Real Estate

Japanese business structure: Toyota and the Keiretsu system

The Toyota Group (Keiretsu)

A keiretsu is a group of interconnected Japanese companies, centered on a bank, that lends money to member companies and has an equity interest in these companies. By combining forces, these companies can reduce costs and risks, better facilitate communication, ensure trust and reliability, and insulate from outside competition. There are two types of keiretsu, horizontal and vertical. The horizontal keiretsu between markets are diversified networks of large companies. These included the three aforementioned descendants of the pre-WWII zaibatsu. Vertical manufacturing and distribution keiretsu are asymmetric networks in which small business sectors are dominated by large sectors.

The Toyota Group is considered the largest of the vertically integrated keiretsu groups. The United States and most Western countries viewed keiretsu unfavorably because they interpreted such a trade scheme to be that of an illegal monopoly or cartel.

The Toyota Group is a magnificent example of a complex, prominent and highly successful keiretsu in Japan. It is a member of the Mitsui Group, which is one of its main banks, but it operates very independently of the bank. In the past two decades, Toyota has been at the top of the list domestically in the United States and abroad in terms of sales and profits. The parent company generates, on average, $ 72 billion each year in sales with 72,000 employees. That works out to a million dollars in sales per employee, which is roughly six times that of its competitor, General Motors. Toyota has been the best-selling car in Japan for more than twenty-four years. This only shows the influence and power of Japanese keiretsu.

This company is the largest industrial combine in Japan and one of the largest keiretsu in the country. Another surprising fact is that Toyota is much more than an automobile manufacturer. In fact, Toyota is a major participant in three telecommunications companies; You are a principal investor in a computer systems development company; and participates in an insurance company specialized in auto insurance. In addition, Toyota operates four real estate firms, two finance firms, and is currently exploring opportunities in the aerospace industry.

Due to the prominence of keiretsu in post-WWII Japan, only employees working in major business sectors benefited. Those forced to work in small businesses suffered from low wages, limited career mobility, and job instability. Much can be said about the keiretsu system, which, as seen in the Toyota Group case study, can generate a lot of power and success.

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