Mitsubishi

Mitsubishi is the name of the one of the most powerful Japanese keiretsu. A keiretsu is a business group loosely held together through cross-holding of stock, meetings of the chief executive officers of the constituent companies, and use of a common logo. It is a format that has flourished in Japan in the aftermath of the postwar American occupation.

During the occupation the largest of the prewar financial cliques, zaibatsu—conglomerates that were tightly held together through subordination to a holding company that served as the zaibatsu head office-were dissolved, their stock sold off. Along with other great zaibatsu like Mitsui, Yasuda, and Sumitomo, Mitsubishi was dissolved by the Holding Commission Liquidation Commission during the late 1940s. In tandem with most of the other former zaibatsu, the companies that had operated under the Mitsubishi logo prior to World War II reassembled as the Mitsubishi keiretsu, albeit forging ties that were far weaker than those characteristic of the prewar period when the typical structure was extremely hierarchical.

The Mitsubishi zaibatsu began as a shipping company created by former samurai Yatoro Iwasaki in the 1870s. Brought into an alliance with another important zaibatsu, Mitsui, the two emergent financial cliques became the backbone of the N.Y.K., a great steamship company designed to be competitive with the Western shipping firms that had captured most of Japans oceanic trade after the Meiji Restoration in 1868. Iwasaki soon diversified into other activities, including both light and heavy manufacturing and mining.

Why did the zaibatsu emerge in early industrializing Japan? Economic historians point to three factors: scarcity of entrepreneurial talent; scarcity of professionals, engineers, and accountants who could successfully import and adapt techniques already developed in the West; and “distance,” both cultural and geographic. Writing and speaking a language radically different from European languages, few Japanese active in industry during the period between 1870 and the 1920s could master English, French, or German, the global languages of the day. A scale economy is created by bringing together skilled professionals under a single structure, one that mobilizes capital by diversifying into banking, one that carries on international trade largely through a single large shipping company, one that centralizes global trade negotiations in a few competent hands.

To some extent these same arguments can be used to explain why the dissolved zaibatsu reassembled as keiretsu after the American occupation ended, and why they continue to operate to this day. For instance, the global information-gathering capacity of a great keiretsu like Mitsubishi is considerable, greater than that marshaled by many governments in the world. Other potential advantages of the keiretsu format include reputation—exploiting the common brand or logo name—and the fostering of externalities in innovation, breakthroughs in one industry within a keiretsu potentially spilling over and stimulating technical advance in other industries that operate under the same keiretsu umbrella. This is the logic behind the idea of “one-setism,” all major Japanese keiretsu seeking to foster or acquire through takeover the same set of companies that are in each of their competitor keiretsu. In short, under the “one-set” principle keiretsu aggressively [Page 1135]compete against other keiretsu. Competition in mainstream manufacturing is largely competition among the few, among great keiretsu like Mitsubishi.

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