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1、Business groups a common feature in many countries around the world.Hongs in Hongkongw Hutchison Whampoa, CITIC Pacific, Swire Pacific, New World DevelopmentChaebol in South Koreaw Samsung, DaewooFamily-centered industrial groups in Indiaw Tata Group, Escorts GroupKeiretsu in Japanw Toyota, Nissan,
2、NTTBusiness GroupsBusiness GroupsCommon characteristics of business groups :Have many individual businessesBusinesses compete in multiple industries:w automotivesw electronicsw servicesSome form of common administration and control across businesses in a business group weaker in case of keiretsu in
3、Japan stronger in case of family-centered industrial groups in IndiaBusiness GroupsBusiness groups similar in form to conglomeratesConglomerates out of favor in many countries?Business groups in many other countries found to be associated with higher performance.Major question: What is rationale for
4、 a business group?What value does a business group provide?日本Keiretsue. g.1. FinancingIntra-group low cost financing by Nucleus Bank, especially for capital intensive industries Protection from takeover threats by cross-holding of sharesAdvantages of KeiretsuBank of Tokyo, MitsubishiMitsubishi Const
5、ructionNippon Mitsubishi OiMitsubishi Heavy Industry Safety net for sales figures , e.g.Mitsubishi Steel for Mitsubishi ConstructionTokio Marine & Fire Insurance, Mitsubishi Research for whole groupAvoid being undercut by competitorsCross-selling business opportunity from group membersclient base /
6、staffDifferent services under one roof = Larger business opportunitiesAccess to foreign markets via general trading companiesJoint development efforts = innovation2. BusinessIndustry-wide expertisee.g. industrial knowledge help merchant bank in assessing new investments opportunityEfficient flow of
7、market information / customer preference for product /service design-12,000 professionals, 42 offices in Japan, 118 offices and subsidiaries in 73 locations overseasLeverage on the groups reputation = reduce image building costDifferent services under one roof = Larger business opportunitiesL-T grow
8、th rather than S-T profitSharing of management expertiseExchange directorsPresidents Club, Friday Club3. ManagementDisadvantages of KeiretsuBad debtInsufficient credit reviewHindrance to open marketTransfer pricing rather than competitive market priceFail to explore new opportunities outsideFather d
9、ead, son dead syndromeBank of Tokyo, Mitsubishi Bank as the risk takerInflexibilityFace saving slow down decision makingOutlook for KeiretsuReduce dependence on group companies Misubishi Motor joint venture with Dialmer-ChyrslerSourcing decision based on cost than relationshipMore open to global eco
10、nomyConcentrate on core businessBig band financial reform making it easier for firms to raise money without going to keiretsu banksBusiness Group in Hong Kong: HongsHongs in Hong KongHong Kong business environment: more concentratedDominated by five large Hongs Hutchison Whampoa*CITIC PacificSwire P
11、acificNew World DevelopmentJardine MathesonHongs are a form of business groupCompete in multiple businesses, typicallyw land and property managementw constructionw retail and other services* Hutchison WhampoaMajor Businesses of HutchisonTurnover 1997, HK$ millionProperty 3,002Ports and related servi
12、ces10,723Retail, manufacturing22,842Telecommunications13,214Energy, Infrastructure and Finance11,778* Hutchison WhampoaTurnover by Geographic AreaHong Kong61%Mainland China10%Other Asian Areas8%Europe12%North America9%Hongs: CompetitionHongs occupy preferred positions in many industries in Hong Kong
13、.Industries tend to involve high capital investmentIndustries involve possession of scarce resourcesHongs operate in mostly oligopolistic or monopolistic industries:few competitorscoordinated action among competitorsHongs: Competition and PerformanceHongs have difficulty moving into international ma
14、rketsStrong position within Hong KongMajor moves being made into ChinaHongs among best performers in Hong Kong:leading constituents of Hang Seng Index (Hong Kong stock exchange)First Pacific also part of Hang Seng Indexamong leading performers in 1990sNetworking in Japan: KeiretsuJapanese Groups of
15、CompaniesDomestic BusinessKeiretsu: Industrial groups of companiesTwo forms: Vertical keiretsu Horizontal keiretsuw 6 major groupsw 2 minor groupsInternational BusinessIntegration among companiesWithin group integrationCross-industry integration Horizontal KeiretsuHorizontal Keiretsu A uniquely Japa
16、nese form of corporate organizationDefinition of Horizontal Keiretsu： group of firms operating in different industriesCharacteristicscross-holding of sharescross-personnel appointmentsintra-group financing by core bankformation of Presidents councilsgeneral trading companiesintra-group company joint
17、 venturesThe Bank of Tokyo MitsubishiTokio Marine& Fire InsuranceMitsubishiCorp.MitsubishiHeavy IndustriesUnit: % of paid-up capitalAs of March 19961.44.54.13.06.13.13.61.62.31.82.04.6Crossholding of Shares (Mitsubishi Group)e.g., Four Major Mitsubishi Group Firms8 Horizontal KeiretsuGroupNumber ofC
18、ompaniesSales in Yen(% for all Japan)Number ofEmployeesMitsubishi18740,582 (2.8%)397,000Mitsui15429,864 (2.1%)187,000Sumitomo17341,846 (2.9%)425,000Fuyo15434,519 (2.4%)363,000DKB13544,012 (3.1%)385,000Sanwa12433,062 (2.3%)256,000Tokai4210,530 (0.7%) 59,000IBJ31 3,018 (0.2%) 52,000三菱三井住友三洋三和第一劝业Keire
19、tsu showing Interlocking and InterloansMitsubishi CorporationFounded in 1870Classified as trading firm, leader in international tradePioneer in the field of “Sogo-Shosha” merchant banking27 member companies employing 230,000 people ( Year 1999)Six major business areas: Information Systems & Services
20、 Fuels Metals Machinery Chemicals Living EssentialsMitsubishiHeavy Inds.MitsubishiCorp.MitsubishiBankMitsubishi Trust &BankingMeiji Mutual Life InsuranceTokioMarine & FireInsuranceMitsubishiWarehouse &TranspMitsubishi MotorsNippon YusenMitsubishi KakokiMitsubishi RayonMitsubishi Const.Mitsubishi Est
21、ateAsahi GlassMitsubishiResearchInstituteMitsubishi ElectricNikonMitsubishi SteelMitsubishi MaterialsMitsubishi AluminumMitsubishi CableMitsubishi ShindohMitsubishi Plastic IndsMitsubishi Gas ChemicalMitsubishi KaseiMitsubishi PetrochemicalMitsubishi Paper MillsKirin BreseryMitsubishi OilMembers of
22、the MitsubishiIndustrial Structure of Matsushita GroupMatsushita Electric IndustrialELECTRICAL20 companiesHOUSING1 companyBICYCLES2 companiesCDs/ TAPES1 companyMACHINERY1 companyREAL ESTATE1 companyFINANCE3 companiesLIGHTING1 companyInner Group of Companies in MitsubishiMitsubishiCorp.MitsubishiBank
23、MitsubishiHeavyIndustriesMetalsChemicalsReal EstateGlassTextilesPaperVertical KeiretsuDefinition of Vertical Keiretsusimilar set of connectionssupplier and distributor networks in same industryAverage size of 35 Vertical groups Assets = 3.3 trillion yenw Parent firm accounted for half the size Sales
24、 = 4 trillion yenw 20% of groups had sales 10 trillion yenw 22% of sales from subsidiaries/ affiliates went to parentw 13% of parent sales went to subsidiaries/ affiliatesKey types of Vertical KeiretsuProduction Keiretsu Centered around major automotive manufacturersw Toyotaw HondaSales & Distributi
25、on Keiretsu Vertical integration of product distribution from factory to retail outletsw Matsushitaw Hitachiw Sonyw AeonCharacteristics of Vertical KeiretsuHigh equity shareholding in subsidiary/ affiliates 91% on subsidiary; 35% in affiliatesIntra-group commercial transactions, including financing
26、& supply chainCross movement of personnelStrategic co-ordinationJapanese Joint VenturesJoint VenturesIntegrate actions of Japanese subsidiaries across regions link firms within a group link firms across groupsJoint ventures help replicate domestic patterns from Japan to international marketsJVs: a c
27、ritical part of investment strategy in AsiaWithin Asia, significant investment by Japan (Japan leading competitors )Japanese Foreign Direct Investment0400800120016002000195019601970198019902000YearNumber of Subsidiaries FormedForeign Subsidiary Exit0200400600800135791113151719212325Age of Subsidiary
28、 (years)Number of ExitsJapanese Investment by Region97044054338296771113082020004000600080001000012000AsiaNorthAmericaEuropeSouthAmericaOceaniaAfricaMiddleEastWorld RegionNumber of Subsidiaries in RegionJapanese Investment by Mode5.8%3.8%43.0%47.4%0200040006000800010000Wholly ownedsubsidiaryJoint Ve
29、ntureAcquisitionCapitalParticipationEntry ModeNumber of Subsidiaries by ModeJapanese Investmentby Mode and Region0%20%40%60%80%AsiaNorth AmericaEuropeLatin AmericaPercent of Subsidiaries by Mode in RegionWholly ownedJoint VentureAcquisitionCapital ParticipationEntry Mode and Performance Financial Pe
30、rformance SurvivalMode199419971999 PercentageWholly-owned subsidiary52.8%56.7%57.8%68%Joint venture59.2%61.8%57.9%67%Acquisition45.2%58.0%59.1%66%Capital Participation59.5%66.3%63.0%59%Total55.4%59.5%58.2%67%Number in financial performance column represents percentage of subsidiaries reporting profi
31、table operations in the year. Types of Joint VenturesInternational Joint VentureBetween Japanese company and local partnersIntra-firm Joint VentureBetween Japanese companies in same keiretsuCross-National Joint VentureBetween unrelated Japanese companiesTri-National Joint VentureBetween Japanese com
32、pany and company from a 3rd countryIntra-firm Joint VentureTTK(Thailand)SumitomoCorp.Noble(Singapore)TeikokuTsushin70%25%5%100%Cross-National Joint VentureShanghai-Asahi Electric WireShanghai Electric GoodsItochu TradingAsahiGlass34%10%56%Reasons for Joint VenturesInternational Joint Venture complem
33、ent competitive advantages disperse investment risksIntra-firm Joint Venture exploit parents competitive advantages internalize firms global activitiesCross-National Joint Venture exploit advantages of home-based, established business relationship transfer existing relationship abroadTri-National Joint Venture exploit advantages of an existing business relationship