SOUTH KOREA & JAPAN ARE HOME TO THE MOST UNDERRATED AND UNIQUE BUSINESS STRUCTURE. THEY BOTH HAVE A COLOSSAL IMPACT ON THEIR RESPECTIVE ECONOMIES AS WELL. HERE'S WHAT.
People often undermine the impact businesses, whether MSMEs or MNCs have on the economy. The prime example is USA. USA is home to one of the world's most innovative & massive companies. The power of corporate America is unseen but tremendous. Let me give you an example. In producing an iPhone, the raw materials are sourced from Brazil, the circuit boards are made in India, the phone assembled in China & the end product is shipped by an Italian company. Now it may be sold in any nation but the profit goes to America. Despite no involvement in the process, the profits go to America! That's the power of Business Economics! Now let's focus on the main topics.
Japan's "keiretsu" business structure:
Keiretsu is a business structure in which various companies form an alliance formally work together.
They have operational independence.
They may have equity stakes in each other.
Examples: Mitsubishi, Honda & Toyota.
They are of two types: Horizontal & Vertical
In vertical keiretsu, there is co-operation between suppliers, manufacturers, distributors, banks, insurance companies & various components of the supply chain. It gets confined to ONE industry only. It is centered around a company.
In horizontal keiretsu, the chain of companies is lead by banks. The various companies here are from different industries (like a conglomerate). It is centered around a bank which holds stakes in all the companies & the companies too have a stake in the bank.
ADVANTAGES OF KEIRETSU:
Lower cost due to close co-operation with suppliers & distributors.
Easy access to capital as keiretsus are traditionally led by banks.
Sharing of resources & employees between various companies. This enhances productivity & co-operation.
During recession, employees are not laid off. They are transferred from one company to another. Thats why japan features in Top 30 nations with lowest unemployment rates.
The companies are not tied to one industry. There is high level of diversification. hence, in case of weak demand in one country, Keiretsus do not collapse.
SOUTH KOREA'S CHAEBOL
They are the Korean version of Keirutsu. Chaebols are family owned conglomerates. they are massive in scale & operations. Some well renowned examples are Samsung, LG & Hyundai. They are public companies i.e. traded on stock exchange & the founding families have majority stakes. Below is the structure of a Chaebol.
ADVANTAGES OF CHAEBOL:
Large scale & diversified operations help in entering global markets.
Close integration with subsidiary companies helps in cost cutting.
Chaebols account for more than half of South Korea's exports and help bring in the majority of foreign capital.
Chaebols drive R&D and innovation in the Korean economy.
THANKS. THAT'S IT FOR THE DAY.