Definition: Ketu is a Japanese term for a business network comprising various companies such as manufacturers, supply chain partners, distributors, and occasionally financiers.
Operational Independence: Companies in a ketu maintain operational independence while cultivating close relationships, sometimes involving small equity stakes in each other.
Historical Context
Translation: "Ketu" translates to "headless combine."
Zaibatsu: Before WWII, powerful families known as zaibatsu dominated Japan's major industries.
Post-War Changes: After WWII, the U.S. dismantled these monopolistic structures, leading to a reorganization of Japanese corporations into ketus.
Motivation: The shift was a response to economic hardships and the perceived undemocratic practices of zaibatsu, which included corrupt political dealings and exploitative pricing.
Structure of Ketu
Types of Ketu
Horizontal Ketu
Characteristics: Alliance of various companies across different sectors with a bank at the center.
Purpose: Distributes goods globally and seeks new markets for ketu companies, facilitating international contracts.
Vertical Ketu
Characteristics: Involves partnerships between manufacturers, suppliers, and distributors.
Example: Toyota relies on a vertical ketu for parts, production, and sales infrastructure.
Benefits of Ketu
Collaboration: Companies leverage each other's expertise, enhancing overall strength.
Information Sharing: Improved efficiency through shared information among members.
Quick Decision-Making: Fast investment decisions and clarity on goals for all members.
Reduced Competition Threat: Alliances limit competition and takeover risks.
Cost Efficiency: Decreased costs from dealing with inter-ketu firms.
Drawbacks of Ketu
Inflexibility: Large size may hinder quick market adjustments.
Limited Competition: Can result in inefficient practices due to reduced competition.
Risky Financial Strategies: Close relationships with banks may lead to risky debt strategies.
Influence Outside Japan
Western Adaptations: While traditional Western companies maintain arms-length relationships with suppliers, some have adopted elements of the ketu system:
Scania: Holds workshops for suppliers to implement lean production.
Ikea: Builds committed partnerships with suppliers based on mutual advantage and trust.
Key Takeaways
Ketu is a unique Japanese business network involving various companies.
Companies in a ketu work closely while remaining operationally independent.
The rise of ketu was a response to the dismantling of zaibatsu post-WWII.
Horizontal ketu involves alliances led by a financial institution, while vertical ketu consists of manufacturers, suppliers, and distributors.
Companies interested in creating their own ketu should consider mutual benefit, trust, and collaboration.
Conclusion
Understanding the structure and principles of ketu provides insight into collaborative business practices that can enhance efficiency and market responsiveness.