Language of Study: Japanese
Subject Major: Management
Country of Study: Japan
Title of Work: Keiretsu Practices in Japan
Abstract: The practice of establishing close relationships between businesses in Japan dates back to the Meiji Era in the late 1800s. Prior to the events of World War II, Japanese conglomerates known as “zaibatsu” were operating in a wide variety of industries, controlling a large amount of divisions, and this allowed them great power in the Japanese economy. After the war, these companies were reorganized to limit their power. Today, they continue some of these same practices in a form called “keiretsu”, where the emphasis is more focused on the relationships. Japanese companies would prefer to deal with organizations that they have history with, which gives those in the group a major advantage over outside players.
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Abstract (IGP Language):
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Elevator Pitch Transcript: Hello everyone, my name is Christopher Hart, and I’m a 5th year student at NAU. I’m also in the Interdisciplinary Global Program, so I am pursuing a double major in Management and Comparative Cultural Studies. In my fourth year, I studied abroad in Osaka University of Commerce in Osaka, Japan. I studied business classes at the school, while I was trying to get an internship with the manufacturing companies Ever-on and Fuserashi with Dr. Matsumoto, which unfortunately didn’t work out so well, so instead I started a project about Japanese business practices. I studied about Japanese Keiretsu practices. This would have to do with the deep connections Japanese companies make with each other, supporting each other. This would give them a great advantage over companies who do business the conventional way, where they have to treat others fairly and objectively. At companies like Toyota, they have suppliers and distributors integrated into the system, allowing low cost and just in time manufacturing, which Toyota is famously known for. When I graduate from NAU, I’m hoping I can begin a career in supply chain and logistics, so I want to see what I can learn from this project and my experiences in Japan. Being a part of IGP has given me the opportunity to do things like this, and I appreciate it, learned a new language, visited a new country, met lots of new people, it’s something that has really changed my life. Thank you.
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Full-Length Video Transcript: Hello everyone, my name is Christopher Hart. I’m a fifth year IGP Student. In my fourth year, I went abroad to Japan and I have recently returned from there. I’m going to talk about my fieldwork experience over there.
First, I’m going to go over the interviews I had with the companies Fuserashi and Ever-on. I went in the interviews with Dr. Matsumoto, who is one of the professors at Osaka University of Commerce. He helped introduce me to the organization, and helped us translate between Japanese and English and vice-versa. This leads to one of the most surprising things about the interview, which was that I could understand about 90 percent of the conversation. I thought this was very good because I could directly talk to the staff there during the interview. Even though I interviewed with both Fuserashi and Ever-on, I could only do one of them, so I would have to make a choice between them. Both these companies were manufacturing companies, making parts for automobiles such as nuts, bolts, and bearings. You could imagine that these companies deal with very technical concepts since it is factory oriented. Which leads to another thing. When I’m studying Japanese, I’m very familiar with the simple language, the day-to-day life stuff. I thought one of the most exciting things about learning Japanese and this type of thing is that we would learn very technical Japanese words like Nekkantanzou, which is hot forging, and hyoumenarasa sokuteiki, which is a surface roughness measurement machine. You can imagine these are very technical terms, and something I’m not very familiar with. If I’m going to work in these industries, I would have to become familiar with these type of things and I thought that would be very exciting to get into. I was doing a lot of research when I would go into these company websites. During the interview, they would ask you things about yourself, they wanted to know my hobbies, they wanted to know my parents occupation, what companies they worked for. I thought that was very interesting. Unfortunately I couldn’t continue to do these, I couldn’t do the internship with these companies because of COVID-19. This was in March when I would go to the interview, it was only the week when I was told that we had to go back to the United States.
Anyway, we did come up with an alternative project I could do my fieldwork in. Japanese related. I would be looking into the automotive industry. More specifically this would be the Keiretsu practices in Japan. Let me give you some background. Prior to the events of World War II, Japanese conglomerates known as zaibatsu were operating in a wide variety of industries, controlling a large amount of divisions, and this allowed them great power in the Japanese economy. After the war, these companies were reorganized to limit their power. Today, they continue some of these same practices in a form called keiretsu. You can see some examples of keiretsu companies right now, these would be formerly zaibatsu. The Sumitomo group, Mitsui group, and the Mitsubishi group. Maybe the Mitsubishi group is the one you’re most familiar with. Sumitomo deals with steel, construction, electronics, insurance, a wide variety of things that you might not think are related, and this is especially true for companies like the Mitsui group which I’ll go into detail later.
So, an example of some of these practices, or I guess this is more of a summary of the actual practices, they would cross shareholdings, they would hold shares in each other’s companies. They would exchange information and personnel between each other. They would coordinate activities, plan things together. They would prefer to do business with associated companies, they don’t like outsiders being a part. They like this history between each other, it’s what they focus on. Some keiretsu companies organize around a central bank, we will see that they are called horizontal keiretsu. I’ll show you an example of that right now.
The Mitsui Group is one of these horizontal keiretsu. They operate in several major industries to provide a variety of products and services. They usually revolve around the central bank to finance these different ventures. They are one of the world’s largest conglomerates, with 506 affiliated companies for consolidation. They closely associate with Sumitomo Mitsui Financial Group and some of their companies include the Mitsui O.S.K. Lines, the maritime shipping company, and this is the bank, the Sumitomo Mitsui Financial Group, which is one of the three large banks in Japan. Now you can see some of the fields that they go into. The business units on the right here, they have iron and steel, energy, infrastructure…down here we got food business, retail, and health care services. Some of these are not very related at all, so I thought it was very interesting to look into companies like this.
One of the examples that Mitsui can do with this kind of power, I will show you the information and personnel exchange practice that keiretsu companies are known for. They wanted to develop a third terminal at a shipping port in Indonesia and they would draw on expertise from their different units, such as the infrastructure projects business unit, and the transportation logistics business unit. This would be different units of their company, they would work together, collaborating to help make this project a lot easier. Mitsui has also acquired stakes in the region prior to this project, including buying Singapore-based Portek International, which operates terminals and port equipment. This would also make it a lot easier for Mitsui, they would play a large part into doing this project. Normally, you would have people contract with each other, they would have unrelated companies negotiate these things together, but this is Mitsui doing most of the work. They can because they have this keiretsu relationship within the group.
We’ve talked about horizontal keiretsu, so this is a vertical keiretsu. This is the Toyota Group. A vertical keiretsu is a large company with hundreds of suppliers, usually organized in a hierarchy. Here, Toyota is at the top of the hierarchy. They don’t normally revolve around a central bank, but they may maintain cross shareholdings in supplier companies to influence their management. They manage to be globally competitive through a business philosophy known as kaizen, which is continuous improvement. We will see that this is an excellent model for supply chain management, a lot of companies look at Toyota’s system and think, this is the way to go. This is the right thing.
More in detail, they follow something called the Toyota way. All the problems that they deal with, they would view it from the perspective of this Toyota way. The two things they focus on is kaizen, and the respect for people. I think kaizen is very fascinating because you would encourage employees to find problems in the organization, it could be very small. They would encourage them to offer solutions, making things just a little bit better. The whole idea is to improve quality little by little each time. They really value this. Another part is that they have respect for people; they respect others, make every effort to understand each other, take responsibility and do their best to build mutual trust. They also focus on teamwork. The whole point with this Toyota way is that if they don’t follow this, this is when the problems are coming. If they have a problem, the reason is because they’ve lost the way.
These are the advantages and disadvantages of the practices. The advantages will be dynamic opportunities for employees; you can imagine if you’re working in a wide variety of industries, if you’re very good at iron and steel, and understand the business process to that, there is some part of that that could work in the food industry or health care. What these keiretsu companies like to do is they take those employees who are experts and try to apply it to a completely different industry, and it usually works, giving these opportunities for these employees. We also have diversification of risk between industries, and this is only natural because you have such a wide variety of things, a large portfolio. If something goes bad, the other one will usually make up for it. There’s a strong group ethic between these companies, and this is very important because it’s Japan. Japan is a very collective oriented country. They focus on the group. This type of thing wouldn’t necessarily work in the United States, where people value the individual a lot more. Japanese people really like to work together, and this could work in similar countries. The practices align with traditional Eastern values. A disadvantage you could see with the keiretsu companies is that even though they’re valuing each other, they focus more on the history of the companies, support each other, some of these companies may not perform very well. Bailing out of poor performing companies by the bank may hurt the group overall. The point of keiretsu companies is to improve each other’s performances. This can make it incredibly difficult for foreign competition, when companies are working together to keep them out. Low competition may lead to poor practices. I guess you could see this with Toyota. Toyota is so powerful in Japan, that if they all of a sudden decided that they weren’t focusing as much on quality as they should, they could last for a good deal because of the power they have. In company relationships, they could lead to these poor practices. They don’t really need to maintain quality as they say they do. So, I hope this was a good overview of keiretsu, I think it is important to consider in the future. Thank you.
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Keywords
Keiretsu, Business, Japan
Christopher Hart
Language
Japanese
Description
Country of Study
Japan
Management