butors that keep the operations running smoothly, typically through a just-in-time (or kanban) production system. Most Japanese automobile companies (eg, Toyota, Nissan) are vertical keiretsu (see below). Good example of a horizontal keiretsu can be seen in the Mitsubishi Business Group. Mitsubishi has a main bank (Mitsubishi Bank), a trading company (Mitsubishi Shoji), and a flagship manufacturer (Mitsubishi Heavy Industries). In addition, three financial firms are typically clustered around these three key companies: a life insurance company, a non-life insurance company, and a trust bank. Together, these financial firms, the trading company, and the group s key manufacturers give the keiretsu its unique identity. Beyond this are hundreds of large and small companies that are associated with the group. Senior managers from the principal companies are frequently assigned to serve in management positions in the smaller firms to assist with inter-company coordination support. Interlocking directorates are common to reinforce this family system.each horizontal keiretsu, a main bank performs several functions. Its most important role is providing funds for company operations, expansion, and R & D. First, these banks provide more than two-thirds of the financial needs of keiretsu-affiliated companies. Second, member companies frequently hold stock in sister companies (known as stable cross-shareholdings). Main banks are among the nation s largest shareholders for such firms, providing considerable stability for company management interested in long-term growth strategies. Third, main banks provide an important audit function for member companies in monitoring corporate performance and evaluating risk. Fourth, main banks provide the best source of venture capital for member companies interested in launching new but risky ventures. For instance, Sumitomo Bank provided massive start-up investments in member company NEC s initiative to capture the semiconductor market. Finally, main banks serve as the company doctor in rescuing companies that are facing bankruptcy. Since corporate bankruptcy can threaten public confidence in Japan s economic system, not just a specific business group, main banks often quietly provide financial support to keep ailing companies going until the firm can be re-organized or the problem resolved. This financial commitment to member companies can also create trouble for the keiretsu, however, when the main bank is required to bail out a non-competitive company that should perhaps be sold off or dissolved.trading company, or sogo shosha, provides member companies with ready access to global markets and distribution networks. These companies (eg, Mitsubishi Shoji, Sumitomo Busan) maintain offices throughout the world and are continually on the lookout for new or expanded markets. At the same time, their field offices collect and analyze market and economic intelligence that can be used by member companies to develop new products or otherwise get a jump on the competition. They frequently assist member companies with various marketing activities as well, and facilitate imports into Japan for their business customers. In fact, historically, Japanese trading companies have been responsible for almost half of Japan s imports and three-fifths of its exports. Finally, the sogo shosha often provide significant credit (through the group s main bank) for small and medium-sized companies involved in bus...
