Japanese Economy Essay Example | Topics and Well Written Essays - 3000 words

Japanese Economy - Essay ExampleIts major undoing is the slow reaction to outside events due to the fact that players in this constitution are in part protected from factors emanating form external markets. (Moffatt, 2011) It is of ample importance to revisit the definition of what the system of Keiretsu comprised before tackling it further. Keiretsu was that system adopted by Japanese firms where they would have transactions between or among them in the long-run. One of the major firms that took up this system is those in the automobile industry besides others like the banking industry and insurance sector. In this line, it is quite notable that the major information that is deepend among the concerned firms involves broadly engineering science and this is especially in the subcontracting of tasks. Mostly, parent companies have the noesis about the production capacities of the subcontracting firms, the financial conditions, employees skills, corporate cultures among other thing s. On the other hand, subcontracting firms are bestowed with the knowledge of their parent firms requirements in terms of production plans of the future, and technological needs, among others. This knowledge that has been shared between the two groups of firms is made easy by the exchange that is witnessed whenever they are giving each other consummatory kind of information by way of relations that have been set for long-run by the parent firms and subcontracting firms. Keiretsu, therefore, is a major example of social exchange based on relations. Social exchange has been merited for its transaction costs reduction. Opportunistic behavior is also demoralised by the long-term relations, which are dependent on shared knowledge amongst these firms. These long-term relations that are social exchange based to a towering extent reduce the costs of transactions in consideration to technology, where the technology meme is divided more effectively in the parent-subcontracting firms relatio nship. Vertical integration is, particularly observe to be the main way transaction costs are reduced. Therefore, in the Keiretsu system any given transaction is preferred to display a just kind of integration and the benefits to the parent company are a must so that the independent subcontractors are allowed to enjoy their freedom as independent entities. The straight integration type of approach means that the meme of the parent company absorbs that of the subcontracting companys in terms of at least the management style or the corporate culture. If it happens that the meme of the subcontractor has proven beneficial to the parent company, then the parent company will pick the keiretsu as opposed to vertical type of integration. (Yamamura, 1997 p253) According to Tabeta and Rahman, in 1996, Keiretsu is to huge extent efficient and besides this it aids in environmental adaptability of the companies of Japan. The structure of a Keiretsu group reduces the costs relating to transact ions as well as enhancing coordination between the suppliers and automakers. It was founded from the 1984s discussions by Aoki as well as Asanumas and their studies were focused on the economics of transaction cost outlays in the system of subcontracting in the automobile industry. (Tabeta and Rahman, 1996) In the period towards the late 1980s, the economy of Japan enjoyed a Keiretsu contribution to the economy of around 17% in terms of total trade revenues as well as