Outline the Recent Evolution of Business Groups in Japan

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In the last decade, Asian countries have made great and rapid economic gains. As many Asian firms outperformed their US counterparts, some researchers began to speculate on whether the organizational structures of business groups—the Japanese conglomerates known as keiretsus—were the causes of these economicgains. Keiretsus are groups of independent companies operating in different markets with different products and services but under common administrative and financial controls. The groups depend on each other for leadership, human resources, and R&D functions, and are extremely important to the economies of their respective countries. The keiretsus are credited with the tremendous economic growth of Japan after World War II. Although a number of researchers have examined these business groups, none have provided in-depth comparisons of them, especially in light of the recent Asian financial woes. Since June 1997, Asia has been enveloped in a severe economic crisis, with widespread bank failures and company bankruptcies. This crisis is unprecedented in a region where most of the governments were accustomed to operating in environments characterized by fiscal balance, low inflation rates, and low levels of unemployment.

• Stakeholder orientation
• Collective leadership
• Either horizontally diversified or vertically integrated • Banks are core group members
• Expansions based on MITI’s long-term plans and group’s strategic planning • Internal goals dictated by own financial institution’s long-term returns • Capitalized by using internal banks and financial institutions willing to take higher risks • Supportive of industrial policy through research subsidies • Competition reduced by support of weaker firms and “no lose” strategy

Japan’s keiretsus have benefited from the practice of “cross-stock sharing,” whereby member companies own some stocks of other member companies. This practice is a symbol of commitment and mutual obligation to the group. It is...
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