Questions-Answers: Keiretsu Case

1. What different demands are being placed on Hitachi Matsushita, and Toyota that are changing the way the each organization does it ‘s sourcing.

Competition and technological changes make firms compete in the production process. Consequently, they end up purchasing high-quality supplies from abroad, thus disadvantaging the dependent small businesses that could provide them locally. The competition also pushes companies to consider manufacturing products that they purchase from other enterprises internally. For instance, Toyota is contemplating starting to manufacture automotive electronics that the firm formerly bought from Denso. Trade disputes also play a role in breaking Keiretsu ties between companies that participate in the production of one commodity in different phases. The booms and recessions interfere with businesses' economic stability harming the supply purchase relations.

2. Is Hitachi’s sourcing policy becoming more or less Keiretsu like? Why?

Hitachi’s sourcing policy resembles Keiretsu because the company invites suppliers to the factory for the development of partnership. Unlike other companies that are digressing from the trend, Hitachi continues to promote the supplier-purchaser relationship. The company values openness and mutual exchange to improve flexibility. The partnership allows the suppliers to know exactly what is expected of them in their goods. The suppliers adopt the identity of the company as a guarantee that they will supply exactly what is needed. Hitachi partners with its customers for customization of its products to meet the customers' needs. The company also has transfer partnership with the supplier firms whereby they exchange workers as a way of creating friendly ties and facilitating trade between them.

3. Is Toyota’s sourcing policy becoming more or less Keiretsu like? Why?

Toyota has Keiretsu relations with the Denso Company that manufactures automotive electronics. The two companies invest in the innovation and the efficiency of each other so that both can benefit from the joint stock of knowledge. For instance, Denso supply electronics to Toyota, which assembles them. However, Toyota has started deviating from the norm and thus is systematically trying to eliminate Keiretsu relations with Denso. This is because the former has adopted an American model of deskilling the supplier and thus, the company is making efforts to manufacture internally the automobile electronics that were formerly sought from Denso.

4. Is Matsushita’s sourcing policy becoming more or less Keiretsu like? Why?

The firm declares that technological changes can strengthen Keiretsu ties. The company tries to boost the skills and knowledge of suppliers. However, the current trend of the firm is breaking Keiretsu ties with businesses that supply low-value products while at the same time strengthening ties with those that produce high-quality goods (top suppliers). For instance, the lower value goods are to be imported while the high-value goods are to be supplied by local suppliers. The firm's policy, therefore, is becoming more Keiretsu in cases of top suppliers while the firm is seeking to delink itself from the suppliers of low-quality goods.

5. From this case, what do you think is happening to sourcing policies generally in Japan?

To a large extent, the sourcing policies are diverting from the traditional Keiretsu trend, and this is evident from the observed behavior of several firms. For instance, Toyota seeks to eliminate the ties with Denso Company, which manufactures automobile electronics. Toyota is trying to produce the products internally, and thus, shortly, Denso may lose the supply business in the company. Matsushita Company has also adopted the trend, and this is by severing ties with the producers of low-quality goods and in the future, the company may also seek to eliminate the top suppliers as well. To a small extent, Keiretsu ties in Japan have future if companies like Hitachi do not show any sign of diverting from the trend. Matsushita is also strengthening ties with top suppliers, but the fate of the relationships in the future is uncertain.

6. Advantages of Keiretsu ties

Keiretsu is useful to the companies for relationship building. Teamwork in the form of invitation of suppliers to the purchasing firm, transfer of workers between the enterprises and interdependency helps to bolster good relations between businesses and thus promoteі productivity in all companies, which implies financial benefits. The relationships also help small business to have a competitive edge in the market by manufacturing some supplies for large enterprises.

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