Keiretsu is an informal relationship between various companies. These companies normally have businesses, which are considered to be intertwining. The nature of this intertwining is usually in terms of shareholding as well as business relationships. It is an informal relationship that is in most cases practised in Japan (Dedoussis, 2001). Over the larger half of the twentieth century, it is said that Keiretsu was dominating the Japanese economy. This is because, all the members of this casual, business group, become shareholders of each other’s companies (Speece, 2001). The level of shareholding is normally on small proportions. This relationship centres on a core bank that the shareholders have selected.
The main objective of this casual group is to prevent the member companies from any form of a hostile takeover attempts or the fluctuation of the equities market (Miwa & Ramseyer, 2004). This group was formed because the members felt that it was necessary for them to have a caution against the rapidly changing tides of the stock markets. With the existence of the Keiretsu, the member companies of this group can be able to carry out long term strategic planning. There are mainly two types of Keiretsu namely; vertical and horizontal. Vertical Keiretsu is also known as industrial Keiretsu. Its main objective is to link distributors, suppliers and manufacturers.
The lower levels of the vertical Keiretsu are known as tiers. Under vertical Keiretsu, sub companies or one company is formed for the objective of benefiting the parent company (Peng, 2001). It is worth noting that the lower the tier the higher risk of economic disturbance. On the other hand, horizontal Keiretsu is also known as financial Keiretsu. This is relationship is concentrated around one bank whose main objective is to provide financial services.
Strategic Options for Market entry and Expansion a Small and Large Company is Likely to Pursue
A small company has an array of options for market expansion or entry. One of the options that a small company can use is licensing. This is because through licensing its brand, patents, and product formula among others the company can be able to penetrate into a new market (Kachru, 2005). A small company is expected to penetrate faster into the market through licensing especially if the licensee is a company that has good distribution networks. The main disadvantage with licensing is that the licensor loses control (Tielmann, 2010). Under unfortunate circumstances, the licensee may take advantage of the licensor. There are also scenarios whereby the licensee may end up becoming the main competitor of the licensor. This can be a great disadvantage because it is very likely that the licensee understands the characteristic of that specific market more than the licensor.
On the other hand, a large company also has a wide range of options for market expansion and entry. One of the best options that a large company can use to enter into a specific market is a joint venture. The large company can enter into a joint venture with company operating in a specific market (Roe & Gilson, 1993). This technique comes in handy when dealing with markets that have barriers. In addition, major multinational corporations have also established a strategic partnership with various other organizations (Gilligan & Hird, 2013). This facilitates achievement of a competitive advantage as the partnering firms are well established in the market the organization is establishing business.
References
Dedoussis, V. (2001). Keiretsu and management practices in Japan – resilience amid change. Journal of Managerial Psychology, 16(2), 1-16.
Gilligan, C., & Hird, M. (2013). International Marketing (RLE International Business): Strategy and Management. New York: Routledge.
Kachru, U. (2005). Strategic Management: Concepts and Cases. New Delhi: Excel Books India.
Miwa, Y., & Ramseyer, J. M. (2004). The Fable of the Keiretsu. Journal of Economics & Management Strategy, 11(2), 169-224.
Peng, M. W. (2001). The keiretsu in Asia:. Journal of International Management Implications for multilevel theories of competitive advantage, 7, 253-276.
Roe, M. J., & Gilson, R. J. (1993). Understanding the Japanese Keiretsu: Overlaps between Corporate Governance and Industrial Organization. The Yale Journal, 102(4), 876-905.
Speece, M. (2001). Asian management style: an introduction. Journal of Managerial Psychology, 16(2), -.
Tielmann, V. (2010). Market Entry Strategies. Berlin: GRIN.
