Discuss and Elaborate the Benefits and Potential Problems of Having a Bank in a Keiretsu

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Both chaebol in Korea and keiretsu in Japan are the successor of zaibatsus which formed in the Meiji era that was vertically controlled by the founding family. In consequence, they are sharing familiar management style, ‘family’ oriented management, in order to extend the beliefs of the founder and maintain a long term relationship between employees and management. The management of chaebol is influenced by the Confucian value and the Japanese group loyalty which emphasize on family-ties and unity. Typical chaebol is an extension of the founding family and the ownership is assumed to be passing one by one within the family group and the eldest son will typically inherit the ownership according to the Korean and Confucian traditions’ hierarchy. The other family members occupy the key position under the chairman and they are expected to follow the chairman (eldest son) beliefs and idea. Although blood ties is the key value for appointing a manager, professional outsider is becoming a necessary for an expanding chaebol. However, under patrimonial ownership and clear hierarchical order, chaebol still formed a centralized managerial structure and the subordinate are tended to be passive and obedient to orders from the chairman. Compare to chaebol, the management of keiretsu is closer to the outsider, which is to anyone excluding from the blood ties. Decentralized authority enables keiretsu to delegated professional manager to manage and expand the firm rather than a less capable relative from the founder family. Qualified managers are typically promoted internally through the kaisha they joined after leaving the college and whom thereby became a ‘family’ member of the group (The Economist 2008a). In Summary, both chaebol and keiretsu are emphasized on the relationship of trust and loyalty in management, however, chaebol indicate the importance of blood

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