The influence of social networks in japanese business – Keiretsu as a japanese network

Term Paper, 2007

24 Pages, Grade: bestanden






3.1. Mitsui-Zaibatsu
3.2. Keiretsu
3.2.1. Horizontal Keiretsu
3.2.2. Vertical Keiretsu Production Keiretsu (seisan keiretsu) Distribution Keiretsu (ryûtsû keiretsu)
3.3. Compare: Zaibatsu – Keiretsu
3.4. Advantages and Disadvantages of Keiretsu

4. Conclusion



Figure 1: Zaibatsu pyramidal structure


„Traditionelle Unternehmen haben ausgedient, die Zeit der Netzwerke bricht an.“ – Ken Everett, Australian manager

Since the beginning of human being, people have always lived and worked together in groups and built up networks with others in order to satisfy their needs. As in former times there have not exist institutions like job centres, hospitals or health insurances funds, people were very related on each other and on their own group. In cases of illness or unemployment, for instance, the family was the only solution to help one in such crises. In those times the group-feeling was very strong.

Nowadays, especially in the Western cultures, it seems like the individual comes far before the group. Values as individuality and independence are very important and can even make people act egoistic. As almost all needs can be satisfied by one alone, without the help of a group, also networking seems to lose its importance.

But of course there are still areas where networks play an important role. Looking to the internet, for instance, one can find an immense number of networks and communities. And also companies have started to recover the worth of networking to gain against their competitors in the global market.

The importance of networks can also be prove by the fact, as researchers found out that economy is a compact netting of social networks (Krupp 1996: 290).

Nevertheless the role of social networks differs between the cultures. In Japan, for instance, business networks have existed for hundreds of years and play an essential role.

To make the origin of these Japanese networks understandable to the reader the first chapter of this term paper is going to look at the main aspects of the Japanese society.

The second chapter looks at the networks in Japan and their role in Japanese business, starting with the first form called Zaibatsu, from its beginning until the Second World War.

Moreover the new form of Japanese networks, called Keiretsu, is going to be analysed and the both forms of Japanese networks are going to be compared, in order to prove how these networks have developed through time. At the end of this chapter the reader will get an overview of the advantages and disadvantages of the Japanese neworks.

As the Japanese economy is playing an increasingly important role as a leader and economic superpower in the world (second largest economy on the globe) (De Mente 2005: 140), one may assume that by copying the Japanese networks, one can also copy their success.

By looking at these Japanese networks and analysing them, this essay will try to prove, that the Western cultures can learn and benefit from these networks.


“The Japanese are probably the most knowable and predictable people on Earth!”George H. Lambert, Japanologist

Japan was and somehow still is a very unsearchable country in the opinion of Westerners. Since the Westerners first arrived in Japan, in the sixteenth century, they tried to analyse and dissect the Japanese culture in order to understand it (De Mente 2005: 2). But still after so many years this culture still seems to be somewhat mysterious.

In the opinion of Boyé Lafayette De Mente, an editor and writer from Tokyo, the fact that the Japanese culture is still such an enigma to the rest of the world, is because of two main reasons: first of all because of the enormous differences between this and the Western cultures. The second main reason is, in the opinion of De Mente, the Japanese themselves, and their efforts to keep foreigners away.

The big cultural differences are explained by De Mente by the origins of the cultures: “While the Japanese mindset is a product of philosophical and metaphysical factors derived from Shinto, Buddhism, Confucianism, Taoism and Zen, the typical Western mindset is primarily a product of the major themes of Christianity fused with logic and scientism.” (De Mente 2005: 1)

The second reason is proven by De Mente with several facts. One of the main facts why it can be said that the Japanese wanted to keep foreigners away is the Japanese language: “Until recent times, the Japanese language was used as a barrier to keep foreigners at bay. The Tokugawa Shogunate government (1603-1868) made it a capital offense to teach the language to foreigners.” (De Mente 2005: 24)

Indeed the Japanese language is very difficult to learn for Westerners as it differs a lot from their languages. The main cause for the big difference is that Japanese language is a “right-brain” language, which means that it is processed by the right side of the brain, while the Western languages are processed by the left side of the brain. (De Mente 2005: 115)

Further to the language, as a specific aspect of the Japanese culture, De Mente assumes that another important aspect of the Japanese is that they are process oriented instead of being result oriented. According to this process orientation they tent to be perfectionists and the most critical people in the world. (De Mente 2005: 16) They are not only critical to others but also to themselves. This can be proved by the fact, that in cases of failure in private as well as in business affairs they tend, much more than any other nation in the world, to commit suicide: they have one of the world highest suicide rates and suicide has a long-term history in Japan. (De Mente 2005: 88-94)

Their perfectionism can also be seen at their work. De Mente says: “The more skilled the Japanese became in their work and the greater the quality of the products they produced, the greater the satisfaction. This satisfaction principle led the Japanese to strive for perfection in their efforts.” (De Mente 2005: 143) This vision of work has it origins in the Zen-Buddhism devise, which says that one should view work as a way of developing character, and not as a way to show productivity. During the years this philosophy became the moral standard by which the Japanese measure themselves and others. (De Mente 2005: 142)

Another important characteristic about the Japanese is that they are very group oriented. Individuals take second place to the group and decisions are based on the consensus by the whole group. (De Mente 2005: 46) This group orientation can also be described by the Japanese expression “Wa”, which describes group loyalty, consensus, cooperation, social cohesion and trust. It shows the essence of the gregariousness in the Japanese society und is the basic for the Japanese business connection. (Kutschker, Schmid 2005: 767-769)

All these characteristics about the Japanese made the Japanese economy became an economical superpower. Especially the Japanese group-orientation and their important role of work make the further details of the Japanese networks more reasonable to the reader.


The literal meaning of networks is, according to Oxford Dictionary: “an arrangement of intersecting horizontal and vertical lines or a group of people who interact together.”

An outstanding feature about the Japanese economy is its large business groups, also described as business networks, Zaibatsu and Keiretsu. These networks can also be described as an arrangement of horizontal and vertical relations between companies. (Chen 1995: 166)

3.1. Mitsui-Zaibatsu

Powerful arrangements and close groups are characteristic for Japan’s history. The first form of powerful close networking systems is called Zaibatsu. Although the structures have strongly changed during the centuries, a look at the past can help to understand the very complex structure of the Japanese networks in the present-time. (Wagner 1997: 42)

The translation of the term Zaibatsu is “wealthy clique” or “conglomerate”. The expression Zaibatsu consist the two Japanese scripts “zai” (estate) and “batsu” (group). (Voack 1962:15)

One of the first and most relevant Zaibatsu was founded by the family Mitsui in the 16th century. Sokubei Mitsui was a Samurai who first brewed rice-wine and later started to give customer loans. (Wade 2004)

After he passed away, his wife took care of the business. Her mission statement was economy. Even her eight children were educated very economically.

When two of her oldest sons, Toshitsugu and Shigetoshi, were old enough she sent them to Tokyo (which was called Edo by this time). In 1634 they opened a textile store there with the capital of their mother. The shop was successful and the third son, Takatoshi, joined them. Because of his outstanding business-talent the brothers soon opened a second store, which he took responsibility of, when he was only 14 years old.

The commercial practice in these days was to buy cheap and to sell expensive. Takatoshi tried to gain against his competitors with low prices to his customers. With this strategy he built up an enormous customer base and so with an age of 28 he had increased the capital of his shop sixteen times. (Wade 2004)

However his older brother Toshitsugu was so jealous because of his younger brother’s success that he sent him back home to take care of his ill mother and forbid him to do any business on the three main markets in those days in Japan: Kyoto, Osaka and Edo. Because of these instructions, he was sent into an economical exile.

Back in his home Takatoshi bought a brewery and started with bank deals. He financed the deals of his customers: short loans to his customers with good conditions. Once again he was very successful with this business.

24 years later, when his older brother passed away he went back to Edo and opened a new textile shop. Independent from his customers orders he always increased the assortment when the prices for his goods were low. With this strategy he could always guaranteed cheap prices to his customers. Later he cancelled the loan giving and created a new Mitsui-motto: pay cash and buy cheap. The more products he sold the lower the prices.

Beside his shop he always tried to create new markets. For this reason he sent his female staff to Edo’s bathhouses to find out the wants of the inhabitants. (Wade 2004)

He was not tired to think about updates. For this reason he also developed the first division of work, by separating the production process of clothes-making for his customers into steps: the first employee measured the cloth, the second pinned up the cloth, and the third cut it and finally the forth stitched the cloth. With this procedure it was possible to increase the number of kimonos produced.

This idea of division of work was discovered over 200 years later by Henry Ford for the automobile production.


Excerpt out of 24 pages


The influence of social networks in japanese business – Keiretsu as a japanese network
Hamburg University of Applied Sciences
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ISBN (eBook)
ISBN (Book)
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Keiretsu, Social Networks, Japanese Business, Networking, Network, Business, Business Network, Business in Japan, Working in Japan, Japan, Japanese, Social
Quote paper
Katharina Niciejewska (Author), 2007, The influence of social networks in japanese business – Keiretsu as a japanese network, Munich, GRIN Verlag,


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