Exam 32: The End of the Cold War and the Challenge of Economic Development and Immigration

Correct Answer:

Answered by Examlex AI Copilot

Keiretsu is a Japanese term that refers to a unique organizational structure involving a network of interconnected businesses. These businesses are often bound together by cross-shareholdings, strategic partnerships, and a central bank or a trading company at the core of the network. The keiretsu system emerged in Japan after World War II, evolving from the earlier zaibatsu system, which was a conglomerate of businesses controlled by a single family.

The keiretsu structure is characterized by:

1. **Cross-shareholding**: Member companies of a keiretsu often hold shares in each other's companies, creating a mutual sense of security and loyalty. This reduces the threat of hostile takeovers and promotes long-term cooperative relationships.

2. **Interlocking directorates**: Executives from one company in the keiretsu may sit on the board of another member company, facilitating coordination and alignment of business strategies.

3. **Central bank or trading company**: At the heart of a keiretsu is usually a central bank that provides financing to member companies, or a trading company that facilitates commerce and trade among them.

4. **Vertical and horizontal integration**: Keiretsu can be categorized into two types: vertical and horizontal. Vertical keiretsu are typically centered around a major manufacturing company and include its various suppliers and distributors. Horizontal keiretsu, on the other hand, consist of companies from various industries that are linked through a central bank or trading company.

5. **Long-term relationships**: Companies within a keiretsu often engage in long-term relationships, prioritizing mutual benefit and stability over short-term gains. This can lead to a focus on quality, innovation, and employee welfare.

Some of the most well-known keiretsu in Japan include Mitsubishi, Sumitomo, and Mitsui, each of which has a network of companies spanning various industries, from automotive to electronics to finance.

The keiretsu system has been both praised and criticized. Advocates argue that it promotes stability, long-term planning, and loyalty, while critics suggest that it can lead to inefficiencies, lack of competition, and difficulty for foreign companies to penetrate the Japanese market. Despite these criticisms, keiretsu have played a significant role in the economic development of Japan and continue to be an important feature of its business landscape.