Keiretsu

Published Oct 25, 2023

Definition of Keiretsu

Keiretsu is a Japanese business term that refers to a network of companies with interlocking relationships, often characterized by cross-shareholdings and long-term business partnerships. These networks are typically found in Japan and consist of companies that have significant financial and commercial ties to one another. The purpose of a keiretsu is to provide mutual support and stability, as well as to enhance the competitiveness of the member companies.

Example

One famous example of a keiretsu is the Mitsubishi keiretsu, which consists of Mitsubishi companies across various industries such as automobiles, electronics, finance, and more. These companies are linked through shareholdings and cross-directorships, allowing them to collaborate on research and development, access shared resources and expertise, and benefit from economies of scale.

Another example is the Sumitomo keiretsu, which includes companies involved in fields such as metals, chemicals, and finance. These member companies have long-standing relationships and often exchange personnel and information, allowing them to coordinate their activities and strengthen their market positions.

Why Keiretsu Matters

Keiretsu can provide several benefits to member companies. By forming strategic alliances and sharing resources, companies within a keiretsu can access a broader customer base, reduce costs through economies of scale, and gain a competitive advantage. Additionally, the long-term nature of the relationships within a keiretsu allows for stability and support during challenging economic times.

Keiretsu are unique to Japan’s business landscape and have played a significant role in the country’s economic development. They have fostered collaboration, innovation, and stability among member companies, contributing to Japan’s global competitiveness in various industries.

Overall, understanding the concept of keiretsu is essential for anyone interested in Japanese business practices and the dynamics of intercompany relationships in a specific market.