Keiretsu is a term used to describe the interlocking business relationships between Japanese corporations. It refers to a group of companies that are affiliated with one another through cross-shareholding and interlocking business relationships, typically centered around a major conglomerate or "core" company. The keiretsu system was a key factor in the growth and success of Japanese industry during the post-World War II period and remains an important part of the Japanese business landscape today.
In the keiretsu system, each member company holds
shares in other companies within the group, creating a web of interlocking
relationships that provides stability and security for all involved. The core
company acts as the center of the keiretsu, providing support and coordination
for the other members, who in turn provide support for the core company. This
mutual support helps to ensure that the companies within the keiretsu can work
together effectively, pooling resources and sharing knowledge to achieve common
goals.
One of the key benefits of the keiretsu system is that
it provides member companies with a stable source of capital, as well as access
to new markets and technologies. By pooling resources and sharing expertise,
companies within the keiretsu can achieve economies of scale and increase their
competitiveness in the global marketplace.
Another benefit of the keiretsu system is that it
helps to ensure the stability of the Japanese economy. By forming close
relationships between companies, the keiretsu system reduces the risk of
economic shocks caused by the failure of individual companies. Additionally,
the interlocking relationships within the keiretsu can help to mitigate the
effects of economic downturns by providing a safety net for member companies.
Despite its advantages, the keiretsu system has also
been criticized in recent years for being overly insular and resistant to
change. Some argue that the close relationships between companies within the
keiretsu can stifle innovation and limit competition, making it difficult for
new entrants to enter the market.
The keiretsu system remains an important part of the
Japanese business landscape, providing stability and security for member
companies and helping to ensure the overall stability of the Japanese economy.
Despite its criticisms, the keiretsu system has proven to be a successful model
for business cooperation and continues to play a significant role in the
Japanese business world.
In our next article we will discuss a modern-day example of Keiretsu
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