Keiretsu Networks (系列 ネットワーク)

A keiretsu network (系列 ネットワーク) or keiretsu value chain network (Japanese: integration, order or system of stakeholders, partners and suppliers) represents a means of mutual security, especially in Japan, and usually includes large manufacturers and their suppliers of raw materials, systems and components (Ahmadin & Lincoln, 2001). Keiretsu groups are defined as clusters of independently managed firms maintaining close and stable economic ties, cemented by a governance mechanism such as presidents’ clubs, partial cross-ownership and interlocking directorates. Within the broad definition lie two distinctive variations. The horizontal keiretsu are conglomerates covering several industries linked by cross-shareholding, intra-group financing and high-level management by a central (often shadowy) body of directors. The vertical keiretsu networks are groups around one big manufacturer and consist of a multi-layered system of suppliers focused on the core company (Gabrowiecki, 2006). Keiretsu networks have received much attention in the European automotive and transportation sector through the success of Japanese companies like Toyota, Mitsubishi or Hitachi and other conglomerates in achieving improved customer service, better inventory control and more efficient overall channel management (Freitag, 2004). Keiretsu, which is a form of Japanese business network, shares many of the goals of several business functions. The concept of a keiretsu network was introduced by Toyota in the mid-1980s (Imai, 1986) and transferred to affiliates and suppliers outside Japan (Kalkowsky, 2004). Figure 4.1 depicts the example of a Keiretsu network structure including the core business functions and enterprises of bank, insurance and finance companies. These core businesses are surrounded by companies in leading industries like automotive, food or machinery and electrical applications. In addition to this, keiretsu networks may include supporting businesses such as warehousing, transportation or component supplies. Keiretsu networks are differentiated into horizontal (same layer) and vertical keiretsu networks (different layers).