these consumers are often employees of the very same keiretsu. Critics of this system contend that they are inefficient; proponents, however, argue that they are sustainable and have helped Japan recover from the post-war period. See also: Japanese miracle, Zaibatsu, Chaebol.

keiretsu

a Japanese term relating to a network of customers and their suppliers working within a related industry, or with a single customer. Developed by the multinational organizations in Japan initially with the idea of exercising control over suppliers. Kereitsu has developed to mean closer links between customer and supplier and includes the sharing of technologies, of skilled employees and of product development. See SUPPLIER DEVELOPMENT, LEAN MANUFACTURING.
References in periodicals archive ?
However, the opinions of Gibson (1998) and the findings of McGuire and Dow (2003) suggest that the keiretsu system has had a strong presence in Japanese business through the 1990s despite economic and regulatory changes in recent years.
As noted, the keiretsu system has made a tremendous contributions to the postwar Japan's industrial miracle.
A major disadvantage of the Keiretsu system by Western standards is that it involves elements of monopolistic market power.
With the long-term stability and security guaranteed by the keiretsu system, the keiretsu manufacturer can bring its downstream distributors and retailers under its wing and thus assure long-term partnership with its members.
Change in the Keiretsu System," Nikkei Weekly, November 5, 1994, p.
Japan still limits foreign investment in the local insurance market and supports the keiretsu system of cross-shareholdings and other political and economic ties among large Japanese companies.
Chapter I provides a good overview of the Japanese business and Keiretsu system, although no new ground is discovered.
Recent articles on the Japanese keiretsu system have focused on the large firm, small supplier interface, a relationship which produces excellent quality at the expense of profits for the supplier firms and virtually shuts out foreign suppliers for manufacturing plants in Japan (Cutts, 1992; Sakai, 1990; Sullivan, 1992).
This does not, however, amount to an admission that the keiretsu system is in general anti-competitive; infringement of the AMA occurs only if firms attempt to exclude rivals through collaboration.
first, the main bank and keiretsu system can provide a ready source of funds to companies that otherwise would be unable to raise capital in a decentralized market.
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.
Minoru Makihara, CEO of Mitsubishi Corporation, has characterized Japan's recent financial ills as a "governance recession" in which the keiretsu system has demonstrated its inefficiencies by its inability to deal with changes in world business.