ADMS 2610 Lecture Notes - Sanwa Bank, Zaibatsu, Human Capital
Different environment in the regions
ASEAN: Association of South East Asian nations
1. rapid growth
Why rapid growth? (p11)
High saving rates: China- 25% of GDP, US- 0.5% of GDP
Demographic situation: high population in this region.
Investment in education
Different economic model: focus on Japan; later other Asian countries just follow the Japanese
Role of state: good links with government.
Corporate finance: different bank rules
Environment of resource activity
Led to a homogenous group with strong attitudes towards themselves and others
To secure resources and the desire to be accepted as equal by the world powers
Japan began territorial expansion to other Asian countries
After WW2, it was shrunk back to its main landmass
US had taken control of Japan
Something happened that promoted US to grant Japan independence in 1952
Communist victory in China
Communist spreading across Europe
Japan re- industrialized and by 1980s had the highest per-capita income in the world.
An important element in Asian business is business groups
3. Business groups: A collection of diversified firms that are formally and informally linked to
each other, and under a central control.
- Business houses in Indian
- Chaebol in South Korea: sumsung, Hyundai, LG
- Keiretsu in Japan: Matsushita, Toyota, Mitsubishi motors
- But it all started in Japan: pre WWII
Zaibatsu: three large families in Japan had business in the most business industries,
shareholders in the most organizations.
Business groups under a family ownership.
Mitsubishi, Mitsui and Sumitomo are the 3 main Zaibatsu pre WWII
- After WWII: when the US enter into Japanese markets after WWII, they signed up the
contract with Japan to put the restriction on the business ownerships, separate the 3 main
Zaibatsu organizations in to different companies.
Japan came up with a new strategy: cross-shareholding
Circular-share purchase from one firm to another firm. Every firm works together
and cooperate into the introductions. They all have shares in different firms
- Horizontal Keiretsu:
Sanwa Bank stayed in the center to connected all the different firms together; it gave the
loans to the firms to invest and expansion with the new products.
President’s council meeting- Shacho-kai: solve problems and carry out the new strategies.
- Vertical Keiretsu:
Suppliers- Toyota- distributors/retailers (transaction cost is very low according to this type
Risk sharing: when the firm goes into bankruptcy, the connected firms or banks can help
Quasi-internal capital markets
Source of scarce human capital
Business group reputation signals quality
Early civilizations- Yellow River, Indus River