Keiretsu

In Japanese business, a “keiretsu” is a group of big companies who get together, invest in each other, and sometimes collab on projects. There are six major keiretsu, and generally speaking, they work a little something like this: there’s a bank involved, and sometimes another financial institution like a brokerage firm, and then there are industrial-type companies that are related in some way, but may or may not be in the exact same line of business. Those institutions work together to set each other up for success, whether that means owning stock so no one gets hostilely taken over, or sharing resources so no one goes broke manufacturing or selling their goods and services.

There are two main types of keiretsu: vertical and horizontal. The vertical guys include organizations that are more or less in the same general line of business, but exist at different steps of the process. For example, a clothing retail-related keiretsu might include the company that designs the clothes, the company the manufactures the clothes, the company that sells the clothes, and the bank that all those companies use to finance their operations. Then there are horizontal keiretsu, which include companies that aren’t necessarily in the same line of work, but can benefit from having strong relationships with one another.

On the plus side, these sorts of alliances reduce risk and improve the financial stability of the member organizations. After all, how sweet would it be to have an alliance of corporate BFFs all working together to make sure everyone’s successful? Answer: pretty sweet.

But on the flip side, if this arrangement is looking a little monopolistic to some, that’s because...it can be. With big ol’ keiretsu hanging around, it can be harder for new and smaller firms to break into the market. Also, those big ol’ keiretsu, since they are so big and well-established, can be slow to react to economic and social changes, which can be bad for business.