iness activities with member companies, again getting a jump on competitors that operate further from lines of credit., Although hundreds of companies may be affiliated with one keiretsu, only the principal companies are allowed to join the Presidents Council (shacho-kai, or kinyo-kai in the case of Mitsubishi). This council (typically consisting of the CEOs of the top twenty to thirty group companies) meets monthly to discuss principal strategies for the group, as well as issues of coordination across the various sister companies. Since council meetings are private and no records are maintained, little is understood about how such councils actually work. At the very least, however, these meetings facilitate extensive cooperation across member companies on developing group strategy and group solidarity, as well as mediating disagreements across member companies.many observers, the very structure of these conglomerates seems to provide an unfair advantage in global competition . To see how this might work, consider the example of Kirin Holdings Company, a member of the Mitsubishi keiretsu. While Kirin produces a wide array of consumer products, including soft drinks,
Exhibit 6.4 Design of a typical Japanese horizontal keiretsu
Note: The shaded boxes represent formal parts of the organization. The white boxes represent independent agencies, institutions, service providers, and contingent workers that are largely outside the formal organization design., And health foods, they are perhaps best known for beer. To produce, bottle, and distribute beer, Kirin needs help from a multitude of sources. In many cases, it can get this help from other sister companies on a long-term reliable manner (see Exhibit 6.5). Kirin Holdings Company needs glass for its bottles, it contacts Asahi Glass, a Mitsubishi company. When Kirin needs aluminum for its cans, it contacts Mitsubishi Aluminum. When Kirin needs plastic to bottle its soft drinks, it contacts Mitsubishi Plastics. When Kirin needs paper for labels, it contacts Mitsubishi Paper. When Kirin needs financing for its operations, it contacts Mitsubishi Bank. When Kirin needs to construct new facilities, if contacts Mitsubishi Construction. When Kirin needs cars and trucks to help distribute its products, it contacts Mitsubishi Motors. And when Kirin needs global distribution of its products, it contacts Mitsubishi Shoji. Is this smart coordination and control by the keiretsu managers or restraint of trade since other (largely foreign) firms oftentimes cannot break through the barriers to seek some of the business? What might foreign firms do to get inside the keiretsu network? Interlocking set of companies that comprise a keiretsu like Mitsubishi can create a considerable competitive advantage in the marketplace. While comparable examples of global sourcing, integrated manufacturing, and multinational marketing can be found in the West, it is questionable whether these companies approach the keiretsu model in terms of integration and cooperation. What makes the keiretsu system unique is that it represents an entire social system in which national culture, government policies, corporate strategies, and management practices are fully integrated, mutually supportive, and reinforced through in...
