The Japanese keiretsu system.docVIP

The Japanese keiretsu system 　　1.Structure of the keiretsu 　　The name keiretsu (in Japanese.系列) means literally system, series or line.Keiretsu are groups of companies with very close business relations (Munich Business School, 2008). The core of these conglomerates is a bank which provides them with liquidity or loans and holds equity positions in the member firms.Cross-shareholding, that means that the companies are shareholders of the most or every other company in the network without being the majority shareholder, and financial support of the bank make it nearly impossible for foreign investors to enter the Japanese market through hostile takeovers (Flath,2005, pp. 238-239). 　　Board members of one company are in many cases also board members,members of the supervisory board or consultants of other group enterprises.Consequently,personal connections are keeping the group together in addition to the structural connections(Kensy,2001,pp.202-203).Personal relations are more important in the Japanese society than in the Western societies like the United States (US) or Europe (Allen and Zhao,2007, pp.1-2). 　　Board members,the middle management and qualified employees meet periodically to examine the market performance of the group as a whole and of individual firms determining potential improvements like product quality or cost reduction (Kensy,2001,p.203).Despite all these mentioned connections inside the network most of the companies are separate legal entities (Flath,2005,pp.238).There are two different main types of keiretsu, the vertical and horizontal (intermarket) keiretsu. 　　1.1 Vertical keiretsu 　　A vertical keiretsu covers the whole value creation chain of a product and/ or service. In most cases, they are formed if the end product is made of many sub-products like in the car industry or the electrical industry. Thereby, an industrial enterprise and/ or a trading company are the centre of a vertical network. A bank can also be part of the network