centives and rewards that make the entire enterprise run smoothly over the long run. Thus, while some similarities exist, and while Western multinationals frequently pursue vertical integration to achieve operating efficiencies, it would be misleading to claim that Western companies have adopted the Japanese business model as their own. Neither their cultures nor government regulations in many cases would allow it.most Westerners think of a keiretsu, they have in mind the horizontal variety discussed above. However, the vertical (or pyramid) keiretsu can be just as powerful, if less well known. Key vertical keiretsu include the major Japanese automobile firms such as Toyota, Nissan, and Honda, as well as some of the major electric giants like Sony and Panasonic (including Quasar and National brands). An illustration of the organization structure of a vertical keiretsu is shown in Exhibit 6.6. As noted above, a vertical keiretsu consists of a major company surrounded by a large number of smaller firms that either act as suppliers or distributors for the big firm.6.5 Keiretsu network for Mitsubishi s Kirin Holdings Company
point of fact, there are two kinds of vertical keiretsu: a production keiretsu, in which a myriad of parts suppliers join together to create subassemblies for a single end product manufacturer (such as Toyota), and a distribution keiretsu, in which a single large firm, usually a manufacturer, moves products to market through a network of wholesalers and retailers that depend on the parent company for goods. Since most manufacturers have both keiretsu types (production and distribution), we can envision the two like an hourglass: an upside-down (production) pyramid on top, in which individual parts suppliers provide various parts (eg, fabric for car seats) to subcomponent assembly companies that ultimately provide subassemblies (eg, completed seats) to the parent company in the center of the hourglass. Here, the parent company assembles the end products and prepares them for market. Next, these products are passed down into another (distribution) pyramid where they are distributed to wholesalers and ultimately to retail consumers.some cases, a leading company from a vertical keiretsu will form an alliance with a horizontal keiretsu to ensure solid financing and improved trading capabilities. Toyota is a member of the Mitsui Group, for example, in addition to running its own vertical keiretsu. Finally, numerous small supplier firms become quasi-members of the group and receive long-term purchasing contracts, as well as assistance with financing and sometimes R & D. These suppliers support the famous kanban (or just-in-time) inventory system that Japan is noted for and must remain loyal to one group. That is, when supplies on an assembly line get short, suppliers are automatically notified and replenish the factory in short order., Let s turn to human resource management policies in Japan. Japanese kaisha tend to view all regular employees (not including continent workers or workers employed by company suppliers) as part of their permanent cost structure. As such, during difficult financial periods, most Japanese companies will go to great lengths to retain their workers. This contrasts with the situation in many Anglo-American firms, where lay-offs are frequently seen as an easy solutio...
