2nd Midterm-Study Guide
and market environment
-US thinks that Keiretsu is a type of cartel and collusive, create entry barriers to markets, exclusionary
ISSUE: If the antitrust concerns about keiretsu are valid, public response lies on Japanese side, if
difficulties of market access is due to the lack of competitiveness of foreign firms, the appropriate policy
response is less clear, maybe foreign firms needs to devise entry strategies more suited to the Jap.
-Keiretsu-3 giant corporations, General trading company, Principle Bank (gave money to manufacturing
without any tests), Manufacturing company
-Financial Keiretsu-Bank, trading, manufacturer working together(enterprise groups, Mitsubishi group)
-Vertical Keiretsu-vertical integration-suppliers and sub-suppliers(supplier networks centering on
assembly firms such as Toyota)
-distribution Keiretsu-general trading company established a domestic distribution network, different
distribution system for each productv}]}v]uvÁ}}µov[i}]v]]µ]}v
network(networks of affiliated wholesalers and retailers that manufacturers of consumer goods use to
distribute their products)
The General trading company market the goods in international markets and domestic. Moved in to
meet the marketing needs of manufacturing company, seek new sources of supply, the bank took
foreign exchange risk for manufacturer, assisted in foreign direct investment.
Marketing, insurance, make contracts for raw material-general trading company
-keiretsu is just how Japanese firms organized their input and ownership structures to compete
successfully in domestic and international markets
-financial keiretsu attract attention for role in corporate governance, provide stable and disciplined
environment for corporate management
-Firms in a keiretsu are not direct competitors in a market, usually have vertical relationships
-Financial keiretsu are highly diversified across sectors, distribution keiretsu have firms producing a
single product or related set of products
-firms in a keiretsu cannot form cartels or collude because they do not operate in the same market
-financial keiretsu are loose collections of independent (]uUZÇv[}}]vZ]]}v
sufficiently well to implement multimarket retaliation strategies necessary for multimarket effect
-Keiretsu was an efficient form of economic organization. Unique Japanese form of business.
b. Choosing R&D location and managing relationships with outside organizations should not be driven by
input costs, taxes, subsidies or even the wage rates for scientists and engineers, as they often are.
Instead, R&D investments should flow preferentially to the locations with the greatest innovative
- locational advantages rooted in proprietary information flows, special relationships with local
companies, and preferential access to local institutions are competitive advantages that are difficult for
outsiders to overcome.
- effective management of locational advantages may ultimately prove more sustainable than simply
implementing corporate best practices.