Knowing Who You Are Doing Business With In Japan: A Managerial View Of Keiretsu And Keiretsu Business Groups.
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.
WHAT IS A KEIRETSU?
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.
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.
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.
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.
CLASSIFICATION OF THE KEIRETSU BUSINESS GROUPS
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.
American Chamber of Commerce in Japan. (1995). US-Japan trade white paper. Tokyo: ACCJ.
Anchordoguy, M. (1990). A brief history of Japan's keiretsu. Harvard Business Review, 68(July/August): 58-59.
Bieda, K. (1970). The structure and operation of the Japanese economy. New York: John Wiley and Sons Australia.
Fung, K. C. (1991). Characteristics of Japanese industrial groups and their potential impact on U.S.-Japan trade. In R. Baldwin (Ed.) Empirical studies of commercial policy (pp.137-168). Chicago, University of Chicago Press.
Gerlach, M. L. (1992). The Japanese Corporate network: A block model analysis. Administrative Science Quarterly, 37: 105-139.
Imai, K. (1990). The legitimacy of Japan's corporate groups. Japan Economics, 17-3: 23-28.
Japan External Trade Organization. (1992). Keiretsu: Rational system undergoing change. JETRO Monitor, 7(3): 1-3.
Johnson, C. A. (1982). MITI and the Japanese Miracle. Stanford: Stanford University Press.
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 Japan External U.S. Trade Author/ Trade Representative Sakamoto & Element Organization Office Gerlach Shimotani Organizational X X X Arrangement Internal Control X X Mechanism Commercial Justification [Legal.sup.*] Ties X X X X [Financial.sup.*] Ties X X X X [Operational.sup.*] Ties X X X X Emotional Commitment [Personal.sup.*] Ties [Cultural.sup.*] Bonds X Cooperative X X X X Activities Symbiotic ? Relationship Author/ Miyashita Element & Russell Organizational X Arrangement Internal Control X Mechanism Commercial Justification [Legal.sup.*] Ties X [Financial.sup.*] Ties X [Operational.sup.*] Ties X Emotional Commitment [Personal.sup.*] Ties X [Cultural.sup.*] Bonds Cooperative X Activities Symbiotic Relationship 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 & Transportation 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 (Asanuma) Food & Beverages (Marudai Food) (Asahi Breweries) Textiles & Apparel Pulp & Paper Chemicals Sumitomo Chemical [^] Sumitomo Bakelite (Asahi Chemical Industry) (Taisho Pharmaceutical) 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) Others
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. [^] (Tomen) Mining & Forestry Mitsui Mining Hokkaido Colliary & Steamship Construction Mitsui Construction Sanki Engineering (Toyo Engineering), (Fujita) Food & Beverages Nippon Flour Mills Textiles & Toray Industries Apparel 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 Ceramics 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 Precision Instruments 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 Nichirei 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 Ceramics Metals NKK (Yodogawa Steel Works) Machinery Kubota Nippon Seiko (Maruyama MFG.) Electrical Hitachi [*] Machinery Oki Electric Industry Yokogawa Electric Transport Nissan Motor Equipment Precision Canon Instruments Retail 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 Zenitaka Toyo Construction Sekisui House Food & Beverages Itoham Foods Suntory Textiles & Unitiko Apparel Teijin Pulp & Paper Chemicals Tokuyama Soda, Sekisui Chemical Ube Industries, Hitachi Chemical Tanabe Seiyoku, Fujisawa Pharmaceuticals Kansai Paint Oil & Coal Cosmo Oil Rubber, Glass & Toyo Tire & Rubber Ceramics 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 Kanematsu Nissho Iwai [*] Kawasho Itoki Co. Construction Shimizu Food & Beverages Textiles & Apparel Pulp & Paper Honshu Paper Chemicals Asahi Chemical Industry Denki Kagaku Kogyo [*], Kyowa Hakko Kogyo 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. Ebara Electrical Hitachi [*] Fuji Electric, Yaskawa Machinery Electric Mfg. Fujitsu, Nippon Columbia Transport Hitachi Zosen Equipment Shin Meiwa Industry Daihatsu Motor Precision Hoya Instruments Retail Takashimaya Financial Service Orix Shipping & Hankyu Transportation Nippon Express [*] Navix Line Others Transport Kawasaki Heavy Industries Equipment Ishikawajima-Harima Heavy Industries [*] Isuzu Motor Precision Asahi Optical Instruments Retail Seibu Department Store Financial Service Kankaku Securities Orient 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. (Construction) Misawa Misawa Homes Co., Ltd. (Construction) 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 & Petrochemical) Nippon Oil Nippon Oil Co., Ltd. (Oil & Coal) Japan Energy Japan Energy Corp. (Oil & Coal, Nonferrous Metals) 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 , Taisei Prefab , Yuraku Real Estate  Misawa Misawa Ceramics , Tokyo Misawa Home , Tohoku Misawa Home , Misawa Ceramic Chemical  Bosuifu Mfg. [lO], Ishii Precision Tool , Misawa Van , Misawa Resort , Toyo Suido Kiko  Ajinomoto Mercian , Calpis Food , Kumazawa Seiyu Sangyo  Toray Towa Orimono  Asahi Asahi Organic Chemicals Ind. , Fuji Titanium Chemical Ind. , Tensho Electric Ind.  Sumitomo Sumitomo Bakelite , Sumitomo Seika Chemical Chemical , Shinto Paint , Sakata Inx , Taoka Chemical , Kyoto Die-Casting , Inabata Co.  Mitsubishi Mitsubishi Plastics Ind. , Nippon Kasei Chemical Chemical , Taiyo sanso , Nippon Synthetic Chemical Ind. , Kawasaki Kasei Chemicals , Emoto Ind. , Nikko Sanso , Tokyo Tanabe , Nitto Kako  Nippon Oil Nippon Hodo , Koa Oil , Japan Oil Transportation  Japan Energy Tatsuta Electric Wire & Cable , Toho Titanium , Koyo Iron Works & Construction [l5], Maruwn Transport  Shin Nippon Nittetsu Mining , Sanko Metal Ind. , Fudo Seitetsu Construction , Taihei Kogyo , Nippon Tetrapod , Nippon Steel Chemical , Koraski , Harima Ceramic [l1], Nippon Concrete Ind. , Nisshin Steel , Godo Steel , TYK , Pacific Metals , Daido Steel , Nippon Metal Ind. , Nichia Steel Works , Japan Metal & Chemicals , Nippon Denko , Takasago Tekko , Nittetsu Steel Pipe , Suzuki Metal Ind. , Nippon Steel Semiconductor , Nittetsu Shoji  Kobe Steel Nippon Koshuha Steel , Shinko Wire , Kokoku Steel Wire , Amatei , Suncall , Osaka Chain and Machinery , Shinko Engineering , Shinko Electric , Nabco , Shinsho  Sumitomo Nippon Pipe Mfg. , Kanto Special Steel Works Metal , Chuo Denki Kogyo , Sumitomo Sitix , Sumitomo Light Metal Ind. , Sumitomo Precesion Products , Sumitomo Special Metals , Daiichi Chuo Kisen  Sony Sony Corp. (Electrical Machinery Toshiba Toshiba Corp. (Electrical Machinery) Hitachi Hitachi, Ltd. (Electrical Machinery Matsushita Matsushita Electric Electric Industrial Co., Ltd. (Electrical Machinery) NEC NEC Corp. (Electrical Sony Machinery) Fujitsu Fujitsu Ltd. (Electrical Machinery) Toyota Toyota Motor Corp. Motor (Transport Equipment) Sony Aiwa , Sony Chemicals , Sony Magnescale , Sony Music Entertainment (Japan)  Toshiba Toshiba Ceramics , Showa Electric Wire & Cable , Toshia Machine , Toshiba Tungaloy , DMW , Tokyo Electric , Nishishiba Electric , Nippon Tungstend , Shibaura Engineering Works , Topcon , Tec  Hitachi Hitachi Chemical , Hitachi Metals , Hitachi Powdered Metals , Hitachi Tool Engineering , Toyo Machinery & Metal , Kokusai Electric , Hitachi Electronics , Nippon Columbia , Hitachi Maxell , Shin-Kobe Electric Machinery , Nakayo Telecommunications , Japan Servo , Yagi Antenna  Hitachi Medical , Hitachi AIC , Kokusan Denki , Tokico , Shinmaywa Ind. , Nissei Sangyo , Hitachi Mteals Techno  Matsushita National House Ind. , Wakayama Electric Precision , Matsushida Refrigeration , Matsushita Seiko , Matsushita Communication Ind. , Kyushu Matsushita Electric , Matsushita-Kotobuki Electronics Ind. , Victor Co. of Japan , Matsushita Electric Works , Asahi National Lighting , Miyata Ind.  NEC Nippon Electric Glass , Nippon Electric Sony Ind. , Nitsuko , Toyo Communication Equipment , Anritsu , Tokin , Japan Aviation Electronics Ind. , Meisei Electric , Ando Electric , Nippon Avionics , Tama Electric  Fujitsu Fujitsu General , Advantest , Fanuc , Fuji Electrochemical , Takamisawa Electric , Kanda Tsushin Kogyo , Fujitsu Denso , Fujitsu Kiden , Shinko Electric Ind. , Towa Electron  Toyota Kyowa Leather Cloth , Aichi Steel Works , Motor Chuo Malleable Iron , Chuo Spring , Tokyo Sintered Metals , Toyoda Machine Works , Toyoda Boshoku , Koyo Seiko , Trinity Ind. , Koito Mfg. , Hino Motors , Daihatsu Motor , Toyota Auto Body  Toyoda Automatic Loom Works , Nippondenso , Tokai Rika , Kanto Auto Works , Futaba Ind. , Kayaba Ind. , Shiroki , Aisin Seiki , Toyoda Gosei , Owari Precise Products , Aisan Ind. , Jeco , Toyota Tsusho  Nissan Motor Nissan Motor Co., Ltd. (Transport Equipment) Honda Motor Honda Motor Co., Ltd. (Transport Equipment) Canon Canon Inc. (Precision Instruments) Mitsubishi Mitsubishi Corp. Corp. (Trading Company) Mitsui & Co. Mitsui & Co. (Trading Company) Nissan Motor SNT , Clarion , Nissan Diesel Motor , Nissan Shatai , Kinugawa Rubber Ind. , Zexel , Akebono Brake Ind. , Ichikoh Ind. , Calsonic , Tochigi Fuji Ind. , Fuji Heavy Ind. , Unisia Jecs , Kansei , Nippon Carbureter , Kiriu Machine Mfg. , Sanoh Ind. , Hashimoto Forming Ind. , Tachi-S , Fuji Univance , Kasai Kogyo , Jidosha Denki Kogyo , Fuji Kiko , Daikin Mfg. , Ikeda Bussan , Yorozu , Yamakawa Ind. , Tsuchiya Manufacturing , Nihon Plast , Ohi Seisakusho , Tosok  Honda Motor Stanley Electric , Showa , Keihin Seiki Mfg.  Canon Copyer , Nippon Typewriter , Canon Electronics  Mitsubishi Nitto Flour Milling , Nihon Nosan Kogyo , Corp. Kanro , Nihon Shokuhin Kako . Kinsho- Mataichi , Meiwa Trading , Tokyo Sangyo , Diamond City  Mitsui & Co. Shin Nippon Air Technologies , Chuo Build Ind. , Nippon Formula Feed Mfg. , Taito  Mitsui Sugar , Honen , F-one , Takasaki Paper Mfg. , Honshu Chemical Ind. , Tokyo Kohtetsu , Hakodate Seimo Sengu , Nihon Unisys , Asia Air Survey , Utoku Express 
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 Dominating Firm (Core KBG Business) Toyota Motor Toyota Motor Corp. (Transport Equipment) Nissan Motor Nissan Motor Co., Ltd. (Transport Equipment) Mazda Motor Mazada Motor Corp. (Transport Equipment) Honda Motor Honda Motor Co., Ltd. (Transport Equipment) Komatsu Komatsu Ltd. (Construction Machinery) Hitachi Hitachi, Ltd. (Electrical Machinery) KBG Major Distributors or Subsidiaries (Mode of Distribution) 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 & Retail) 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 & Retail) 5 Nissan Cherry Dealerships (Wholesale & Retail) Nissan Autoparts Tokyo (Wholesale & Retail) Mazda Motor Autorama (Wholesale & Retail) Autozam (Wholesale & Retail) Mazda Autoparts Sales (Wholesale & Retail) Citron Japan (Wholesale & Retail) Honda Motor 101 Honda Kurio Dealerships (Wholesale & Retail) 97 Honda Belno Dealerships (Wholesale & Retail) 1371 Honda Primo Dealerships (Wholesale & Retail) 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 (Wholesale) (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 (Wholesale) 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 (Service) Matsushita Matsushita 10 Regional National Sales Subsidiaries (Wholesale) Electric Electric 8 Regional National Credit (Credit Sales) Industry Industrial Co., National Lease (Lease) Ltd. (Electrical 25,000 KBG Member Stores (Retail) Machinery) Sony Sony Corp. (Electrical Machinery) Sharp Sharp Corp. (Electrical Machinery) Casio Computer Casio Computer Co., Ltd. (Electrical Machinery) Ricoh Ricoh Co., Ltd. (OA Machinery) Canon Canon Inc. (OA Machinery & Cameras) Fuji Photo Film Fuji Photo Film Co. Ltd. (Chemicals) Konica Konica Corp. (Chemicals) Takeda Chemical Takeda Chemical Industries Industries, Ltd. (Pharmaceuticals) Sony Sony Network (Wholesale) 18 Regional Sony Consumer Marketing (Wholesale) 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 (Wholesale) 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 (Wholesale) 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. (Pharmaceuticals) Otsuka Otsuka Chemical Co., Ltd. (Pharmaceuticals) Shisedo Shisedo Co., Ltd. (Cosmetics) Kanebo Kanebo Ltd. (Cosmetics) Pola Pola Cosmetics Inc. (Cosmetics) Kao Kao Corp. (Chemicals) Snow Brand Snow Brand Milk Milk Products Products Co., Ltd. (Foods & Beverages) Yakult Honsha Yakult Honsha (F & B) Nippon Ham Nippon Meat Packers, Inc. (Foods & Beverages) Nichirei Nichirei Corp. (Foods & Beverages) 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 (Wholesale) 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 (Retail) 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 (Wholesale) 8 Regional Nippon Ham Processed Food Sales (Wholesale) 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. (Retail) Tokyu Tokyu Corp. (Land Transport) Orix Orix Corp. (Miscellaneous Finance) Mitsubishi Corp. Mitsubishi Corp. (Trading Company) Mitsui & Co. Mitsui & Co. (Trading Company) 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.
|Printer friendly Cite/link Email Feedback|
|Author:||Lai, George Ming-Hong|
|Publication:||Journal of World Business|
|Date:||Dec 22, 1999|
|Previous Article:||Surviving The Transition: Central European Bank Executives' View Of Environmental Changes.|
|Next Article:||An Unconventional Approach to Intellectual Property Protection: The Case of an Australian Firm Transferring Shipbuilding Technologies to China.|