USD Magazine, Spring 1996

and benefiting from the materials or services they have to offer. The Japanese keiretsu fosters an isolationist attitude that is looked upon warily by the rest of the global economic players. The American Keiretsu, on the other hand, fosters relationships that guarantee business between a manufacturer and supplier, but also encourages the supplier to seek other clients, Burt explains. All firms are equal in the American Keiretsu, with each partner focused on success in the marketplace. Japanese keiretsu groups are hierarchical and smother the ability of supplier firms to seek profits beyond those generated through the partnership. From the purchasing standpoint, suppliers are essential to helping manu– facturers achieve global success. The American Keiretsu relationship is an ideal marriage between firms that are dependent on each other. "It is simply unreasonable to assume that any firm can achieve world-class status without world-class suppliers," Burt writes in his book. international business sector, Quijano, Briscoe and Burt are anxious to see U.S. firms succeed in the global market. They can pin– point where improvements are needed and suggest solutions for improving competitiveness and strengthening INCENTIVE TO SUCCEED As employees and scholars of the the economy. They also know that without competition from foreign firms, U.S. business lead– ers may still be resting on past successes with little incentive to improve production practices or plan for long-term viability. "Without competition we wouldn't be striving to become better businesspeople and improve our economy," Quijano says.

holding down costs. It's a marked depar– ture from the typical U.S. business rela– tionship, in which buyers usually pur– chase parts or components at the lowest cost, without regard to quality. Burt, however, is careful to draw a distinction between the American and Japanese keiretsu. The latter has received considerable attention in the past few years, not all of it positive. Companies in Japanese keiretsu relationships are tightly bound to each other, with the small supply firms unable to do business with anyone but the manufacturer that heads the keiretsu. This closed-loop system, U.S. business and political leaders complain, shuts out the possibility of international companies doing business with many Japanese firms

Manufacturers typically blame 50 percent of their quality problems on supplied materials, Burt says. Nationally, the problem stems from the years following World War II, when profits were plentiful, foreign competition was minimal, and attention to quality faltered. Now, with countries like Japan and Germany turning out superior elec– tronics, communication equipment and cars, among other products, U.S. firms are struggling to keep up. When Japan and Germany were rebuilding their economies following the war, business and political leaders in those countries joined forces to develop long-term strate– gies that regarded manufacturing as a key component to a healthy economy. During the same period in the 1950s and 1960s, American executive officers and managers were lulled into believing they would always dominate their markets. Businesses dealt with short-term strategies to increase profits but neglected long-term plans for sustained viability. The American Keiretsu system squarely addresses the quality prob- lem and advises manu– facturers and suppliers to form partnerships to produce business exclusively with the sup- plier, the manufacturer provides incentive for the supplier to deliv- er high-quality materials on time, Burt explains. If the supply firm needs better equipment or addition- al funds to produce a higher-quality product, the keiretsu partners work together to find the needed funds. This type of cooperation between buyers (the manufacturing firm) and suppliers helps guarantee quality while the needed components and the completed product that will be sold on the mass market. By agreeing to do

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