I’ve never seen the word–just heard it. I remember T. Boone Pickens back in the 1980s talking about the Japanese domestic market, and how hard it was to break in because of their business practice of “kairetsu,” (or so it sounded to me).
It had something to do with the relationship between big manufacturers and their suppliers, and that somehow it didn’t allow real competition.
Anyone with any more light on this???
It is spelled “keiretsu” and it referred to the Japanese system of large corporations aligning themselves in to organizations that would have made John D. Rockefeller ashamed.
I did a google search and came up with a lot of hits on it.
That’s too harsh a description. Rockefeller’s infamy was using illegal tactics to crush his competitors so he could have a monopoly. Keiretsu is a loose form of vertical integration established by mutual ownership and “gentlemen’s agreements” between suppliers and manufacturers.
An example would be a company that manufactures mufflers. In the U.S., “Muffler Technologies” would sell to GM, Ford, and Chrysler, and whoever else it could strike contracts with. In Japan, the company would most likely deal exclusively with one OEM (say Toyota), and furthermore, Toyota would own 10 or 20% of “New Bright Japan Muffler Co., Ltd”. Major decisions would not be made by “New Bright Japan” without close consultation with Toyota.
This is not unheard of in the U.S., in effect if not in the details. GM spun off many of its supplier plants into Delphi Automotive; certainly Delphi Automotive still has deep ties with G.M. although it is nominally a separate company.
That said, the Japanese economy is, for better or worse, much less open than the U.S.'s. But I don’t think keiretsu are a major part of that.
In Japan it’s all very above-board and proper and keeping in line with their philosophy of business. Simply put, a company aligns itself with certain suppliers. They share trade secrets, sit on each other’s boards of directors and gnerally try to work together as an integrated unit. The flip side is that they freeze out anyone who isn’t part of the group. As a result it’s difficult to even get a different brand of aspirin into a drug store, because it’s not part of the chain.
In the U.S., of course, there’d be antitrust charges, allegations of price fixing and general monopolistic hell to pay. But that’s part of the cultural difference between the societies. We believe competition pushes the best ideas, products, etc. to the top, the Japanese believe that cooperation is the key.
I read an article in Time a few years ago regarding American Keiretsu. Basically, many of the big companies own pieces of the others. They particularly made a case regarding media companies–Disney, ABC, Time Warner, Columbia, Paramount, etc., all owning large percentages of their alleged competitors. With all the recent buyouts and consolidation, I don’t know to what extent it still holds true.
Keiretsu isn’t aligned companies in the way described in this thread. A keiretsu is a company like Mitsubishi, so when Mitsubishi Motors wants electric components for automobiles, they order them from Mitsubishi Electric. A keiretsu is one conglomerate of aligned companies, in a very tightly knit manner that would be more akin to monopolistic collusion between branches of the same conglomerate. That is why keiretsu are illegal in Japan. The bigger question is why aren’t the keiretsu prosecuted. And the answer should be obvious.