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Knowing Who You Are Doing Business With In Japan: A Managerial View Of Keiretsu And Keiretsu Business Groups.

Keiretsu ties formed and used by the major Japanese business groups have long been a fundamental phenomenon of the Japanese business system. As Japan moves toward greater prosperity, keiretsu ties will be used by various keiretsu business groups (KBGs) to promote firms and groups successes. Yet, not all KBGs will act in a similar manner. Important, but subtle, variations among the type of ties within a KBG may have profound implications for the outsiders hoping to do business with major Japanese firms. Unfortunately, keiretsu and KBGs are not well understood by professional practitioners. The relationships among members of a keiretsu are subtler and more pervasive. These long standing keiretsu ties are not likely to disappear, because they are fundamental to the way in which Japanese firms operate.

Even after the break of the Japanese "bubble economy" has strained some of the historic commercial justifications and emotional commitments of keiretsu, it has strengthened others. The changing Japanese consumption pattern is weakening some of the influence of the manufacturer-dominated distribution KBGs. Exhausted bottom-tier suppliers and growing overseas production are also weakening the power of KBGs. Over fifteen years of U.S. political pressure is restraining the overt cooperative activities of KBGs. All these factors have led some to suggest that the notion of a keiretsu as a way of doing business is dying. However, some of these same pressures that threaten manufacturer-dominated distribution KBGs and supply KBGs work in favor of multiple-origin horizontal KBGs and other forms of KBGs. Thus, keiretsu relationships are not likely to disappear overnight as many U.S. managers have hoped for. Keiretsu is a factor that all international executives need to understand if they are to do business with the Japanese.

Building upon current and past research, the first phase of this paper presents a more comprehensive and sophisticated view of a keiretsu and a KBG. Working from these views, four types of keiretsu business groups are identified. The dimensions I used to classify the four types of keiretsus, suggest important differences in dealing with these firms and the degree to which dealing with different firms within various collections. The managerial importance of the different types of keiretsus is then illustrated.


The term "keiretsu" has not been well defined in the popular press. Most authors mistakenly use the terms "keiretsu" and "Keiretsu business groups (KBGs)" interchangeably. Keiretsu is an organizational arrangement created for a group of companies. However, many researchers and businesspersons use this term loosely to mean business groups that use keiretsu as a device to systematically arrange or organize relationships among companies. It is problematical to use the term "keiretsu" to mean the keiretsu business groups (KBGs). Keiretsu is an organizational arrangement. Keiretsu business groups, or KBGs, are business groups that use keiretsu as a device to arrange or organize member companies systematically. The proper usage of these two terms, keiretsu and keiretsu business groups, is necessary to avoid the confusion of mixing an organizational arrangement and an organization itself.

Adding to the confusion is the disagreement over the key elements of keiretsu. Authors seem to emphasize only one aspect of the complex ties among firms. For instance, Anchordoguy (1990) defines keiretsu as "societies of business with interlocking ownership and close buyer-supplier relationships, that help keep out foreign imports and investment." Imai (1990) defines keiretsu as a "web of relationships, ranging from tight to loose, among companies working together." Gerlach (1992) defines keiretsu as "clique-like patterns based on alliances." Internal control, cohesiveness, policy coordination and symbiotic relationships combine to become a keiretsu linking firms into groups. If all of these aspects are simultaneously considered, a much richer and more complete understanding of the power of the linkages can be understood. Because the combination of elements is so important to understand, it is necessary to take some time discussing each element and its contribution to the whole.

Internal Control

Many people fail to comprehend the internal control mechanism of keiretsu and conclude that KBGs are no more than just loose affiliations among equal partners. Internal control is so crucial that many famous Japanese management practices cannot function well without it. For example, the Just In Time system (JIT) used by Toyota needs full cooperation or even sacrifice of its suppliers and distributors. Suppliers have to bare high inventory cost and work overtime on short notice for Toyota to enjoy its goal of zero inventory. Why would these Japanese suppliers and distributors accept this kind of arrangement whereas their U.S. counterparts refuse to accept it? Suppliers have little choice. The internal control exercised by Toyota, as a leader of both its supply KBG and its distribution KBG, is both pervasive and comprehensive.

The existence of a leader or leaders in a group inevitably causes inequality of power relationships in a group. Lincoln, Gerlach, and Takahashi (1992) have pointed out that inside each keiretsu business group, "asymmetries of power and dependence result in uneven distribution of economic benefits and risks." However, they too fail to realize and fully explain that it is necessary to have an internal control mechanism to maintain cohesion and order inside each keiretsu business group.

With order and status built into each keiretsu business group, members in the keiretsu business groups are not equal. A more sophisticated view of keiretsu takes into consideration status and resource differences among member companies. Internal control is necessary in such a situation. Thus, this study includes "an organizational arrangement for internal control" as one essential element of keiretsu.

Cohesiveness with Order

If a keiretsu is an organizational arrangement established for internal control, it is necessary to have means of maintaining cohesiveness and order in each KBG and to facilitate member companies' cooperative activities. The effectiveness of keiretsu depends on how cohesiveness and order are maintained in implementing group decisions. Cohesiveness and order are maintained by integrating commercial justification and emotional commitment. A commercial justification would be only a necessary but not sufficient condition for the existence of keiretsu relations.

Often the outsiders are only told about half of the total picture. For instance, Japan External Trade Organization (JETRO) is a strong promoter of the importance of commercial justification for integrating KBG members together (JETRO Monitor, 1992). Consistent with JETRO' s emphasis, commercial justifications considered in this study are composed of long-term legal ties, financial ties, and operational ties. Stable long-term commercial ties across firms facilitate free flow of information, tightly coordinated production and distribution schedules, wide dissemination of technology, and effective long-term planning. Legal ties further integrate firms together via cross shareholding or unilateral shareholding. When major firms in a KBG have stakes in other group members, it is natural for them to work together to enhance their mutual benefits. Financial ties are created by loans and other financial incentives from bank members and dominating firms to group members. Day-to-day operational ties also reinforce the other linkages to increase efficiency and productivity and hence the competitiveness of not only individual firms but also the group as a whole. However, it is necessary to point out that although JETRO and some authors emphasize this element of keiretsu heavily, commercial ties are not the real binding forces of the keiretsu.

Emotional commitment is instrumental for maintaining cohesiveness and order in each business group and to facilitate member companies' cooperative activities. In the seventies and early eighties, many U.S. and Japanese researchers focused their attentions almost exclusively on this element of keiretsu. Among them, Bieda is representative. He defined keiretsu as "an affiliation intermediary with social and personal bonds" (Bieda, 1970). In this study, emotional commitments are composed of personal ties and cultural bonds. Both yield social and cultural pressure to strengthen the internal cohesion or order of keiretsu business groups. Personal ties, formed through kinship, school of graduation, and hometown fellowship, are further strengthened by movement of employees from one firm to another among members of a KBG. Cultural bonds are fostered by the notions of interrelation and through loyalty to a prestigious name or at the very least the fear of being excluded. The famous "Japan Village" ideology is the fou ndation for many cultural bonds.

Commercial justification and emotional commitment are not mutually exclusive. These strengthen the keiretsu ties in Japan. Similar to the U.S. culture and usage, the Japanese can find a way to separate inner reality and outer reality professionally or commercially. The Japanese views "omote" and "wola" (outer reality and inner reality) as different facets of the same reality. Commercial justification and emotional commitment are not separate but internal to each other. Compared with the U.S. view, they are used totally reversed in Japan, at least among the Japanese businesspersons. Emotional commitment is the outer reality. Commercial justification is the inner reality.

In practice, commercial justifications (e.g., the inner reality) are less emphasized when everything runs smoothly. Emotional commitments (e.g., the outer reality) are the dominating facet. However, in time of economic crisis, commercial justifications, emphasizing efficiency and productivity, become the dominating facet for making decisions. For example, Mazda has traditionally been associated with the Sumitomo KBG. When the Japanese auto firm ran into trouble financially, the Sumitomo KBG's willingness to allow Ford to take control of Mazda is a good example in such a circumstance. "Gaiatsu", or foreign pressure in English, is often a necessary but not sufficient to force a change in member ties. Of course there will be lots of resentments toward such an externally induced change, but it can be reasoned as beyond the control of the KBGs or the Japanese society. The resentments and frustrations can be channeled toward foreigners or foreign governments, while leaving the keiretsu concepts of solidity and coh esion intact.

Policy Facilitation

Overall the policy of keiretsu business groups is to maintain the security and the growth of each business and the group as a whole. Gerlach (1992) has noted that most KBGs are interested in sharing risks and creating industrial synergy. However, asymmetries of status and dependence within each KBG result in an uneven distribution of economic benefits and risks. Commercial justifications and emotional commitments can help in reducing the discontentment. Legal, financial, and operational ties all combine to force the junior members to consider the cost of not complying. To further promote willing compliance and foster the obligation to comply, more powerful members of most KBGs use personal ties and cultural bonds, which are major factors behind emotional commitment. Therefore, it is necessary to have keiretsu as a "facilitator" of policy implementation.

The facilitation may be both symbolic and real. Symbolically, the cooperative activities of group members are represented as an outcome of the group facilitated by the keiretsu relationship. When the outcomes can be observed by all group members, these cooperative activities in return reinforce the strength of keiretsu. For example, the tactic of acquiring loans or investments from financial or dominating members of the group can be easily seen. Maruyama (1992) reports that for Mitsubishi Corp.'s outstanding loans, 46% were secured from group financial institutions, including Mitsubishi Bank (27%) and Mitsubishi Trust & Banking Corp. (11%). Toyota's financial involvement with its suppliers and distributors is both symbolic and real. In fact, Toyota's capital investment in and loans to its keiretsu members are so large that it is nicknamed "Toyota Bank" in Japan.

Symbiotic Relationship

For keiretsu ties to be effective, bureaucratic and political supports are necessary. Japanese government bureaucrats, mainly senior bureaucrats in the Ministry of International Trade (MITI), the Ministry of Finance (MOF), the Bank of Japan (BOJ), and the Ministry of Construction, provide keiretsu business groups with not only bureaucratic support but also political supports from many bureaucrats-turned-politicians. The political strength of Japanese bureaucrats and the importance of bureaucrats' support of keiretsu can best be demonstrated by the many Japanese prime ministers who used to be bureaucrats. Prime minister Yoshida Shigeru protected former zaibatsu firms from the Supreme Commander for the Allied Powers (SCAP) after W.W.II. Prime minister Ikeda, prime minister Kishi, and prime minister Sato, all former bureaucrats themselves, together dominated Japanese politics from 1957 to 1972. During their priministerships, KBGs grew and prospered. The political influence of bureaucrats is still powerful today. Combined with the political influence that keiretsu business groups members can exert over Japanese career politicians using legal or illegal political donations, the political support for keiretsu ties remains solid. In return for the political support of bureaucrats, KBG-backed politicians cooperate with bureaucrats on perhaps their most important issue: preserving the current bureaucratic system and the senior bureaucrats who run it.

This symbiotic relationship can also be observed at the operational level. Johnson (1982) suggests that it is bureaucrats who run Japan, and that the Japanese government is not the protector of consumers but the protector of the Japanese business establishment.

With a few exceptions, KBGs are the Japanese business establishment. In this sense, Johnson's observation would support the notion that the Japanese government, run by bureaucrats, is the protector the KBGs. With its longstanding probusiness position, the Japanese government allows KBGs to be formed and strengthened by institutional arrangements such as intercorporate shareholding, group financing, and interlocking directorships. In return for the bureaucratic protection, KBGs' members seem to cooperate in implementing industrial policies of the Ministry of International Trade and Industry, economic or financial policies of the Ministry of Finance and the Bank of Japan, and so forth.

In sum, the term keiretsu may be more comprehensively defined as follows: 1) a systematized arrangement for internal control of member firms; 2) a means of control supported by a combination of commercial justifications (including legal ties, financial ties, and operational ties) and emotional commitments (including personal ties and cultural bonds); 3) a mechanism to facilitate policy implementation; 4) not only the effects are observed and reinforced by group members' cooperative activities but the pattern of relationships is sanctioned by a symbiotic relationship between major Japanese business groups and government bureaucrats.


KBGs are the major Japanese business groups that use keiretsu to implement their group decisions. Totally copying and translating the current classifications of KBGs in Japan, as many U.S. researchers do, forces these researchers to accept the hidden Japanese definitions of keiretsu behind these classifications. This study provides readers the opportunity to avoid such a direct translation and presents two new original criteria in classifying KBGs beyond the normal vertical versus horizontal divisions. By adding these two criteria--status difference within the group and degree of internal control--executives can identify Japanese firms with keiretsu ties and classify them more appropriately.

Different types of KBGs differ in their status structure and degree of internal control, which in turn affects the strength and effectiveness of their keiretsu ties. Many executives are familiar with two basic classes of KBGs. Some call them horizontal keiretsu and vertical keiretsu. Others call them Kinyu or financial keiretsu and Kigyo or capital keiretsu. This simple division hides very important differences between these two. Some horizontal KBGs historically stemmed from a single powerful firm, which history is still a binding force among the group members. For example, the solidarity of the Mitsubishi KBG is almost unbreakable even for other non-group Japanese firms. In comparison, multiple-origin horizontal KBGs, such as the Mitsui KBG or the DKB KBG, are indeed more or less confederations of firms. Defenders of KBGs demonstrate the harmlessness of the keiretsu phenomena to the outsiders by citing the actions of these apparently loose coalitions.

A horizontal or financial KBG typically extends across various industries centered on a core group of Japanese firms. The core group usually includes a major bank, a trading company, and a limited number of manufacturers or service firms. In contrast, a vertical or industrial KBG is an association formed by a dominating Japanese firm with its suppliers and distributors. These are well-established classifications (horizontal versus vertical) and use industry as the classification factor. The first classification of this study adopts the same criteria but emphasizes status difference within the group.

Furthermore, in addition to the inaccurate usage of the term keiretsu to mean keiretsu business groups, such a limited classification is not enough to help in analyzing the complexity and subtlety of the keiretsu business groups. A subclassification is necessary. Major factors of keiretsu have to be identified as determining variables in classifying and subclassifying these business groups. A few researchers, such as Fung (1991), subclassify horizontal KBG into zaibatsu-descendant and bank-centered. Some others, such as Miyashita and Russell (1991), subclassify vertical KBG into production KBG and distribution KBG. With some modifications, this study combines these two approaches and subclassifies both the horizontal KBGs and the vertical KBGs using the same determining variable, degree of internal control of member firms.

Status Patterns in Horizontal and Vertical KBGs

The existence of core firms in a horizontal KBG and a dominating firm in a vertical KBG inevitably causes power inequalities inside each group. Such an arrangement creates asymmetries of power and dependence, which in turn result in uneven distribution of economic benefits and risks. Thus, assigning status to each member for maintaining order inside the group is critical. As is shown in Figure 1, there is a major difference in the organizational structure between the horizontal KBGs and the vertical KBGs.

Despite the special status enjoyed by the core firms, members in a horizontal KBG tend to be treated as equal partners or at least less hierarchically. In comparison, members in a vertical KBG tend to be treated differently according to each one's status in their vertical hierarchy. One of the obvious differences between the horizontal and vertical types is the pattern of stockholding. Multiple mutual stockholding is common among members in a horizontal KBG. Because every member is a major or minor stockholder of the others, and sometimes has representatives as directors of the other members' board of directors, mutual respect and consideration are not only important but also necessary. In a vertical group, however, ownership of stock normally is in a unilateral manner with the dominating firm owning shares of the subcontractors or distributors. Here, the relationships are hierarchically ordered, with the manufacturer on the top of either its subcontractors or distributors.

Degree of Internal Control

Internal control is another major characteristic of keiretsu. Without classification of the horizontal KBGs and the vertical KBGs by degree of internal control, the cooperative activities resulting from different internal control practices cannot be differentiated. Failure to do so often gives some researchers the opportunity to counter the criticisms about the trade impeding nature of KBGs by presenting examples with low degree of internal control and hence fewer cooperative activities.

There has been a major debate about the degree of cohesiveness and internal control of the horizontal KBGs. Many researchers, such as JETRO, see all the horizontal KBGs as weak in cohesiveness or internal control. They stress a diffused pattern of intercorporate share holding and a lack of a central command center. Thus, they suggest that KBGs are incapable of impeding foreign intrusions into Japan. The lack of success by U.S. firms is attributed to their inability to understand Japan and Japanese markets. Others, such as Okumura (1992) and Bieda (1970), stress the effective control of member firms by collective arrangements such as presidential councils or president's clubs. Foreign firms face coordinated group actions to minimize their penetration of the Japanese home market. Both sides are actually looking at different types of the horizontal KBGs. The argument can be resolved if the horizontal KBGs are classified as single-origin horizontal KBGs and multiple-origin horizontal KBGs. Single-origin KBGs hav e a high degree of internal control, while multiple-origin KBGs typically have a low degree of internal control. This difference in internal control also exists in the vertical KBGs. Suppliers in vertical KBGs have only one major outlet for their products, that renders them more easily controlled by the dominating firms. Distributors have many outlets and customers to sell their goods or services, which gives them leverage to avoid being tightly controlled by the dominating firms.

Four Types of KEG and their Members

KBGs can be classified into four types: single-origin horizontal KBGs, multipleorigin horizontal KBGs, single-outlet vertical KBGs (supply KBGs), and multipleoutlet vertical KBGs (distribution KBGs). In Figure 2, the two basic classes of these KBGs, the horizontal KBGs and the vertical KBGs, originate from a dichotomous classification of the KBGs and includes the differing status of member firms inside each group. The four subclasses are derived from a dichotomous classification of these two basic classes of KBGs by degree of internal control over member firms. Firms are not restricted to belonging to only one type of KBG. For instance, Toyota Motor Company is the dominating manufacturer in the Toyota supply KBG and the Toyota distribution KBG as well as a quasi member, observer, of the Mitsui horizontal KBG.

Although the keiretsu system has been widely used in Japan by firms of different sizes, this study focuses only on large firms and their keiretsu-affiliated members. To be considered as a KBG in this study, the core firms or the dominating firms have to be among the one thousand largest firms in Japan or listed in the first section of Tokyo, Osaka, and Nagoya Stock Exchanges. Table 2 lists member firms in the single-origin horizontal KBGs. Table 3 lists member firms in the multiple-origin KBGs. Table 4 lists major firms in the supply KBGs. Table 5 lists major firms in the distribution KBGs. Firms in the Mitsui KBG have always been classified by most Japanese researchers into the same category with firms in the Mitsubishi KBG and the Sumitomo KBG, because many of these firms are zaibatsu descendants. We argue that firms in the Mitsui KBG should be classified into the same category with firms in the Fuyo KBG, the Sanwa KBG, and the DKB KBG, because most of these firms can no longer be considered as from the single zaibatsu origin after many powerful new members, such as Toyota and Nippondenso, joined the group.

Under the classification proposed in this study, the majority of single-origin horizontal KBGs members in each KBG can trace their roots back to the same pre-W.W.II zaibatsu, the Mitsubishi zaibatsu and the Sumitomo zaibatsu. Most of the member firms bear their group name and use the group logo. In contrast, multiple-origin horizontal KBGs are composed of several factions with different origins. The Mitsui KBG, the Fuyo KBG, the Sanwa KBG, and the Dai--Ichi Kangyo (DKB) KBG all have at least three different factions inside each group.

Each of the supply KBGs (the single-outlet vertical KBGs) has a dominating manufacturer, or a dominating service firm, and hundreds or thousands of suppliers directly or indirectly dependent on it. Many of these suppliers are mom-and-pop workshops. The majority of their products go into the final assembly of the dominating manufacturers in their KBGs, such as those in the Toyota supply KBG or the Toshiba supply KBG. Each of the distribution KBGs (the multiple-outlet vertical KBGs) has a dominating manufacturer, or a dominating distributor, and hundreds or thousands of distributors related to it. The majority of these distributors, mostly neighborhood retailers, sell only products of the dominating manufacturer in their distribution KBGs, as in the case of Toyota auto dealers in the Toyota distribution KBG.


Keiretsu is a unique form of cooperation with multiple dimensions. Most recognize that it implies legal, financial, and some operational ties, but there are such substantial differences across firms using this form of cooperation. Mere membership in a group that someone has identified as a keiretsu business group, or a KBG, does not provide enough information. It is necessary to understand how people of outside firms will be treated. There are some subtle but important emergent features, which can help. These less well recognized aspects include: 1) the relationships among the members of the horizontal KBGs; 2) the degree of internal control within the vertical KBGs; 3) the symbiotic relationships involving government ties; and 4) dealing with a member of a KBG.

Relationships among the Members

Understanding the subtle patterns of cooperation among the members of the horizontal KBGs are important for a manager from an outside firm. Intragroup trade practices prevail because of mutual dependence and mutual interest. Being a member of a single-origin horizontal KBG means being financially linked to most of the core firms in the group. Because everyone has a very real stake in seeing that all the group firms increase or improve their business in the years to come. Penetrating such a web from the outside is futile. Given the opportunity, group members will always prefer intragroup trade instead of the market mechanism.

A good example would be the intragroup trade practices of the Mitsubishi single-origin horizontal KBG. The general trading company of the Mitsubishi horizontal KBG, Mitsubishi Corp., functions as the Mitsubishi group's hub. As Maruyama (1992) notes "Suppose it sells steel materials to Mitsubishi Heavy Industry. It may ship the freight via Nippon Yusen K.K. and on behalf of that company take an order for ships from Mitsubishi Heavy Industry. In this way, Mitsubishi Corp. mediates a chain of intergroup trade within the Mitsubishi group... In addition, Mitsubishi Corp. also helps to organize large-scale group projects, and functions as a center for gathering and processing global information."

Intragroup trade practices of the multiple-origin horizontal KBGs are not as strong as those in the single-origin horizontal groups. Being financially linked, most of the time, only to a core bank but not to the rest of group members means that everyone does not have a real stake in seeing that all the group firms increase or improve their business in the years to come. A market mechanism is preferable to intragroup trade cooperation.

A good example would be the intragroup trade practices of the DKB horizontal KBG through Itochu. Itochu is the DKB group's general trading company, but its function as a hub of intragroup trade is limited. Most of the group members are independent and they offer Itochu business only when it makes sense financially. Nonetheless, I would suggest that in the past few years Itochu has been among Japan's top trading companies in terms of annual sales means that Itochu has a great potential to really become the group's hub of intragroup trade. Its performance is encouraging group members to increase their operational ties and financial ties with Itochu, which further advances the commercial justifications for group members to work together.

Degree of Internal Control

Tight control is a salient characteristic of relations among a set of firms. When dealing with these tightly controlled firms, one must place on the status differential of the firms. The supply KBGs (the single-outlet KBGs) are the strongest in the degree of internal control, which builds on the fact that pay differentials between dominating manufacturer and its lower-tier suppliers are maintained by the vertical relationship. The dominating firms in the distribution KBGs (the multiple-outlet vertical KBGs) can exert less internal control over their group members. However, the dominating firms' influence over their distributors is still quite strong compared with their U.S. counterparts.

It is extremely difficult to penetrate a supply KBG using simple economic advantages. In the case of the Toyota supply KBG, trust and reliance between members of the group, especially between Toyota Motor Corp. and its first-tier subcontractors, has been built through years as a result of working together, making common investments, and sharing management personnel (Shimokawa, 1985). Close ties blur the boundaries between these companies. It is virtually impossible, therefore, for Toyota Motor Corp. to make major parts purchasing decisions solely on a cost basis that might favor a non-group firm. Such an emotional commitment, however, does not extend down to the suppliers lower than the third-tier of the keiretsu hierarchy. When the prices of group members are higher than those of non-group members, Toyota Motor Corp. or its first-tier subcontractors can simply require its group members at the bottom of its keiretsu hierarchy to meet those low prices of non-group members with the original high-priced designs. These group members can choose to accept the orders or go out of business.

Dominating firms in the distribution KBGs are not only group leaders but also channel leaders. This arrangement gives the dominating firm tighter control over the distribution channel by exercising the keiretsu ties. It not only provides the dominant firm with more controls over planning, production, and marketing but also makes it very difficult for outsiders, be they Japanese or foreign, to use these keiretsu-affiliated distribution channels. Toyota Motor Corp.'s control over the Toyota distribution KBG is one good example. Tight control over dealers enables Toyota to enjoy a dominating market position in its domestic auto market. Through frequent door-to-door customer visits, the dealers assist Toyota in building customers' confidence and trust. They assist Toyota to assess the volume of cars that can be sold. These cooperative activities make Toyota's task of planning for production and sales much easier. Keiretsu-tied dealerships also give Toyota more control over the number of cars each dealership is a ssigned to sell, which helps prevent individual dealers from discounting their cars to increase sales. By lowering the dealer's profit margin per car and compensating it by offering bonuses and rebates to the dealers for meeting their quotas, Toyota can motivate the dealership to vigorously pursue sales. By granting exclusive sales rights in designated areas, it protects the dealerships from competition with other group members.

As a manager from an outside firm, one can take Ford's recent move in Mazda as a good lesson. Totally disregarding the emotional commitment part of keiretsu, the new president from Ford dismantles the Mazda production KBG, which has become a drag of Mazda. However, the Mazda distribution KBG has been preserved and well taken of. Ford is moving closer and closer to its objective of getting more control of distribution channel in Japan and having more contacts with the Japanese consumers.

Symbiotic Relationships Involving Government Ties

Most core firms in the horizontal KBGs and most dominating firms in the vertical KBGs have had strong symbiotic relationships involving government ties. It seems that the more the symbiotic the ties are, the more external relations are influenced by bureaucratic policy and tradition. Actually, it is the other way around. The Japanese government bureaucrats are the ones who are influenced. For example, cooperative lobbying activities against foreign imports, especially foreign consumer goods, are quite natural for the horizontal KBGs, because most of the group members are Japanese domestic manufacturers. Using the symbiotic relationship 'with the bureaucrats and bureaucrats-turned-politicians, the horizontal KBGs have few difficulties in lobbying for restrictions on the distribution methods used to introduce foreign products in Japan and other anti-competitive exclusionary activities. (AACJ, 1995).

In many cases, formal Japanese laws and regulations are written only in general terms, with the details supplied by administrative guidelines. According to a 1994 report of the office of the U.S. Trade Representative, the resulting broad power and discretion of Japanese bureaucrats make it difficult for foreign firms to learn what approvals may be required to conduct business, and even more difficult to obtain those approvals.

For the KBGs, this is not a problem at all. There are lots of bureaucrats-turned-executives in their KBGs under the "Amakudari" practice, which allows senior Japanese government bureau crats to become top executives of the firms they once regulated (Toyo Keizai, 1994). The KBGs can easily turn these difficulties caused by administrative guidelines to their advantage. It is easy for the KBGs to use the personal connections these bureaucrats-turned-executives had built when they were in office to influence the administrative guidelines in the KBGs' favor.

As a manager from an outside firm, one is tempting to form strategic alliances with powerful KBG members to avoid being excluded or obtain access from such symbiotic relationships. This strategy can only work to some degree until it hits a "glass wall," or the conservative nature of the Japanese bureaucrats. Furthermore, major concessions in other areas, such as technological transfers or exclusionary distribution rights, are often needed for an outside firm to "get in."

Dealing with a Member of a KBG

The first step in dealing with Japanese firms is to know if you are dealing with a member of a KBG. If you are, keep in mind that it is more or less constrained by its keiretsu relationships. Then, spend some time to study what kind of linkages it is bound by. Is it a supply KBG? A distribution KBG? A single-origin horizontal KBG? A multiple-origin horizontal KBG? Or some forms of combination?

In attempting to deal with a dominant firm in a supply KBG. Competition seems to be inevitable. If you compete with the dominant firm, you are really competing against the whole KBG. If you deal with a non-dominant firm, it is unlikely they can deal with you as an independent entity and it is unlikely they will deal with you except in very minor matters. The possible exception is competition far from the dominant firm in a secondary area of supply if you have a decided technological advantage that can be protected.

In attempting to deal with the dominant firm in a distribution KBG, cooperation might work if the dominant firm saw cooperation would benefit it and the network would benefit. If competing with it, you meet a stone wall of integrated firms. It is not easy to penetrate from the subordinate firms or at the bottom as it is with the supply KBG.

If the firm is a member of a multiple horizontal KBG, there is substantial room for cooperation as the firm has room to maneuver and is not tightly bound to other members. Members of the multiple-origin horizontal KBGs (See Table 3) seem to be the most likely KBG firms foreigners can effectively work with. At least, the members of the multiple-origin horizontal KBGs prefer to use market mechanism and they are less constrained by intragroup trade cooperation. With multiple memberships, the specific area of cooperation or competition can make a difference.

If competing with a member of a single-origin horizontal KBG, you are really competing against the whole KBG. Such is not the case if a competitor is a member of a multiple-origin KBG e.g., Mitsubishi Cable versus NKK or Mitsui, Mining, and Smelting. It is difficult to form a workable alliance with a single-origin horizontal group unless what you can provide is outside the KBG.

Thus, linkages with single horizontal KBGs should not, with rare exceptions, be initiated in an attempt to trade technology or international marketing access in hopes of entering the Japanese domestic market. It is very unlikely outsiders will penetrate. Don't be disappointed when a tentative cooperation with a minor member of a supply KBG never comes to completion or languishes as just a meeting of CEOs. If you must penetrate a distribution KBG outlets, it will not occur unless you have the cooperation of the dominating firm. And this may be blocked if the dominating firm is also a member of another type of KBG.

Complex. You bet. But armed with the tables in this article and some logical thinking, most executives can judge the difficulty of dealing with various types of KBG and more fully understand the context of relationships with Japanese firms.

Acknowledgment: George Ming--Hong Lai is Associate Professor, Business Administration Department, National Taichung Institute of Technology, Taiwan. He graduated from the DBA Program, Golden Gate University in 1996. The author wishes to thank Kerry Curtis, Warnock Davies and Nancy Bord for advising him to research the keiretsu phenomenon. He also wishes to thank Richard Osborn and the two anonymous readers for their constructive comments and suggestions.

George M. Lai, No. 164 Ping-Teng Street, Taichung, Taiwan, R.O.C.


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Lincoln, J. R., Gerlach, M. L., & Takahashi, P. (1992). Keiretsu networks in the Japanese economy: A dyad analysis of intercorporate ties. American Sociological Review, 57: 561-585.

Maruyama, Y. (1992). The big six horizontal keiretsu. Japan Quarterly, 39(2): 186-199.

Miyashita, K., & Russell, D. (1994). Keiretsu: Inside the hidden Japanese conglomerates. New York: McGraw-Hill.

Okumura, H. (1992). Corporate capitalism: Cracks in the system. Japan Quarterly, 39(1): 54-61.

Sakamoto, K., & Shimotani, M. (1987). Kigyo Gurupu no Kenkhu [Theoretical Study of the Corporate Groups]. In K. Sakamoto & M. Shimotani (Eds.) Gendai Nihon no Kigyo Gurupu [Contemporary Japanese Business Groups] (pp. 11-18). Tokyo: Toiyo Keizai Shimbosha.

Shimokawa, K. (1985). Japan's keiretsu system: The case of the automobile industry. Japan Economic Studies, 13(4): 3-31.

Toyo Keizai. (1994). Japan company handbook (Autumn). Tokyo: Toyo Keizai.
               Definition of Keiretsu by Element and author
                             External     U.S. Trade
Author/                       Trade     Representative         Sakamoto &
Element                    Organization     Office     Gerlach Shimotani
Organizational                                X           X        X
Internal Control                              X                    X
  [Legal.sup.*] Ties            X             X           X        X
  [Financial.sup.*] Ties        X             X           X        X
  [Operational.sup.*] Ties      X             X           X        X
  [Personal.sup.*] Ties
  [Cultural.sup.*] Bonds        X
Cooperative                     X             X           X        X
Symbiotic                                     ?
Author/                    Miyashita
Element                    & Russell
Organizational                 X
Internal Control               X
  [Legal.sup.*] Ties           X
  [Financial.sup.*] Ties       X
  [Operational.sup.*] Ties     X
  [Personal.sup.*] Ties        X
  [Cultural.sup.*] Bonds
Cooperative                    X
Note: The U.S. trade representative office does not explicitly
include this element in its definition of keiretsu.
             Member Firms in the Single-Origin Horizontal KBGs
Industry\KBG              Mitsubishi
Bank & Insurance          Tokyo Mitsubishi Bank [^]
                          Mitsubishi Trust & Banking
                          Meiji Mutual Life
                          Tokyo Marine & Fire
                          (Nippon Trust Bank)
Trading Co.               Mitsubishi Corp. [^]
Mining & Forestry
Construction              Mitsubishi Construction
Food & Beverages          Kirin Brewery
Textiles & Apparel        Mitsubishi Rayon
Pulp & Paper              Mitsubishi Paper Mills
Chemicals                 Mitsubishi Chemical
                          Mitsubishi Gas Chemical
                          Mitsubishi Plastics
                          (Dai Nippon Toryo)
Oil & Coal                Mitsubishi Oil
Glass & Ceramics          Ashahi Glass
Metals                    Mitsubishi Steel Mfg.
                          Mitsubishi Materials
                          Mitsubishi Shindoh
                          Mitsubishi Aluminum
                          Mitsubishi Cable Industry
Machinery                 Mitsubishi Kakoki
Electrical Machinery      Mitsubishi Electric [^]
Transport Equipment       Mitsubishi Heavy Industry [^]
                          Mitsubishi Motors
Precision Instruments     Nikon
Real Estate               Mitsubishi Estate
Shipping & Transportation Nippon Yusen
                          Mitsubishi Warehouse &
Others                    Institute Mitsubishi Research
Industry\KBG              Sumitomo
Bank & Insurance          Sumitomo Bank [^]
                          Sumitomo Trust & Banking
                          Sumitomo Life
                          Sumitomo Marine & Fire
Trading Co.               Sumitomo
Mining & Forestry         Sumitomo Forestry
                          Sumitomo Coal Mining
Construction              Sumitomo Construction
                          Sumitomo Forestry
Food & Beverages          (Marudai Food)
                          (Asahi Breweries)
Textiles & Apparel
Pulp & Paper
Chemicals                 Sumitomo Chemical [^]
                          Sumitomo Bakelite
                          (Asahi Chemical Industry) (Taisho
Oil & Coal
Glass & Ceramics          Nippon Sheet Glass
                          Sumitomo Osaka Cement
Metals                    Sumitomo Metal Ind. [^]
                          Sumitomo Metal Mining
                          Sumitomo Electric Industry
                          Sumitomo Light Metal Industries
Machinery                 Sumitomo Heavy Industry
Electrical Machinery      NEC
                          (Matsushita Electric)
                          (Sanyo Electric)
Transport Equipment       (Mazda Motor)
Precision Instruments
Real Estate               Sumitomo Reality & Development
Shipping & Transportation Sumitomo Warehouse
                          (Hanshin Electric Railway)

Source: Kigyo Keiretsu Soran '94 (Keiretsu at a Glance '94), Kigyo Keiretsu To Kyogai Chitsu '94 (Keiretsu & Industry Map '94), and Kigyo Keiretsu Kanlen Kaisha Jiden '91 (Directory of Keiretsu-affiliated Firms '91)

Note: (^.)means this firm is one of the core firms in this horizontal KBG. ()means this firm is not a president club member, but has strong Keiretsu ties within this horizontal KBG.

Mitsubishi Bank merged with Tokyo Bank to form Tokyo Mitsubishi Bank in April, 1996.
               Firms in the Multiple-Origin Horizontal KBGs
                      the Mitsui KBG and the Fuyo KBG
Industry\KBG      Mitsui
Bank & Insurance  Sakura Bank [^]
                  Mitsui Trust & Banking
                  Mitsui Mutual Life
                  Mitsui Marine & Fire
Trading Company   Mitsui & Co. [^]
Mining & Forestry Mitsui Mining
                  Hokkaido Colliary & Steamship
Construction      Mitsui Construction
                  Sanki Engineering
                  (Toyo Engineering), (Fujita)
Food & Beverages  Nippon Flour Mills
Textiles &        Toray Industries
Pulp & Paper      New Oji Paper
                  Nippon Paper Industries [*]
Chemicals         Mitsui Tootsu Chemicals
                  Denki Kagaku Kogyo [*]
                  Mitsui Petrochemical Ind.
                  (Toagosei), (Fuji Photo Film)
Oil & Coal        (General Sekiyu)
Rubber, Glass &   Chichibu Onoda Cement
Metals            Mitsui Mining & Smelting
Machinery         Japan Steel Works
                  (Toshiba Machine)
Electrical        Toshiba
  Machinery       (Nippondenso)
Transport         Mitsui Engineering & Shipbuilding
  Equipment       Ishikawajima-Harima Heavy Ind. [*]
                  Toyota Motor
Retail            Mitsukoshi
Real Estate       Mitsui Real Estate Development [^]
Industry\KBG      Fuyo
Bank & Insurance  Fuji Bank [^]
                  Yasuda Trust & Banking
                  Yasuda Mutual Life
                  Yasuda Fire & Marine
Trading Company   Marubeni
                  (Okura Co.)
Mining & Forestry
Construction      Taisei
                  (Tobishima), (Matsui Construction)
                  (Nishimatsu Construction), (Maeda)
Food & Beverages  Nisshin Flour Milling
                  Sapporo Breweries
Textiles &        Nisshinbo Industries
  Apparel         Toho Rayon
                  (Katakura Industries), (Teikoku Sen-i)
                  (Suminoe Textile)
Pulp & Paper      Nippon Paper Industries [*]
Chemicals         Showa Denko
                  Nippon Oil & Fats
                  Kureha Chemical Industry
                  (Nippon Carbon)
Oil & Coal        Tonen
Rubber, Glass &   Nihon Cement
Metals            NKK
                  (Yodogawa Steel Works)
Machinery         Kubota
                  Nippon Seiko
                  (Maruyama MFG.)
Electrical        Hitachi [*]
  Machinery       Oki Electric Industry
                  Yokogawa Electric
Transport         Nissan Motor
Precision         Canon
Real Estate       Tokyo Tatemono
Shipping &       Mitsui OSK Line Tobu Railway
  Transportation Mitsui-Soko     Keihin Electric Express Railway
                                 Showa Line
Others           (Kanebo)        (Nippon Suisan), (Hitachi Sales)
Industry\KBG     Sanwa
Bank & Insurance Sanwa Bank [^]
                 Toyo Trust & Banking
                 Nippon Life
                 (Daido Life)
Trading Company  Nichimen
                 Nissho Iwai [*]
                 Iwatani International
Construction     Obayashi
                 Toyo Construction
                 Sekisui House
Food & Beverages Itoham Foods
Textiles &       Unitiko
  Apparel        Teijin
Pulp & Paper
Chemicals        Tokuyama Soda, Sekisui Chemical
                 Ube Industries, Hitachi Chemical
                 Tanabe Seiyoku, Fujisawa
                 Kansai Paint
Oil & Coal       Cosmo Oil
Rubber, Glass &  Toyo Tire & Rubber
Metal            Kobe Steel [*], Nisshin Steel
                 Nakayama Steel Works
                 Hitachi Metals, Hitachi Cable
Machinery        NTN
Electrical       Hitachi [*], Iwatsu Electric, Sharp,
  Machinery      Kyocera
                 Nitto Denko
Industry/KBG     DKB
Bank & Insurance Dai-Ichi Kangyo Bank [^]
                 Asahi Mutual Life
                 Fukoku Mutual Life
                 Nissan Fire & Marine
                 Taisei Fire & Marine
Trading Company  Itochu
                 Nissho Iwai [*]
                 Itoki Co.
Construction     Shimizu
Food & Beverages
Textiles &
Pulp & Paper     Honshu Paper
Chemicals        Asahi Chemical Industry
                 Denki Kagaku Kogyo [*], Kyowa Hakko
                 Nippon Zeon, Ashahi Denka Kogyo
                 Sankyo, Shiseido, Lion
Oil & Coal       Showa Shell Sekiyu
Rubber, Glass &  Yokohama Rubber
  Ceramics       Chichibu Cement
Metal            Kawasaki Steel, Kobe Steel [*]
                 Japan Metals & Chemicals, Nippon
                  Light Metal
                 Furukawa, Furukawa Electric
Machinery        Niigata Engineering Iseki
                 Iseki & Co.
Electrical       Hitachi [*] Fuji Electric, Yaskawa
  Machinery       Electric Mfg.
                 Fujitsu, Nippon Columbia
Transport         Hitachi Zosen
  Equipment       Shin Meiwa Industry
                  Daihatsu Motor
Precision         Hoya
Retail            Takashimaya
Financial Service Orix
Shipping &        Hankyu
  Transportation  Nippon Express [*]
                  Navix Line
Transport         Kawasaki Heavy Industries
  Equipment       Ishikawajima-Harima Heavy Industries [*]
                  Isuzu Motor
Precision         Asahi Optical
Retail            Seibu Department Store
Financial Service Kankaku Securities
Shipping &        Nippon Express [*]
  Transportation  Kawasaki Kisen
                  Shibusawa Warehouse
Others            Tokyo Dome

Source: Kigyo Keiretsu Soran '94 (Keiretsu at a Glance '94), Kigyo Keiretsu To Kyogai Chitsu '94 (Keiretsu and Industry Map '94), and Kigyo Keiretsu Kanlen Kaisha Jiden '91 (Directory of Keiretsu-affiliated Firms '91).

Notes: (^.)means this firm is one of the core firms in this horizontal KBG. ()means this firm is not a president club member, but has strong Keiretsu ties within this horizontal KBG. (^.)m(*.)means this firm is affiliated with more.
                       Major Firms in the SupplyKBGs
             Dominating Firm
KBG          (Core Business)
Taisei       Taisei Corp.
Misawa       Misawa Homes Co., Ltd.
Ajinomoto    Ajinomoto Co., Inc.
               (Foods & Beverages)
Toray        Toray Industries, Inc.
               (Textiles & Apparel)
Asahi        Asahi Chemical Industry
  Chemical     Co., Ltd. (Textiles &
               Apparel, Chemicals)
Sumitomo     Sumitomo Chemical Co.,
 Chemical      Ltd. (Chemicals)
Mitsubishi   Mitsubishi Chemical
  Chemical     Corp. (Chemicals &
Nippon Oil   Nippon Oil Co., Ltd.
               (Oil & Coal)
Japan Energy Japan Energy Corp. (Oil
               & Coal, Nonferrous
Shin Nippon  Nippon Steel Corp.
  Seitetsu     (Steel & Metals)
Kobe Steel   Kobe Steel, Ltd. (Steel
               & Metals)
Sumitomo     Sumitomo Metal Ind.
  Metal        (Steel & Metals)
KBG          Major Suppliers or Subsidiaries (Industry)
Taisei       Taisei Rotec [3], Taisei Prefab [3], Yuraku Real
               Estate [26]
Misawa       Misawa Ceramics [3], Tokyo Misawa Home [3],
               Tohoku Misawa Home [3], Misawa Ceramic Chemical
               [7] Bosuifu Mfg. [lO], Ishii Precision Tool
               [15], Misawa Van [23], Misawa Resort [33], Toyo
               Suido Kiko [33]
Ajinomoto    Mercian [4], Calpis Food [4], Kumazawa Seiyu
               Sangyo [4]
Toray        Towa Orimono [5]
Asahi        Asahi Organic Chemicals Ind. [7], Fuji Titanium
  Chemical     Ind. [7], Tensho Electric Ind. [16]
Sumitomo     Sumitomo Bakelite [7], Sumitomo Seika Chemical
 Chemical      [7], Shinto Paint [7], Sakata Inx [7], Taoka
               Chemical [7], Kyoto Die-Casting [13], Inabata
               Co. [20]
Mitsubishi   Mitsubishi Plastics Ind. [7], Nippon Kasei
  Chemical     Chemical [7], Taiyo sanso [7], Nippon Synthetic
               Chemical Ind. [7], Kawasaki Kasei Chemicals
               [7], Emoto Ind. [7], Nikko Sanso [7], Tokyo
               Tanabe [8], Nitto Kako [10]
Nippon Oil   Nippon Hodo [3], Koa Oil [9], Japan Oil
               Transportation [27]
Japan Energy Tatsuta Electric Wire & Cable [13], Toho
               Titanium [13], Koyo Iron Works & Construction
               [l5], Maruwn Transport [27]
Shin Nippon  Nittetsu Mining [2], Sanko Metal Ind. [3], Fudo
  Seitetsu     Construction [3], Taihei Kogyo [3], Nippon
               Tetrapod [3], Nippon Steel Chemical [7],
               Koraski [11], Harima Ceramic [l1], Nippon
               Concrete Ind. [11], Nisshin Steel [12], Godo
               Steel [12], TYK [12], Pacific Metals [12],
               Daido Steel [12], Nippon Metal Ind. [12],
               Nichia Steel Works [12], Japan Metal &
               Chemicals [12], Nippon Denko [12], Takasago
               Tekko [12], Nittetsu Steel Pipe [12], Suzuki
               Metal Ind. [12], Nippon Steel Semiconductor
               [16], Nittetsu Shoji [20]
Kobe Steel   Nippon Koshuha Steel [12], Shinko Wire [12],
               Kokoku Steel Wire [12], Amatei [14], Suncall
               [14], Osaka Chain and Machinery [15], Shinko
               Engineering [15], Shinko Electric [16],
               Nabco [17], Shinsho [20]
Sumitomo     Nippon Pipe Mfg. [12], Kanto Special Steel Works
  Metal        [12], Chuo Denki Kogyo [12], Sumitomo Sitix
               [13], Sumitomo Light Metal Ind. [13], Sumitomo
               Precesion Products [15], Sumitomo Special Metals
               [16], Daiichi Chuo Kisen [28]
Sony       Sony Corp. (Electrical
Toshiba    Toshiba Corp. (Electrical
Hitachi    Hitachi, Ltd. (Electrical
Matsushita Matsushita Electric
  Electric   Industrial Co., Ltd.
             (Electrical Machinery)
NEC        NEC Corp. (Electrical
Sony         Machinery)
Fujitsu    Fujitsu Ltd. (Electrical
Toyota     Toyota Motor Corp.
  Motor      (Transport Equipment)
Sony       Aiwa [16], Sony Chemicals [16], Sony
             Magnescale [18], Sony Music Entertainment
             (Japan) [19]
Toshiba    Toshiba Ceramics [11], Showa Electric Wire &
             Cable [13], Toshia Machine [15], Toshiba
             Tungaloy [15], DMW [15], Tokyo Electric [16],
             Nishishiba Electric [16], Nippon
             Tungstend [16], Shibaura Engineering
             Works [16], Topcon [18], Tec [20]
Hitachi    Hitachi Chemical [7], Hitachi Metals [12],
             Hitachi Powdered Metals [14], Hitachi Tool
             Engineering [14], Toyo Machinery & Metal [15],
             Kokusai Electric [16], Hitachi
             Electronics [16], Nippon Columbia [16],
             Hitachi Maxell [16], Shin-Kobe Electric
             Machinery [16], Nakayo
             Telecommunications [16], Japan Servo [16],
             Yagi Antenna [16] Hitachi Medical [16],
             Hitachi AIC [16], Kokusan Denki [16],
             Tokico [17], Shinmaywa Ind. [17], Nissei
             Sangyo [20], Hitachi Mteals Techno [20]
Matsushita National House Ind. [3], Wakayama
  Electric   Precision [15], Matsushida Refrigeration [16],
             Matsushita Seiko [16], Matsushita
             Communication Ind. [16], Kyushu Matsushita
             Electric [16], Matsushita-Kotobuki Electronics
             Ind. [16], Victor Co. of Japan [16],
             Matsushita Electric Works [16], Asahi National
             Lighting [16], Miyata Ind. [17]
NEC        Nippon Electric Glass [11], Nippon Electric
Sony         Ind. [16], Nitsuko [16], Toyo Communication
             Equipment [16], Anritsu [16], Tokin [16],
             Japan Aviation Electronics Ind. [16], Meisei
             Electric [16], Ando Electric [16], Nippon
             Avionics [16], Tama Electric [16]
Fujitsu    Fujitsu General [16], Advantest [16],
             Fanuc [16], Fuji Electrochemical [16],
             Takamisawa Electric [16], Kanda Tsushin
             Kogyo [16], Fujitsu Denso [16], Fujitsu
             Kiden [16], Shinko Electric Ind. [16], Towa
             Electron [16]
Toyota     Kyowa Leather Cloth [7], Aichi Steel Works [12],
  Motor      Chuo Malleable Iron [12], Chuo Spring [14],
             Tokyo Sintered Metals [14], Toyoda Machine
             Works [15], Toyoda Boshoku [15], Koyo
             Seiko [15], Trinity Ind. [15], Koito
             Mfg. [16], Hino Motors [17], Daihatsu
             Motor [17], Toyota Auto Body [17] Toyoda
             Automatic Loom Works [17], Nippondenso [17],
             Tokai Rika [17], Kanto Auto Works [17], Futaba
             Ind. [17], Kayaba Ind. [17], Shiroki [17],
             Aisin Seiki [17], Toyoda Gosei [17], Owari
             Precise Products [17], Aisan Ind. [17],
             Jeco [18], Toyota Tsusho [20]
Nissan Motor Nissan Motor Co., Ltd.
               (Transport Equipment)
Honda Motor  Honda Motor Co., Ltd.
               (Transport Equipment)
Canon        Canon Inc. (Precision
Mitsubishi   Mitsubishi Corp.
  Corp.        (Trading Company)
Mitsui & Co. Mitsui & Co. (Trading
Nissan Motor SNT [15], Clarion [16], Nissan Diesel Motor [17],
               Nissan Shatai [17], Kinugawa Rubber Ind. [17],
               Zexel [17], Akebono Brake Ind. [17], Ichikoh
               Ind. [17], Calsonic [17], Tochigi Fuji Ind.
               [17], Fuji Heavy Ind. [17], Unisia Jecs [17],
               Kansei [17], Nippon Carbureter [17], Kiriu
               Machine Mfg. [17], Sanoh Ind. [17], Hashimoto
               Forming Ind. [17], Tachi-S [17], Fuji Univance
               [17], Kasai Kogyo [17], Jidosha Denki Kogyo
               [17], Fuji Kiko [17], Daikin Mfg. [17], Ikeda
               Bussan [17], Yorozu [17], Yamakawa Ind. [17],
               Tsuchiya Manufacturing [17], Nihon Plast [17],
               Ohi Seisakusho [17], Tosok [18]
Honda Motor  Stanley Electric [16], Showa [17], Keihin Seiki
               Mfg. [17]
Canon        Copyer [15], Nippon Typewriter [15], Canon
               Electronics [16]
Mitsubishi   Nitto Flour Milling [4], Nihon Nosan Kogyo [4],
  Corp.        Kanro [4], Nihon Shokuhin Kako [4]. Kinsho-
               Mataichi [20], Meiwa Trading [20], Tokyo
               Sangyo [20], Diamond City [26]
Mitsui & Co. Shin Nippon Air Technologies [3], Chuo Build
               Ind. [3], Nippon Formula Feed Mfg. [4], Taito
               [4] Mitsui Sugar [4], Honen [4], F-one [5],
               Takasaki Paper Mfg. [6], Honshu Chemical Ind.
               [7], Tokyo Kohtetsu [12], Hakodate Seimo Sengu
               [19], Nihon Unisys [20], Asia Air Survey [29],
               Utoku Express [30]

Source: Kigyo Keiretsu Soran '94 (Keiretsu at a Glance '94), Kigyo Keiretsu Kanlen Kaisha Jiden '91 (Directory of Keiretsu-affiliated Firms '91), and Japan Company Handbook I & II - Autumn '94.

Note: (1.)Fishery, Agriculture & Forestry, (2.)Mining, (3.)Construction, (4.)Foods, (5.)Textiles & Apparel, (6.)Pulp & Paper, (7.)Chemicals, (8.)Pharmaceuticals, (9.)Oil & Coal Products (10.)Rubber Products, (11.)Glass & Ceramics, (12.)Steel Products, (13.)Nonferrous Metals, (14.)Metal Products, (15.)Machinery, (16.)Electrical Machinery, (17.)Transport Equipment, (18.)Precision Instruments, (19.)Other Products, (20.)Wholesale, (21.)Retail, (22.)Banks (23.)Miscellaneous Finance, (24.)Security, (25.)Insurance, (26.)Real Estate, (27.)Land Transport (28.)Marine Transport, (29.)Air transport, (30.)Warehousing & Harbor Transport Services (31.)Communication, (32.)Electric Power & Gas, (33.)Services.
                   Major Firms in the Distribution KBGs
             Firm (Core
  KBG          Business)
Toyota Motor Toyota Motor
               Corp. (Transport
Nissan Motor Nissan Motor Co.,
               Ltd. (Transport
Mazda Motor  Mazada Motor
               Corp. (Transport
Honda Motor  Honda Motor Co.,
               Ltd. (Transport
Komatsu      Komatsu Ltd.
Hitachi      Hitachi, Ltd.
  KBG        Major Distributors or Subsidiaries (Mode of
Toyota Motor 50 Toyota Dealerships (Wholesale & Retail)
             52 Toyopet Dealerships (Wholesale & Retail)
             77 Corolla Dealerships (Wholesale & Retail)
             66 Auto Dealerships (Wholesale & Retail)
             66 Vista Dealerships (Wholesale & Retail)
             33 Toyota Forklift Dealerships (Wholesale &
             34 Toyota Autoparts (Wholesale & Retail)
Nissan Motor 55 Nissan Dealerships (Wholesale & Retail)
             41 Nissan Motor Dealerships (Wholesale & Retail)
             58 Nissan Sunny Dealerships (Wholesale & Retail)
             52 Nissan Prince Dealerships (Wholesale &
             5 Nissan Cherry Dealerships (Wholesale & Retail)
             Nissan Autoparts Tokyo (Wholesale & Retail)
Mazda Motor  Autorama (Wholesale & Retail)
             Autozam (Wholesale & Retail)
             Mazda Autoparts Sales (Wholesale &
             Citron Japan (Wholesale & Retail)
Honda Motor  101 Honda Kurio Dealerships (Wholesale & Retail)
             97 Honda Belno Dealerships (Wholesale &
             1371 Honda Primo Dealerships (Wholesale &
             Honda Motorcycle Dealership (Wholesale & Retail)
             Honda Autopart Service (Wholesale & Retail)
Komatsu      17 Regional Komatsu Sales Subsidiaries (Retail)
             Komatsu Parts Sales, Western Japan (Retail)
             Komatsu Press Engineering Service (Service)
             Komatsu Pulleytecs (service)
             4 Regional Small-Scale Construction Machines
             Sales (Retail)
             4 Regional Komatsu Pick (Retail)
Hitachi      Hitachi Sales (Wholesale)
             Nissei Sangyo (Wholesale)
             Hitachi Reinetsu (Wholesale)
             Hitachi Information System (Wholesale)
             Hitachi Software engineering (Wholesale)
             Hitachi Auto Parts Sales (Wholesale)
             Hitachi Electric Parts Sales (Wholesale)
             Hitachi Credit (Retail)
             Hitachi Elevator Service (Service)
             Hitachi Electric Service (Service)
             10,000 KBG Member Stores (Retail)
NEC        NEC Corp.          16 Regional NEC Sales Subsidiaries (Wholesale)
             (Electrical      NEC Data Machine (Wholesale)
             Machinery)       NEC Wireless Electrics (Wholesale)
                              NEC Software (Wholesale)
                              NEC Communication System (Wholesale)
                              NEC Field Service (Service)
                              NEC Product Service (Service)
                              NEC Transmission Engineering (Service)
Toshiba    Toshiba Corp.      4 Regional Toshiba Sales Subsidiaries
             (Electrical      Toshiba Equipment & Machinery (Wholesale)
             Machinery)       Toshiba Device (Wholesale)
                              Toshiba Information Machine (Wholesale)
                              Toshiba Medical System (Wholesale)
                              Toshiba Credit (Credit Sales)
                              Toshiba Engineering (Service)
                              Toshiba Tokyo Metropolitan Service (Service)
                              12,000 KBG Member Stores (Retail)
Mitsubishi Mitsubishi         5 Regional Mitsubishi Electric Machine Sales
                              Subsidiaries (Wholesale)
  Electric   Electric Corp.   (Wholesale)
             (Electric        6 Regional Mitsubishi Electric Product Sales
                              Subsidiaries (Wholesale)
            Machinery)        Kodensha (Wholesale)
                              Reoreisha (Wholesale)
                              Mitsubishi Electric Business system (Wholesale)
                              Mitsubishi Electric Osram (Wholesale)
                              Reowa Trading (Wholesale)
                              Tokyo Mitsubishi Electrical Equipment and
                              Machine Sales
                              Reoden Elevator Installation (Retail)
                              4,000 KBG Member Stores, (Retail)
Fujitsu    Fujitsu Ltd.       Fujitsu Business System (Wholesale)
             (Electrical      Fujitsu Supply (Wholesale)
             Machinery)       Fujitsu OA (Wholesale)
                              Fujitsu Micro Device (Wholesale)
                              Fujitsu SA Systems (Wholesale)
                              Fujitsu Shikoku Infortec (Wholesale)
                              Fujitsu Trading (Wholesale)
                              Fujitsu Office Machine (Wholesale)
                              6 Fujitsu System Support (Service)
                              Fujitsu FIP (Service)
                              Fujitsu Social Science Laboratory (Service)
                              Fujitsu Dai-Ichi Communication Software
Matsushita Matsushita         10 Regional National Sales Subsidiaries
  Electric   Electric         8 Regional National Credit (Credit Sales)
  Industry   Industrial Co.,  National Lease (Lease)
             Ltd. (Electrical 25,000 KBG Member Stores (Retail)
Sony            Sony Corp.
Sharp           Sharp Corp.
Casio Computer  Casio Computer
                Co., Ltd. (Electrical
Ricoh           Ricoh Co., Ltd.
                  (OA Machinery)
Canon           Canon Inc. (OA
                  Machinery &
Fuji Photo Film Fuji Photo Film Co.
                  Ltd. (Chemicals)
Konica          Konica Corp.
Takeda Chemical Takeda Chemical
  Industries      Industries, Ltd.
Sony            Sony Network (Wholesale)
                18 Regional Sony Consumer Marketing
                Sony Service (Service)
                3,000 KBG Member Stores (Retail)
Sharp           Sharp Electronics Sales (Wholesale)
                Sharp System Product (Wholesale)
                Sharp Engineering (Aftersale Service)
                Sharp System Service (Aftersale Service)
                Sharp Finance (Credit Sale, Lease)
                3,000 KBG Member Stores (Retail)
Casio Computer  7 Regional Casio Information Machine
                6 Regional Casio Sales (Wholesale)
                Osaka System Sales (Wholesale)
                Casio Eishin (Wholesale)
                Casio Lease (Lease)
                Casio System Development
                (Wholesale & Service)
                Casio Information Service
                (Wholesale & Service)
                Casio API (Wholesale & Service)
Ricoh           10 Regional Ricoh Subsidiaries
                36 Regional Ricoh (Chain Store)
                Ricoh Education Machine (Wholesale
                & Direct Sale)
                Ricoh Information System (Service)
Canon           Canon Sales (Wholesale)
                Canon Copyer Sales (Wholesale)
                51 Regional Canon Copyer (Chain Store)
Fuji Photo Film Fuji Color Sales (Wholesale)
                Regional Fuji Color Chain Store
                (Chain Store)
                Fuji Medical System (Wholesale)
                Fuji Special Paper (Wholesale)
                Fuji Magnetic Tape (Wholesale)
                Fuji Film Battery (Wholesale)
                Fuji Service (Service)
                Fuji Photo Service (Service)
Konica          Konica Sales (Wholesale)
                12 Regional Konica Chain Stores
                (Chain Store)
                Konica Shoji (Wholesale)
                Konica Medical (Wholesale)
                Konica Color Equipment (Wholesale)
                Konica Business Machine (Wholesale)
                Konica Magnetics (Wholesale)
                Nippon ID System (Wholesale)
Takeda Chemical 109 Regional Takeda Subsidiaries
  Industries    (Wholesale & Direct Sales)
                150 Second-Tier Distributors (Wholesale)
                38,000 KBG Member Stores (Retail)
Taisho           Taisho
  Pharmaceutical   Pharmaceutical
                   Co., Ltd.
Otsuka           Otsuka Chemical
                   Co., Ltd.
Shisedo          Shisedo Co., Ltd.
Kanebo           Kanebo Ltd.
Pola             Pola Cosmetics Inc.
Kao              Kao Corp.
Snow Brand       Snow Brand Milk
  Milk Products    Products Co.,
                   Ltd. (Foods &
Yakult Honsha    Yakult Honsha (F
                   & B)
Nippon Ham       Nippon Meat
                   Packers, Inc.
                   (Foods &
Nichirei         Nichirei Corp.
                   (Foods &
Ito-Yokado       Ito-Yokado Co.,
                   Ltd. (Retail)
Taisho           8 Regional Taisho Subsidiaries (Wholesale &
                 Direct Sales)
  Pharmaceutical 36,000 KBG Member Stores (Retail)
                 [Unique.sup.*] Reverse Shareholding
Otsuka           17 Regional Otsuka Subsidiaries
                 (Wholesale & Direct Sales)
                 13 Major Second-Tier Distributors
Shisedo          Shisedo Distribution Service (Wholesale)
                 13 Shisedo Regional Cosmetics Sales
                 Subsidiaries (Wholesale)
                 25,000 KBG Member stores in Cosmetics (Retail)
                 Shisedo Fine Toilet (Wholesale)
                 17,000 KBG Member Stores in Toilet Products
Kanebo           71 Regional Kanebo Cosmetics Sales (Wholesale)
                 24,000 KBG Member Stores in Cosmetics (Retail)
                 Kanebo Products Sales (Wholesale)
Pola             79 Regional Pola Sales (Wholesale & Direct Sale)
Kao              20 Regional Kao Toiletry Sales (Wholesales)
                 Kao Cosmetics Sales (Wholesale)
                 Kao Beauty Salon Sales (Wholesale)
Snow Brand       Snow Brand Busan (Wholesale)
  Milk Products  Snow Brand Shoji (Wholesale)
                 Shimaya Shoji (Wholesale)
                 Jinkijima Shoji (Wholesale)
Yakult Honsha    160 Regional Yakult Sales (Wholesale)
Nippon Ham       36 Regional Nippon Ham Meat Sales (Wholesale)
                 15 Regional Nippon Ham Ham & Sausage Sales
                 8 Regional Nippon Ham Processed Food Sales
                 4 Regional Marine Foods Sales (Wholesale)
Nichirei         Kansai Nichirei (Wholesale)
                 Shikoku Suisan Reizo (Wholesale)
                 Hosa Reizo (Wholesale)
                 Yukiwa (Wholesale)
                 Hinata Star Food (Wholesale)
Ito-Yokado       York-Benimaru (Chain Store)
                 York-Mart (Chain Store)
                 Robinson Japan (Department Store)
                 Oshuman Japan (Sports Specialty Store)
                 Daikuma (Discount Store)
                 Seven-Eleven Japan (Convenience Chain Store)
                 Denny Japan (Restaurant Chain)
Daiei            Deiei, Inc. (Retail)
Seibu Saison     Seiyu, Ltd.
Tokyu            Tokyu Corp.
Orix             Orix Corp.
Mitsubishi Corp. Mitsubishi Corp.
Mitsui & Co.     Mitsui & Co.
Daiei            Maruetsu (Chain Store)
                 Jujiya (Department Chain)
                 Volks (Steak House Chain)
                 Printemps Guinza (Department Chain)
                 Thecar (Direct Marketing)
                 Daiei Finance (Finance)
Seibu Saison     Seibu Department Store (Department Store)
                 Family Mart (Convenience Chain Store)
                 Seiyo Food System (Restaurant Chain)
                 Yoshinoya D&C (Restaurant Chain)
                 Osawa Shokai (Wholesaler)
                 Niko (Direct Marketing)
                 Seibu Auto Sales (Dealer) [Sold.sup.*]
                 to Chrysler, 6/95
                 Jaguar Japan (Dealer)
                 Parco (Shopping Center, Fashion Specialty Shop)
                 Credit Saison (Credit Sales)
                 Saison Information Systems (Service)
Tokyu            Tokyu Department Store (Retail)
                 Tokyu Store (Chain Store)
                 Nagano Tokyu Department Store (Retail)
                 Tokyu Trading (Wholesale)
                 Tokyu Card (Credit Sales)
Orix             Orix Alfa (Lease)
                 Orix Life Insurance (Insurance)
                 Orix Credit (Credit Sales)
                 Orix Commodities (Future Trade)
Mitsubishi Corp. MC Finance (Finance)
                 Mitsubishi Corp. Futures (Future Trade)
                 Ryosin Lease (Lease)
Mitsui & Co.     Mitsui Lease (Lease)
                 Busan Shapack (Finance)
                 Mitsui Co. Futures (Future Trade)

Source: Ryutsu Keiretsu To Shijyo Chizu '91 (Distribution Keiretsu and Market Map '91), Kigyo Keiretsu Soran '94 (Keiretsu at a Glance '94), Kigyo Keiretsu Kanlen Kaisha Jiden '91 (Directory of Keiretsu-affiliated Firms '91), and Japan Company Handbook, I & II - Autumn '94.
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Author:Lai, George Ming-Hong
Publication:Journal of World Business
Date:Dec 22, 1999
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