Keiretsu

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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 ?
In sum, Japan's Keiretsus have benefited from the practice of "cross-stock sharing", whereby member companies own some stocks of other member companies.
Whereas the Chaebol has more of a conglomerate structure Keiretsus are either horizontally diversified or vertically integrated.
A significant number of Japanese firms are members of industrial groupings or keiretsus. Some keiretsu groups have histories spanning several decades and are characterized by stability in group membership.
* We also investigate whether the relationships differ between keiretsu and nonkeiretsu firms.
The concept, known as lifetime employment, shushin koyo seido, was spawned by the social reciprocity and familistic values of the Japanese culture and nurtured by keiretsus. It mandates a powerful employee obligation to care for the company as reimbursement for a lifetime of steadily improving living standards (Kiernan, 1993).
To support this system, keiretsus must maintain flexibility by using temporary employees, primarily women, and by transferring employees to one of their supplier units during economic downturns (Gerlach, 1987).
On the other hand, Japan's Keiretsus have benefited from the practice of "cross-stock sharing", whereby member companies own some stocks of other member companies.
Despite problems associated with high costs of doing business, staffing, keiretsu business relationships, exclusionary practices, and complex distribution systems, many American firms succeed.
First, keiretsu and nonkeiretsu structures allow us to investigate the relation between organizational structure and firm performance.
We did not include vertical keiretsu linkages in our tests because business relationships are qualitatively different in horizontal and vertical keiretsu.
The stronger firms are prevented from doing too well and the weaker firms are prevented from hitting extreme lows, due to a web of constraints that keiretsu networks place on their member firms as group members pay an insurance premium for the safety net that insulates each of them from the never-too-distant specter of business adversity (Lincoln et al., 1996).
Even after the break of the Japanese "bubble economy" has strained some of the historic commercial justifications and emotional commitments of keiretsu, it has strengthened others.