The keiretsu approach to relationships is becoming very popular, but the factor

Question

The keiretsu approach to relationships is becoming very popular, but the factor that is usually left out is how to develop one in the beginning. Oftentimes, you want to work with a supplier that has the best reputation, but they are already working with their own club of important partners and don’t want to let you in. Your company may be too small for them to consider you as a serious partner, or they do not want to dilute their efforts with existing contracts. As a result you may have to pay premium pricing or offer technology exchanges or other incentives that may require you to give up too much. It is sometimes a long and laborious process to find a suitable partner.

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Explanation / Answer

Keiretsu is a business network consisting of independent business partners working together to enhance each other's business activities and thereby achieving their organizational goals. Business partners include various manufacturers, suppliers and distributors. They form a group, partnership or alliance to cater to each other's business requirements. This group is purely based on trust and allows a partner to establish a stable business. It helps the partners to focus on the core business requirements. However, the main issues is with start ups. A new company finds it difficult to break through the competition and partner with some reputed suppliers or distributors. They always have a price to pay for entering the club of partners or else will have to work with the less reputed suppliers who are not partnered with the group. It is fair because the partners in a keiretsu are all with a history that go back which means they have established their relationship gradually and over a period of time. A new company lacks the commitment and motivation for any partner of the keiretsu to be associated with. It has its own risks and challenges and a market segment to capture and survive. A start up can start with the less reputed suppliers and build up its own reputation in the market through continuous improvement or else the only way to be associated with a keiretsu is to pay the price for it.

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