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What are the Japanese keiretsu?

Updated: 12/11/2022
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EncofBizandFinance

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The Japanese keiretsu are large holding companies

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Q: What are the Japanese keiretsu?
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Many American and European business people argue that the keiretsu system in Japan acts as a barrier to foreign companies entering the Japanese market Why do you think they believe this?

Many American and European businesspeople argue that the keiretsu system in Japan acts as a barrier to foreign companies entering the Japanese market. Why do you think they believe this?According to the Wikipedia "a keiretsu, keiretsu is a set of companies with interlocking business relationships and shareholdings. It is a type of business group" (Wikipedia, n.d.) The character of these groups is to cooperate, to support and supply each company within the group in order to protect companies from growing world competition. Japanese businesses in keiretsu protect domestic market from foreign investments and inflow of competitors. From Japanese point of view, there is high level of business protection. Moreover, the cultural aspect of Japan is important to mention. Japanese culture is high context culture where decision making process is within the group and loyalty to business group is on very high level of the scale. (Griffin, Pustay, 2005) Therefore, these groups are viewed as positive.On the other hand, foreign businesses those want to enter the Japanese market feel discrimination because these "cultural" barriers have no formal form such as NAFTA or other trade organizations; therefore, it is hard to negotiate. Foreign investors entering Japanese market need to face cultural barrier, while Japanese companies face "only" formal barriers. That is why American and European businesspeople feel keiretsu as the barrier with no way to overcome.


Does capitalism exist in Japan?

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What is Industry Aggregation?

Industry Aggregation is a new business model for American industry based on collaboration between companies serving the same basic market. It can best be understood by comparing it to the "Keiretsu" business model which fueled the Japanese "Economic Miracle" of the post World War II era. In the keiretsu model large industrials trading on the Tokyo Stock Exchange would have interlocking ownership and partner with a bank which would supply credit to the entire group. The companies were thus able to achieve tremendous benefits through joint cost-sharing activities as well as increases in revenues through cross-marketing. The American Industry Aggregation model is similar but designed from the ground up for small to mid-sized private companies which then enjoy the same basic set of benefits as the Keiretsu members. In the Industry Aggregation model a public company serves as the group's banker. For more info: http://www.tycoonplaybook.com


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