today we will talk about ketu ketsu is a Japanese term referring to a business Network made up of different companies including manufacturers supply chain Partners Distributors and occasionally finers they work together have close relationships and sometimes take small Equity stakes in each other all the while remaining operationally independent translated literally ketu means headless combine powerful families known as zatu once ran the majority of Japan's major industries that all changed after World War II when the United States came in and busted up these structures zotus were seen as monopolistic and undemocratic reportedly buying politicians in exchange for contracts and using pricing mechanisms that exploited the poor faced with economic hardships after the war Japanese companies responded by reorganizing themselves as cetus Japanese corporations value having close ties with one another working together rather than keeping others at arms length is believed to be mutually beneficial for all parties in fact decades after its formation ketsu still represent major parts of the country's economy ketsu has even gone on to influence business practices in other countries albeit in a looser form in Japan where companies are expected to cooperate katus are regulated by specific laws outside the country the term generally refers to informal alliances between more than two organizations in 1996 academic Jeffrey Dyer wrote in Harvard Business Review that Chryslers teaming up with suppliers to cut the cost of manufacturing cars meant it had created an American ketu many other companies in the United States and Europe are viewed to have borrowed something from ketu too the ketu system is traditionally structured along a horizont Al or vertical integration Model A horizontal ketsu is characterized by an alliance of different companies from various sectors including a bank the bank is the centerpiece of the network and is responsible for providing the other companies with financial services the purpose of horizontal cetus is to distribute Goods around the world ketsu seek new markets for ketsu companies help establish ketsu companies in other countries and sign contracts with other International companies that Supply Commodities used in Japanese industry in contrast a vertical ketu refers to manufacturers suppliers and Distributors partnering up to cut costs and become more efficient the automobile company Toyota is an example of a vertical ketu Toyota relies on suppliers and manufacturers for parts employees for production real estate for dealerships steel Plastics and electronic suppliers for cars and wholesalers while these ancillary companies operate within the vertical C of Toyota they are members of the larger horizontal ketsu although much lower on the organizational chart working closely together can bring many benefits companies in the ketsu can leverage each other's expertise to become stronger and better information shared among customers suppliers and employees within the ketu can lead to increased efficiency as a result of this information sharing investment decisions can be made faster and suppliers and employees and customers know the purposes and goals of those Investments forming an alliance also limits the threat of competition and makes it more difficult for its members to be subject to takeover attempts by Outsiders in addition the reduction of costs due to dealing with intetsu firms can increase efficiency within the supply chain however there are also several drawbacks critics point out that their large size makes it difficult for cetus to adjust quickly to Market changes and that limited competition leads to efficient practices another potential issue is easy access to Capital close relationships with a bank might encourage a company to embark on risky debt fueled strategies that an outside institution would probably never help to finance in the west companies typically have relationships with suppliers that are distinct from the ketsu system in that they take an arms length approach however a few manufacturers in the west have engineered their own unique hybrid sourcing programs that borrow certain elements from the ketsu system for example Scania the Swedish bus and truck maker has tried to deepen its loyalties to its manufacturers in order to improve the company's Supply chains it has accomplished this by holding workshops for its suppliers on the Scania production system which emphasizes continuous Improvement and lean production Ikea's approach to supplier relationships also resembles the structure of ketu the company Works to build committed Partnerships with its suppliers based on Mutual Advantage trusts its vendors with significant tasks and collaborates with its vendors in order to maximize efficiency companies interested in engineering their own form of a ketu should keep these general principles in mind here are five key takeaways one ketu is a Japanese term referring to a business Network made up of different companies including manufacturers supply chain Partners Distributors and occasionally financiers two ketsu work together have close relationships and sometimes take small Equity stakes in each other all the while remaining operationally independent three ketu's Rose to prominence after World War II and the destruction of the Japanese zaibatsu four a horizontal ketu is an alliance of different companies led by a bank that provides them with Finance five a vertical ketsu refers to manufacturers suppliers and Distributors partnering up to cut costs and become more efficient hope this would help thanks for watching