Keiretsu

Definition

Keiretsu refers to a system of interlinked corporations in Japan that emerged after World War II, characterized by close-knit relationships among manufacturers, suppliers, and distributors. This network of companies often shares ownership stakes and collaborates to enhance competitiveness and market stability. The keiretsu system played a crucial role in Japan's post-war economic recovery and industrialization, fostering innovation and efficiency within a cooperative framework.

5 Must Know Facts For Your Next Test

1. Keiretsu structures are typically divided into two types: horizontal keiretsu, which involve groups of companies across various industries, and vertical keiretsu, focusing on a single industry or supply chain.
2. The relationships within keiretsu often include cross-shareholding, which helps prevent hostile takeovers and fosters long-term partnerships.
3. Keiretsu contributed significantly to Japan's economic stability by creating reliable supply chains and enabling companies to share risks and resources.
4. The influence of keiretsu extended into political spheres, as these corporate networks often lobbied for favorable policies that benefited their collective interests.
5. While keiretsu helped Japan recover economically, it has faced criticism for creating inefficiencies and hindering competition by protecting member companies from market forces.

Review Questions

• How did keiretsu evolve from pre-war economic structures like zaibatsu, and what impact did this have on Japan's economy?
  • Keiretsu evolved from the zaibatsu, which were large family-controlled conglomerates that dominated the economy prior to World War II. Following the war, the dissolution of zaibatsu paved the way for keiretsu to emerge as more decentralized corporate groups focused on collaboration rather than strict control. This shift allowed for increased competition and innovation among member companies while providing stability in supply chains, contributing to Japan's remarkable post-war economic recovery.
• Analyze how the structure of keiretsu influenced Japan's industrial policy and economic strategy during its recovery period.
  • The structure of keiretsu significantly influenced Japan's industrial policy by fostering cooperation among firms and ensuring that resources were shared effectively across sectors. This collaboration enabled companies to innovate more rapidly and respond efficiently to market demands. As a result, government policies often supported keiretsu networks through favorable regulations and investments in infrastructure, reinforcing their importance in Japan's broader economic strategy during the recovery period.
• Evaluate the long-term effects of keiretsu on Japan's global economic competitiveness and its challenges in adapting to a changing world economy.
  • Keiretsu had profound long-term effects on Japan's global economic competitiveness by enabling firms to establish robust supply chains and improve product quality through cooperation. However, as globalization intensified, these networks faced challenges such as complacency and reduced innovation due to their insulated nature. In a rapidly changing world economy, many keiretsu struggled to adapt to new competitive pressures from non-Japanese firms, leading to calls for reform within these networks to embrace more flexible business practices.

Related terms

Zaibatsu: Zaibatsu were large family-controlled vertical monopolies that dominated the Japanese economy before World War II, often seen as predecessors to the modern keiretsu.

Supply Chain Management: Supply Chain Management involves the handling of the entire production flow of a good or service, which is a key element in the functioning of keiretsu networks.

Post-War Economic Miracle: The Post-War Economic Miracle refers to Japan's rapid industrial growth and economic recovery from the devastation of World War II, heavily influenced by the development of keiretsu.