Keiretsu system

Definition

The keiretsu system is a Japanese business model characterized by a network of interlinked corporations, often centered around a major bank or trading company. This system promotes close cooperation and mutual support among its member firms, fostering long-term relationships that can drive economic growth and technological advancements in Japan. The keiretsu structure enables firms to share resources, expertise, and technology, which enhances their competitive advantage in both domestic and international markets.

5 Must Know Facts For Your Next Test

1. The keiretsu system emerged after World War II as a way to stabilize the Japanese economy and promote collaboration among businesses.
2. Keiretsu members often share equity stakes in one another, which strengthens their business ties and reduces the likelihood of hostile takeovers.
3. This system has been credited with contributing to Japan's rapid economic growth during the post-war period, particularly in sectors like automotive and electronics.
4. Keiretsu arrangements facilitate knowledge transfer and innovation among companies, helping them remain competitive on a global scale.
5. Government policies have historically supported keiretsu formations by providing favorable regulations and financial incentives for collaborative ventures.

Review Questions

• How does the keiretsu system facilitate collaboration among businesses in Japan?
  • The keiretsu system facilitates collaboration by creating networks of interlinked companies that share resources and information. This close cooperation allows member firms to work together more effectively, pooling their strengths in areas like research and development. By building long-term relationships, companies within a keiretsu can innovate more efficiently and respond quickly to market changes.
• Evaluate the impact of the keiretsu system on Japan's economic growth after World War II.
  • The keiretsu system had a significant impact on Japan's economic growth post-World War II by fostering stability and encouraging collaborative innovation. With companies working closely together, they were able to streamline production processes and enhance product quality, which contributed to Japan's global competitiveness. This interconnectedness also allowed for a shared investment in technological advancements, fueling rapid industrialization and economic success.
• Synthesize the role of government policy in shaping the keiretsu system and its effects on technological advancements in Japan.
  • Government policy played a crucial role in shaping the keiretsu system by providing support through favorable regulations and financial incentives. This enabled companies to form alliances that enhanced their capabilities and encouraged innovation. As a result, the collaboration among keiretsu members led to significant technological advancements, especially in industries like automotive and electronics, which not only bolstered Japan's economy but also positioned it as a leader in global markets.

Related terms

Zaibatsu:

Large family-controlled vertical monopolies that dominated the Japanese economy before World War II, which were dismantled during the Allied occupation.

JIT (Just-In-Time): A production strategy aimed at reducing flow times within production systems as well as response times from suppliers and to customers, closely associated with Japanese manufacturing efficiency.

Mitsubishi Group: One of the most well-known keiretsu in Japan, consisting of diverse companies involved in various industries including finance, construction, and automobiles.