SOGOSHOSHA Japanese Trading Companies and KEIRETSU interlinked corporate ownership

changes were last made to this web page 2004 Feb 19, previous update 2001, Dec 19

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Chapter 17 Page 608 Export Trading Companies Sogoshosha and Keiretsu

. The World's largest ETCs, Export Trading Companies are dominated by the Japanese and Korean firms - some of which date from before World War II. In this course we will refer to them by their Japanese name "Sogoshosha". In Japan, the Sogoshosha are associated with corporate groups called Keiretsu. eg. Mitsubishi Trading company with Mitsubishi Bank, Mitsubishi Automotive, Mitsubishi Heavy Industries, Mitsubishi Electronic, etc. WTGR . "According to the Japan Fair Trade Commission (JFTC), almost 20% of Japan's capital was held by six major corporate groupings (Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa, and Dai-Ichi Kangyo [DKB]) and their subsidiaries in Japan"  http://pubs.acs.org/hotartcl/chemtech/97/jun/keir.html Cross-shareholding ratios of major keiretsu Keiretsu JFY Mitsui Mitsubishi Sumitomo Fuyo Sanwa DKB Average of six major groups 1989 46.1 59.7 83.7 34.7 17.6 17.8 43.3 1991 46.1 61.0 85.3 36.0 18.2 18.4 44.1 1992 45.8 61.2 85.3 36.0 18.3 17.3 44.0 from  http://pubs.acs.org/hotartcl/chemtech/97/jun/keir.html   . What this chart means is that the degree to which the keiretsu members own each other, is very high. This degree of cross ownership is not matched in the North American or European corporate environment. WTGR

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Export Trading Companies Keiretsu

. Description of Keiretsu can be found on the site of Professor Paul Herbig  www.tristate.edu/faculty/Herbig.html  Tri-State University, Indiana Japanese Marketing lecture series   www.geocities.com/Athens/Delphi/9158/kwujmktg23.html  WTGR . Prof. Herbig explains "The keiretsu system is a driving force behind Japan's industrial success. Japanese keiretsu such as Fuyo, Dai-Ichi Kangyo, Mitsubishi, Mitsui, Sanwa, and Sumitomo generate nearly one-quarter of Japanese business revenues. This system is not simply a superior form of business operations; it is a system that fits Japanese culture....It is the team concept that makes this system part of Japanese corporate culture. While Americans have been complaining that the keiretsu violates U.S. antitrust laws, the fact is that it is rooted in economic cooperation, which lowers transaction costs, and in collaborative research efforts, which expedite development of new technologies. When an organization gains membership in a keiretsu, both financial and non-financial benefits accrue. These benefits include reduced risk through mutual support and the control of stock voting power, cooperation in marketing and product development, guaranteed markets and sources of supply, ties with a trading company that supplies needed raw material imports and handles export trade, and a bank to supply financial resources. Trading firms also arrange for transportation, insurance, warehousing, and financing." Prof. Herbig suggest Keiretsu are relevant not just in Japan "Are keiretsu relationships a uniquely Japanese business practice? International keiretsu-style practices have received positive evaluation, particularly in the auto parts industry. For example, the “Big Three” U.S. auto makers have begun favoring long-term contracts with selected parts producers instead of short-term agreements they are accustomed to making. Associations of suppliers have been formed to help maintain communications between auto makers and parts producers. European car makers are also following in the United States' footsteps. This growing tendency for keiretsu-style practices to be adopted internationally indicates that the advantages of this cooperative business style have come to be recognized worldwide and not just in Japan."

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Export Trading Companies Sogoshosha

. Description of Sogoshosha can be found on the site of Professor Paul Herbig  www.tristate.edu/faculty/Herbig.html  Tri-State University, Indiana Japanese Marketing lecture series  www.geocities.com/Athens/Delphi/9158/kwujmktg22.html EVOLUTION AND CULTURAL BASIS OF THE SOGO SHOSHA WTGR . Prof. Herbig explains "Sogo shosha were first established in the late nineteenth century, shortly after Japan opened her doors to the outside world....The desire to develop foreign trade that was independent of foreign control led to the emergence of firms specializing in foreign transactions, the precursors of the sogo shosha....Sogo shosha came to perform multiple functions, including procuring modern equipment, new technology and raw materials; financing purchases; and arranging for the shipment and exporting of the final products."

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The Sogoshosha an example Mitsui - formerly incorporated just after WWII but in fact a company more than 300 years old Mitsui is the oldest
Mitsubishi is the biggest	http://www.mitsubishi.or.jp/e/h/his.html - history of the origins of the company

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