The Toyota Group (Keiretsu)
A keiretsu is a group of interrelated Japanese companies, centered on a bank, that lends money to member companies and has an equity stake in these companies. By combining forces, these companies can reduce costs and risks, better facilitate communication, ensure trust and reliability, and provide insulation from outside competition. There are two types of keiretsu, horizontal and vertical. Cross-market horizontal keiretsu are diversified networks of large companies. These included the three aforementioned descendants of the pre-World War II zaibatsu. Vertical manufacturing and distribution keiretsu are asymmetrical networks in which small business sectors are dominated by large sectors.
The Toyota Group is considered the largest of the vertically integrated keiretsu groups. The United States and most Western countries looked unfavorably on keiretsu because they interpreted such a business scheme as that of an outlaw monopoly or cartel.
The Toyota Group is an excellent example of a very successful, complex and prominent keiretsu in Japan. It is a member of the Mitsui Group, which is one of its main banks, but it operates very independently of the bank. Over the past two decades, Toyota has been at the top of the list nationally in the United States and abroad in terms of sales and profit. The parent company generates, on average, $72 billion each year in sales with 72,000 employees. That equates to $1 million in sales per employee, which is about six times more than its competitor, General Motors. Toyota has been the best-selling car in Japan for more than twenty-four years. This just shows the influence and power of the Japanese keiretsu.
This company is the largest industrial combine in Japan and one of the largest keiretsu in the country. Another surprising fact is that Toyota is much more than a car manufacturer. In fact, Toyota is a major player in three telecommunications companies; is a principal investor in a computer systems development company; and participates in an insurance company specializing in automobile insurance. In addition, Toyota operates four real estate firms, two financial firms, and is currently exploring opportunities in the aerospace industry.
Due to the prominence of keiretsu in post-World War II Japan, only employees working in the core sectors of the company benefited. Those forced to work in small businesses suffered low wages, limited career mobility, and job instability. A lot can be said about the keiretsu system, which, as seen in the Toyota Group case study, can generate a lot of power and success.
