A corporate group , company group or business group , also formally known as a group of companies , is a collection of parent and subsidiary corporations that function as a single economic entity through a common source of control. These types of groups are often managed by an account manager. The concept of a group is frequently used in tax law , accounting and (less frequently) company law to attribute the rights and duties of one member of the group to another or the whole. If the corporations are engaged in entirely different businesses, the group is called a conglomerate . The forming of corporate groups usually involves consolidation via mergers and acquisitions , although the group concept focuses on the instances in which the merged and acquired corporate entities remain in existence rather than the instances in which they are dissolved by the parent. The group may be owned by a holding company which may have no actual operations.
35-627: The Saigol Group , also known as Kohinoor Group , is a Pakistani group of companies headquartered in Lahore . It was founded by Amin Saigol in the 1930s with a small shop that eventually developed into the Kohinoor Rubber Works. The Saigol family were originally farmers from a small town called Khotian , Chakwal District , Punjab, Pakistan . Khotian town was later named Saigolabad after this family. Sayeed Saigol moved to Calcutta in
70-408: A business group is a network of firms that regularly collaborate over a long time period. Granovetter argues that business groups refers to an intermediate level of binding, excluding on the one hand a set of firms bound merely by short-term alliances and on the other a set of firms legally consolidated into a single unit. Williamson claims that business groups lie between markets and hierarchies; this
105-511: A growing corporate acquisition industry in Japan, as companies are no longer able to be easily "bailed out" by their banks, as well as rising derivative litigation by more independent shareholders. The keiretsu model is fairly unique to Japan. However, many diversified non-Japanese businesses groups have been described as keiretsu , such as the Virgin Group (UK), Tata Group (India),
140-447: A horizontal business group as are many other keiretsu . Chinese groups exhibit similar features. Horizontal business groups are also referred to as "associative business groups". A vertical business group is a group of companies controlled, but not entirely owned, by a single investor. Vertical groups are often organized as pyramids of companies controlled by the main investor through a holding company. A unique feature of pyramidal holdings
175-503: A number of larger companies. Harvard Law School professor J. Mark Ramseyer and University of Tokyo professor Yoshiro Miwa have argued that the postwar keiretsu are a "fable" created by Marxist thinkers in the 1960s so as to argue that monopoly capital dominated the Japanese economy. They point to the sparsity and tenuousness of cross-shareholding relationships within the keiretsu , the inconsistency in members' relationships with
210-581: Is a set of companies with interlocking business relationships and shareholdings that dominated the Japanese economy in the second half of the 20th century. In the legal sense, it is a type of business group that is in a loosely organized alliance within Japan's business community. It rose up to replace the zaibatsu system that was dissolved in the occupation of Japan following the Second World War . Though their influence has shrunk since
245-461: Is composed of companies. The general rule is that a company is a separate legal entity from its shareholders, that is the shareholder's liability for the subsidiary's debts is limited to the value of the shares, and the shareholders cannot be required to perform the company's obligations. However, some jurisdictions create exceptions to this rule. For example, Germany has created affiliated enterprise law which provides situations in which one company
280-402: Is concerned. In a horizontal business group there is no central holding company – the group companies are connected through various formal or informal ties, including reciprocal shareholding. Thus, a horizontal business group is a rather loose confederation of firms. Coordination between them is achieved mainly by mutual adjustment and standardization of norms. Mitsubishi is a well-known example of
315-562: Is further worked out by Douma & Schreuder. Khanna and Rivkin suggest that business groups are typically not legal constructs though some regulatory bodies have attempted to codify a definition. In the United Arab Emirates , a business group can also be known as a trade association . Typical examples are Adidas Group or Icelandair Group . Keiretsu A keiretsu ( Japanese : 系列 , literally system , series , grouping of enterprises , order of succession )
350-553: Is liable for the debts of another company. In New Zealand, the Companies Act provides that the assets of related companies may be pooled to pay the creditors if one of the companies is liquidated. However, the circumstances in which this power will be exercised are very narrow. Leff defines "business group" as a group of companies that does business in different markets under common administrative or financial control whose members are linked by relations of interpersonal trust on
385-610: Is married to Mian Muhammad Mansha. Tariq Saigol, the eldest brother, is head of Kohinoor-Maple group, which owns the Kohinoor textile mills and Maple-Leaf Cement. He is known to be openly critical of the Pakistani government's lack of interest in the textile sector. Nasim Saigol heads PEL and Kohinoor industries. Rafiq, the youngest brother, takes care of the group's other business interests. The group currently owns following companies: Group of companies A corporate group
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#1732802415408420-448: Is often loose and often not something considered in day-to-day decision making by its members. Vertical keiretsu (also known as industrial or distribution keiretsu ) are used to link suppliers, manufacturers, and distributors of one industry. Banks have less influence on vertical keiretsu . Examples of this type include Toyota , Toshiba , and Nissan . One or more sub-companies, arranged in tiers of importance, are created to benefit
455-414: Is that it allows the main investor to exert control with a limited amount of capital. Korean chaebols , Indian business houses and most European business groups are vertical in character. Vertical business groups are also referred to as "hierarchical business groups". Encarnation refers to Indian business houses, emphasizing multiple forms of ties among group members. Powell and Smith-Doerr state that
490-475: Is that it is set up around a Japanese bank through cross-shareholding relationships with other companies. The bank assists these companies with a range of financial services. The leading horizontal Japanese keiretsu , also referred to as the "Big Six", include: Fuyo , Sanwa , Sumitomo , Mitsubishi , Mitsui , and DKB Group . Horizontal keiretsu may also have vertical relationships, called branches. Horizontal keiretsu peaked around 1988, when over half of
525-530: The Japanese economic miracle which followed World War II, amid the dissolution of family-controlled vertical monopolies called zaibatsu . The zaibatsu had been at the heart of economic and industrial activity within the Empire of Japan since Japanese industrialization accelerated during the Meiji Era . They held great influence over Japanese national and foreign policies which only increased following
560-433: The keiretsu and acted as a monitoring and emergency bail-out entity. One effect of this structure was to minimize the presence of hostile takeovers in Japan, because no entities could challenge the power of the banks. Although the divisions between them have blurred in recent years, there have been eight major postwar keiretsu . Toyota is considered the biggest of the vertically integrated keiretsu groups, although
595-429: The "main banks" of each keiretsu , and the lack of power and reach of the zaibatsu alumni "lunch clubs" which are often argued to form a core of keiretsu governance. By April 2015, U.S. Trade Representative Michael Froman and Japanese Economy Minister Akira Amari, representing the two largest economies of the 12-nation Trans-Pacific Partnership , were involved in bilateral talks regarding agriculture and auto parts,
630-606: The "two largest obstacles for Japan." These bilateral accords would open each other's markets for products such as rice, pork and automobiles. During the two-day ministerial TPP negotiating session held in Singapore in May 2015, veteran US negotiator Wendy Cutler and Oe Hiroshi of the Japanese Gaimusho held bilateral trade talks regarding one of the most contentious trade issues, automobiles. American negotiators wanted
665-598: The 1930s and opened a shoe store. He opened a rubber shoe factory, and was a supplier of rubber shoes and raincoats to the Allied Forces during World War II. Saigol, anticipating the division and independence of British India , moved his assets to Lahore in the early 1940s. After the independence of Pakistan in 1947, with the help of his younger brothers Yousuf and Bashir, he set up their first textile spinning mill in Lyallpur (now called Faisalabad ) in 1949. Later
700-441: The 2000s. For instance, many troubled Japanese companies are faced with a new reality in which receiving financial support from their main banks are getting harder and unlikelier than ever before. The companies include Sharp Corporation and Toshiba , both the iconic Japanese corporations that were forced to accept foreign investment in their aftermath of financial difficulties in 2010s. This changed environment, in turn, has led to
735-604: The Colombian Grupo Empresarial Antioqueño and the Venezuelan Grupo Cisneros . The automotive and banking industries have created broad cross-ownership networks across nations, but the national companies are normally independently managed. Banks cited as being central to keiretsu -like systems include Deutsche Bank and some keiretsu -like systems, generally referred to as trusts , were created by investment banks in
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#1732802415408770-521: The Japanese victories in the Russo-Japanese War of 1904–1905 and World War I . During the inter-war period the zaibatsu aided Japanese militarism and benefited from their conquest of East Asia by receiving lucrative contracts. After the surrender of Japan the Allied occupation forces partially attempted to dissolve the zaibatsu which had worked closely with the militarists during
805-747: The United States such as JP Morgan and Mellon Financial / Mellon family beginning in the late 19th century (roughly the same period they were created in Japan), but they were largely curtailed through anti-trust legislation championed by Theodore Roosevelt in the early part of the 20th century. A form of keiretsu can also be found in the cross-shareholdings of the large media companies throughout most developed nations. These are largely designed to link content producers to particular distribution channels, and larger content projects, such as expensive movies, are often incorporated with ownership spread across
840-415: The alliances vertically integrated, as well. In this period, official government policy promoted the creation of robust trade corporations that could withstand heavy pressures from intensified trade competition. The major keiretsu were each centered on one bank, which lent money to the keiretsu member companies and held equity positions in the companies. Each bank had great control over the companies in
875-481: The basis of similar personal ethnic or commercial background. One method of defining a group is as a cluster of legally distinct firms with a managerial relationship. The relationship between the firms in a group may be formal or informal. A keiretsu is one type of business group. A concern is another. Douma and Schreuder (2013) distinguish "horizontal" and "vertical business groups" as follows: 'Business groups can be horizontal or vertical as far as their structure
910-454: The company is rather considered as a "emerged" keiretsu , along with Softbank , Seven & I Holdings Co. The banks at the top are not as large as normally required, so it is actually considered to be more horizontally integrated than other keiretsu . The Japanese recession in the 1990s had profound effects on the keiretsu . Many of the largest banks were hit hard by bad loan portfolios and forced to merge or go out of business. This had
945-644: The effect of blurring the lines between the individual keiretsu : Sumitomo Bank and Mitsui Bank , for instance, became Sumitomo Mitsui Banking Corporation in 2001, while Sanwa Bank (the banker for the Hankyu-Toho Group) became part of Bank of Tokyo-Mitsubishi UFJ . Generally, these causes gave rise to a strong notion in the Japanese business community that the old keiretsu system was not an effective business model, and led to an overall loosening of keiretsu alliances. While they still exist, they are not as centralized or integrated as they were before
980-748: The family expanded its textile business to Rawalpindi and Gujjar Khan , and bought a sugar mill in Jauharabad from the Pakistan Industrial Development Corporation . In 1958–59, the Saigols founded the United Bank Limited . In 1972, Zulfikar Ali Bhutto regime started its nationalization drive and most businesses of the Saigol Group were nationalized over the next four years. By 1976, only
1015-482: The first half of the 20th century and during the war. However, the United States government later rescinded those orders in an effort to reindustrialize Japan as a bulwark against communism in Asia, so the zaibatsu were never completely dissolved. The two types of keiretsu , horizontal and vertical , can be further categorized as: The primary aspect of a horizontal keiretsu (also known as financial keiretsu )
1050-403: The late 20th century, they continue to be important forces in Japan's economy in the early 21st century. The members' companies own small portions of the shares in each other's companies, centered on a core bank; this system helps insulate each company from stock market fluctuations and takeover attempts, thus enabling long-term planning in projects. The prototypical keiretsu appeared during
1085-610: The parent company. Major suppliers form the second tier beneath the parent, and smaller manufacturing companies make up the third and fourth tiers. Those at the highest levels are most profitable, and most insulated from fluctuations in the market. Some vertical keiretsu may belong to one or another horizontal keiretsu . Some vertical keiretsu are family businesses , such as the Hitotsubashi/Shogakukan , Otowa/Kodansha and APA groups. Studies have found these vertical keiretsus, particularly those that belong to
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1120-542: The same horizontal keiretsu , are more likely to form alliances than the other types or even those companies where one or two have keiretsu affiliations. Vertical keiretsu is considered an effective and competitive organizational model in the car industry. During the occupation of Japan , under the Supreme Commander of the Allied Powers , General Douglas MacArthur , a partially successful attempt
1155-481: The textile and sugar businesses remained. Then under General Zia-ul-Haq 's regime beginning in 1977 reprivatization of industries started. In the early 1980s, the Saigol Group started rebuilding and reinvesting after their losses due to nationalization of industries in Pakistan during the 1970s. The group is now managed by three Saigol brothers: Tariq Saigol, Nasim Saigol, and Taufeeq Saigol. Their sister Naz Saigol
1190-666: The value in the Japanese stock market consisted of cross-shareholdings. Since then, banks have gradually reduced their cross-shareholdings. The Japanese corporate governance code, effective from June 2015, requires listed companies to disclose a rationale for their cross-shareholdings. Partly as a result of this requirement, the four Japanese "megabanks" descended from the six major keiretsu banks (namely Mitsubishi UFJ Financial Group , Sumitomo Mitsui Financial Group , Sumitomo Mitsui Trust Group and Mizuho Financial Group ) have indicated plans to further reduce their balance of cross-shareholding investments. Membership in horizontal keiretsu
1225-473: Was made to dissolve the zaibatsu in the late 1940s. Sixteen zaibatsu were targeted for complete dissolution, and 26 more for reorganization after dissolution. However, the companies formed from the dismantling of the zaibatsu were later reintegrated. The dispersed corporations were reinterlinked through share purchases to form horizontally integrated alliances across many industries. Where possible, keiretsu companies would also supply one another, making
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