Chaebols and Keiretsus

Chaebol refers to a South Korean form of business

conglomerate. They are government-supported powerful
global multinationals owning numerous international
enterprises. The Korean word means "business family" or
"monopoly" and is often used the way conglomerate is used.
There are several dozen large Korean family-controlled,
government-assisted corporate groups which fall under this
definition. Through aggressive governmental support and
finance, some have become well-known international brand
names, such as Samsung, Hyundai and LG.
The government also works to promote competition between
the chaebol to prevent monopolies.

Samsung Group Electronics,

insurance, Card,
Construction &
Shipbuilding
LG Group
Electronics,
insurance,
Chemicals,
Telecom, Trade
Hyundai
Motors, Steel &
Automotive Group Stock
POSCO
Steel

keiretsus

 A keiretsu in Japan is a system,

series, grouping of enterprises, order
of succession) is a set of companies
with interlocking business
relationships and shareholdings. It is
a type of business group.
Before World war II ,Japanese
industry was controlled by large
family-controlled vertical monopolies
called zaibatsu.
After world war II. General Douglas
McArthur dissolved zaibatsu.

 Sixteen zaibatsu were targeted for complete dissolution,

and twenty six more for reorganization after dissolution.
However, the companies formed from the dismantling
of the zaibatsu were later reintegrated.
The dispersed corporations were re-interlinked through
share purchases to form horizontally-integrated
alliances across many industries called Keiretsu.
Where possible, keiretsu companies would also supply
one another, making the alliances vertically integrated
as well. In this period, official government policy
promoted the creation of robust trade corporations
which could withstand heavy pressures from intensified
world trade competition.

 The major keiretsu were each centered around one bank, which
lent money to the keiretsu's member companies and held equity
positions in the companies. Each bank had great control over
the companies in the keiretsu and acted as a monitoring entity
and as an emergency bail-out entity. One effect of this structure
was to minimize the presence of hostile takeovers in Japan,
because no entities could challenge the power of the banks.
Two types of keiretsu:
Vertical keiretsu illustrates the organization and relationships
within a company (for example all factors of production of a
certain product will be connected)
Horizontal keiretsu shows relationships between entities and
industries, normally centered around a bank and trading
company. Both are complexly woven together and self-sustain
each other.

Example :
Name

Bank

Major group companies

Mitsubishi

Mitsubishi Corporation, Kirin

Brewery, Mitsubishi Electric,
Mitsubishi Fuso, Mitsubishi Motors,
Mitsubishi Bank (until
Nippon Yusen, Nippon Oil, Tokio
1996)
Marine and Fire Insurance, Nikon,
Bank of TokyoMitsubishi Chemical, Mitsubishi
Mitsubishi (19962005)
Estate, Mitsubishi Heavy Industries,
Bank of TokyoMitsubishi Rayon Co., Ltd.,
Mitsubishi UFJ (2006 )
Mitsubishi Materials Corp.,
Mitsubishi Paper Mills Ltd., Pacific
Consultants International Ltd.

Mitsui

Mitsui Bank (until

1990)
Fuji Photo Film, Mitsui Real
Sakura Bank (1990
Estate, Mitsukoshi, Suntory,
2001)
Toshiba
Sumitomo Mitsui Bank
(2001 )

 Toyota is considered the biggest of the "verticallyintegrated" keiretsu groups.[2]

The Japanese recession in the 1990s had profound
effects on the keiretsu. Many of the largest banks
were hit hard by bad loan portfolios and forced to
merge or go out of business. This had the effect of
blurring the lines between the keiretsu: Sumitomo
Bank and Mitsui Bank, for instance, became
Sumitomo Mitsui Banking Corporation in 2001
The keiretsu model has not appeared outside
Japan, but many non-Japanese businesses are
described as keiretsu such as the Virgin Group
(UK), Tata Group (India) and Cisco Systems (USA).

Big 4 Zaibatsu
(preceding World War
II)

Mitsubishi Sumitomo
Mitsui Yasuda

Big 6 Keiretsu (until

shortly after Japan
bubble)

Mitsubishi Mitsui
Sumitomo Fuyo
Dai-Ichi Kangyo
Sanwa
Midori Kai Mizuho
Group Mitsubishi
Mitsui Sumitomo

Current Groups

Difference between Chaebol &

Keiretsus

Chaebol are still largely controlled by their founding families,

while keiretsu are controlled by groups of professional managers.
Chaebol are centralized in ownership, while keiretsu are more
decentralized.
Chaebol often formed subsidiaries to produce components for
exports, while large Japanese corporations often employed
outside contractors.
Chaebol are prohibited from owning private banks, partly in
order to increase the government's leverage over the banks in
areas such as credit allocation. In 1990, government regulations
made it difficult for a chaebol to develop an exclusive banking
relationship. Keiretsu have historically worked with an affiliated
bank, giving the affiliated companies almost unlimited access to
credit, although this is no longer a universal feature of keiretsu.