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ASIA AND GLOBAL ECONOMIES SUBMITTED BY, K. SRUJANA.

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TABLE OF CONTENTS S. NO 1 2 TOPIC INTRODUCTION INTRODUCTION ABOUT FIYO, SANWA, DKB GROUPS 3 4 5 MANPOWER OF INDUSTRIAL GROUPS MARKETING OF INDUSTRIAL GROUPS MONEY/CAPITAL OF INDUSTRIAL GROUPS 6 7 WORLD ISNT FLAT REFERENCES 10 11 14 5 6 8 PAGE NO 3

1.

INTRODUCTION:

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CENTUM U JAPANESE KEIRETSU: Keiretsu is a Japanese term which is nothing but a Group or it can also be interpreted as alliance or partnership. The Japanese use an economic system which is known as Keiretsu to organize the corporation into one cohesive structure that is nothing but a group of companies are linked together through sharing business, cross-shareholding and having mutual values and interests. Keiretsu is nothing but Spider Web Strategy. Classification of keiretsu: (a) Zaibatsu (loosely related and strongly diversified, for instance Mitsubishi), (b) Single production keiretsu based on a strong leading corporation, for instance Hitachi, (c) So called spin-off keiretsu formed as a result of the most innovative parts of the core company becoming self-dependent, for instance Matsushita, (d) Regional keiretsu formed by regional subsidiaries becoming self-dependent, for instance NEC, (e) Person-oriented keiretsu, networks of companies created by charismatic

owners, for instance Seibu, Softbank. Keiretsu Factor Ownership Products Finance Market Technology Cross-shareholding Specialized In-group bank Global sales Group development (incremental) / Innovative leaders Source: based on P. Buckley (2005, p. 36) Economic System (Keiretsu) is of 2 types they are: Horizontal.
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CENTUM U Vertical. HORIZONTAL KEIRETSU (or) FINANCIAL KEIRETSU: Horizontal Keiretsu is nothing but a group of companies in different industries are organized around one of its commercial bank which provides variety of financial services to the companies around it. The major groups in horizontal keiretsu are known as Big Six. This Big Six include: a) b) c) d) e) f) Mitsubishi. Sanwa. Dai-Ichi Kangyo. Mitsui. Fuyo. Sumiotomo. The industries in Horizontal Keiretsu are banking, manufacturing, steel, insurance, trading, chemical and electric gas. These companies follow the OneSet Policy where the groups avoid the direct competition between the member firms. This policy allowed the rapid cooperative development of the keiretsu. VERTICAL KEIRETSU (or) INDUSTRIAL KEIRETSU: Vertical Keiretsu emerges when corporate companies are linked together through the intra group production activities and ownership of long term equity. It is used for linking a) b)
c)

Suppliers. Manufacturers. Distributors of one industry. Example in Vertical Keiretsu:

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CENTUM U Toyota is a vertically integrated keiretsu group. Its success depended on manufacturers of parts, real estate dealership, electronics suppliers, suppliers, steel, employee for the production and plastic suppliers for cars and wholesalers. Some companies in vertical keiretsu:

AUTOMOBILE INDUSTRY: TOYOTA GROUP. NISSAN GROUP. HONDA GROUP. DAIHATSU MOTORS. ISUZU. ELECTRONICS: HITACHI. TOSHIBA. SANYO. MATSUSHITA. SONY. FIYO, SANWA and DKB: Fiyo, Sanwa and DKB are called as financial keiretsu. The formation of this financial keiretsu is during 1950s and 1960s they came in response to banks ability to finance the firm investment and operations. Link between Group Members: The important link between the groups in keiretsu is share cross holding. The cross holding ratio is that the total value of members shares by group members.

2.

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CENTUM U Group 1987 1999 2000 % change 1987 2000 FIYO SANWA DBK 5.27 4.75 6.99 4.31 4.79 6.32 3.70 4.07 5.87 -29.79% -14.31% -16.02%

3.

MANPOWER OF INDUSTRIAL GROUPS: FUYO: The number of employee, number of companies, net profit and net sales as a percentage of the nonfinancial Japanese companies for the FIYO group is given below: Industr ial group No es of Sales a of sales non financial compani es 110 FIYO 2.7 0.9 2.5 as Employment as share of total employment of financial companies non Profit share of as of non

Compani

share total of

total profit financal companies

SANWA GROUP: The number of employee, number of companies, net profit and net sales as a percentage of the nonfinancial Japanese companies for the SANWA group is given below: Industri No of Sales as Employment Profit as

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CENTUM U al group Compan ies a of sales non financial compani es SANWA 84 2.4 0.8 1.1 share total of as share of total employment of financial companies non share of of non

total profit financal companies

DKB (DAI-ICHI KANGYO) GROUP: The number of employee, number of companies, net profit and net sales as a percentage of the nonfinancial Japanese companies for the FIYO group is given below: Industr ial group No es of Sales a of sales non financial compani es DKB 64 2.9 0.8 1.1 as Employment as share of total employment of financial companies non Profit share of as of non

Compani

share total of

total profit financal companies

4.

MARKETING OF INDUATRIAL GROUPS: FUYO GROUP: The trading company of Fuyo Group is Marubeni. FUYO Group activities are quite diverse. Fuyo group trade more than twenty thousand different commodities on commission basis, invest in overseas market and domestic, and they also extend credit to affiliated companies and customers. They also encourage the joint ventures among companies in the group.

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CENTUM U Comparison of sales of FIYO group with other multinational companies COUNTRY FUYO ROYAL DUTCH SHELL FORD MOTOR GE FIAT PROCTER and GAMBLE / USA USA ITALY USA 37,100 25,000 25,200 10,800 26 17 17 7 JAPAN NETH/ UK Sales 100,800 77,100 Index 70 53

SANWA GROUP: Trading of Sanwa Group is done by Takashiama, Nissho Iwai and Orix. Sanwa Group carry out logging, milling pulp and paper, purchasing, transport and wood marketing operations which are more or less equivalent to DKB in size and scope. Sanwa does not derive its power and profits merely from the individual companies that make up its clan. The Tag line of Sanwa is Suntory: Thinking about the Earth, which was emblazoned on its one of the product. Now a days Sanwa Group is reducing its identification in Osaka whose head quarters are in Tokyo even it is trying to maintain its old office in the same place. Sanwa is trying to become national without losing the customers in Osaka. Comparison of Sanwa Group sales with Multinational Companies:

COUNTRY SANWA ROYAL DUTCH SHELL FORD MOTOR GE MBA-ASIA / USA USA JAPAN NETH/ UK

Sales 90,400 77,100

Index 62 53

37,100 25,000

26 17
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FIAT PROCTER and GAMBLE

ITALY USA

25,200 10,800

17 7

DKB GROUP: Trading of DKB Group is done by Itochu, Seibu. DKB use integrated marketing system which strengthened the capabilities for swift and timely development of the products and services. Alliance of DKB focus on marketing the products which are best suited for the customers or consumers. The marketing personnel should enquire the customer or consumer from the level where they have information about investing in funds. The key feature of DKB is that integrated system which they feel as the best way to ensure the marketing in responsible manner and also build trust and confidence to customers or consumers. Comparison of DKB Group sales with Multinational Companies: COUNTRY DKB ROYAL DUTCH SHELL FORD MOTOR GE FIAT PROCTER and GAMBLE / USA USA ITALY USA 37,100 25,000 25,200 10,800 26 17 17 7 JAPAN NETH/ UK Sales 1,07,800 77,100 Index 74 53

5.

CAPITAL / MONEY OF INDUSTRIAL GROUPS: FIYO GROUP: In the year 1996 the executive council of FUYO Group has 27 full time employees. The capital or money for FUYO Group is obtained from Yasuda Zaibatsu which includes Fuji Bank which is the main bank and also the trusted

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CENTUM U bank of Yasuda Zaibatsu like Yasuda Fire and Marine, Yasuda trust and banking and also insurance companies and Marine and Yasuda Mutual life. Yasuda Zaibatsu also supported the companies which are associated or part of FUYO group like Oki Denki (electronics), Toho Rayon (fibers), Tokyo Tatemono (real estate) and Showa Line (shipping). FUYO Group depends on MITI but banks were the centre for FIYO Group and the Japanese companies does not depend on the government to borrow money. FIYO Group maintains a high degree of solidarity and communication among the personal, they dont compete with each other and they even dont cooperate with the groups outside it and these relations are maintained on mutual trust bases. Cross Shareholding of FIYO GROUP IS: Group 1987 1999 2000 % change from 1987 2000 -29.79%

FIYO

5.27

4.31

3.70

SANWA GROUP: Sanwa Group is obtained after the merging of Sanwa Bank with Tokai Bank. It doesnt depend on the government but it depends on Sanwa Trust Bank. Sanwa Trust Bank is formed by merging of Sanwa trust bank, Toyo trust and Tokai trust. Sanwa Group uses Trade Credit as their financing so, bank loans are not higher share of liability. Trade Credit is a non financial corporation and it is lending funds among the group itself. The total trade credit of Sanwa Group in the year 2000 is 22%. Sanwa Group is also depended on Nippon Insurance and Nomura Securities for its financial core. In the big six of keiretsu the member of group will have cross share holding. Cross Shareholding of SANWA GROUP IS: Group 1987 1999 2000 % change from 1987 2000 -14.31%

SANWA

4.75

4.79

4.07

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CENTUM U DKB GROUP: Dai-Ichi Kangyo Group is the newest of big six horizontal Keiretsu the main bank Dai-Ichi Bank which is the core of zaibatsu which is created in Meiji Era. DBK bank also has ties with other two banks Matsukata and Furukawa. In 1971 the merging of two banks Dai-Ichi Bank and Kangyo bank made Dai-Ichi Kangyo bank. Cross Shareholding of DKB GROUP IS: Group 1987 1999 2000 % change from 1987 2000 -16.02%

DKB

6.99

6.32

5.87

6.

WORLD IS NOT FLAT: No, Automobile industry is not the regional industry but rather all the industries act as such, the 500 largest companies in the world accounted for over $14 trillion of total sales (revenues) in fiscal year 2001. The average revenues for a firm in the top 500 were $28 billion, ranging from Wal-Mart at $220 billion to Takenaka at $10 billion. In this study of the intra-regional sales of these 500 firms, a total of 380 were included with available geographic segment data. These 380 firms account for 79.2% of the total revenues of all the 500 firms. The average sales volume of a firm in the set of 380 is $29.2 billion. Across these 380 large firms the average intra-regional sales represent 71.9%. A relative sales dominance in a specific regional market, rather than a very wide and evenly distributed spread of sales, reflects five underlying issues critical to the MNEs functioning. Firstly, many number of MNEs are not world- wide but fixed to only a specific region. This means that the firms products are not really equally accessible and/or attractive to consumers all around the world, in spite of many MNEs attempting to adapt their products to local demand.

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CENTUM U The second deals with the lack of success in the worldwide markets, although based on aggregate company-level data, could be interpreted as a reflection of the limits to the non-location-bound nature of the MNEs knowledge base that is, their firm-specific advantages (FSAs). Firms may have sophisticated and proprietary technological knowledge, brand names, etc., but there may be severe limits to the joint international transferability of this knowledge, and its acceptance by customers across regions. These limits may exist irrespective of whether the knowledge is embodied in final products and then exported, transferred as an intermediate product through licensing, or utilized in foreign affiliates through FDI. The next issue is that the MNEs dint perform well across globe will show the ability to leverage the critical location-bound FSAs. Coming to the fourth critical issue, as the MNEs market share is totally different at various locations so this calls for different strategies to compete The above given four issues have very crucial importance when it comes to Multinational Enterprises corporate governance. We cannot say governance is the only problem and the presence of multiple environmental circumstances may also be critical here. However, the need for regional strategies does suggest the parallel introduction of a regional component in the MNEs governance structure to deal appropriately with the distinctive characteristics of each leg of the triad, and with the regions outside it, much in line with Ohmaes (1985) prescriptions. This need for distinct regional strategies should be viewed as a complement to the well-known normative models that advocate simple globalization strategies as a set of purposive decisions and actions instrumental to a broad and deep penetration of foreign markets (Govindarajan and Gupta, 2001; Jeannet, 2000; Yip, 2002). Regionalization should be viewed as an expression of semiglobalization (Ghemawat, 2003). Semi-globalization implies that we observe neither extreme geographical fragmentation of the world in national markets nor complete integration. Incomplete integration means that location specificity, in this case regional specificity, matters. Only in the context of incomplete

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CENTUM U integration is there scope for international MNE strategy that is conceptually distinct from conventional domestic strategy.

7.

REFERENCES: Clyde Eagleton, Excesses of Self-Determination, in Foreign Affairs, Vol. William Easterly, The Utopian Nightmare, in Foreign Policy

31(1953), No. 4. September/October 2005. Pankaj Ghemawat, Why the World Isnt Flat, in Foreign Policy, March/April 2007.

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Branislav Gosovic and John G. Ruggie, On the Creation of a New International

Economic Order: Issue Linkage and the Seventh Special Session of the UN General Assembly, in International Organization, Vol. 30 (1976), No. 2. Louis Henkin, How Nations Behave: Law and Foreign Policy. Columbia Wyatt C. Wells. ANTITRUST AND THE FORMATION OF THE POSTWAR Magnus Blomstorm, Sumner J. La Croix. INSTITUTIONAL CHANGE IN Gregory H. Watson. BUSINESS SYSTEM ENGINEERING: Managing University Press, 1979. WORLD. Columbia University Press, 2002 Law, Page No 185. JAPN. Taylor and Francis, 2006 History, Page No 133. Breakthrough Changes for Productivity and Profit. John Wiley and Sons, 1994, Page No 122. Nikolaos Karagiannis, Zagros Madjd Sadjadi. MODERN STATE INTERVENTION IN THE ERA OF GLOBALIZATION. Edward Elgar Publishing, 2007 Business and Economics, Page No 192. Stuart Crainer, Des Dearlove. FIRESTRATERS!: Igniting the Entrepreneurial Organization. FT.com, 2001 Business and Economics, 308 Pages Kenman L. Wong, Scott B. Rae. BUSINESS FOR THE COMMON GOODS: A

Christian Vision for the MarketPlace. InterVarsity Press, 2011 Business and Economics, Page No 140. Pankaj Ghemawat. REDEFINING GLOBAL STRATEGY: Crossing Borders in

a world where Differences Still Matter. Harvard Business Press, 2007 Business and Economics, Page No 232.

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