Essay: Forms of Japanese Keiretsu
Keiretsu involves running interrelated businesses that have share shareholders or have business relationships. There three forms of keiretsu, these are:
- Kigyo shudan- there are horizontally group of interrelated business
- Ryutsu keiretsu- these are group of businesses that share a network of distribution channels
- Seisan keiretsu- consist of group of businesses sharing a vertically manufacturing networks
The Japanese automobile has utilized keiretsu due to the increased mega-competition and globalization. Keiretsu focused on reduction of the cost of purchasing, reorganization of the procurement plan into a global procurement plan and reducing the number of suppliers. To be specific, Nissan adopted this plan on 1999 October in its revival plan due to the fierce global competition. Through the Keiretsu business groups, the Japanese automobile industry has been able to cut down its cost by re-organizing its suppliers as the Nissan COO notes “shuKeiretsu relationship contributed to the relatively high cost of automotive part” (Ikeda, & Nakagawa, 1999).
Among the most success Japanese automobile manufacturers that have been able to employ Keiretsu are Honda, Nissan and Toyota. Currently, Toyota is considered the largest vertically integrated Keiretsu group of business. While organizing its Keiretsu, Nissan group of business decided to employ the mass bidding system whereby the supplier with least prices would offered a contract through commonization of platforms. Nissan and Renault commonized their platforms in order to reduce these costs. Volkswagen group is trying to employ the commonization of platform in order enjoy the advantages of mass production and reduce the costs too.