If you are reading this, you’ve probably been brainstorming, looking for full proof business models, searching for ideas to survive in spite of economic turbulences.
In a shark infested world, only the strong survive, that’s what happens in business, it’s a cutthroat, highly competitive world.
No one wants to lose their business, we all want to live, but inflation insecurities, loss of customers, shaky economies, and supply chain problems may threaten our abilities to survive when operating the wrong business model.
A business model acts as a money making blueprint for your business. But, whether you are a start-up, a business owner or a business builder, you will discover adopting a business model that works is a game of chance.
There are several business models, but one that stands out, has stood the test of time, and works well with developed businesses is the Keiretsu business model.
Keiretsu is a Japanese word that means ‘group.’ In business the word refers to a business network of several companies. The online dictionary explains the benefits of a keiretsu as;
“the formation of a keiretsu allows a manufacturer to establish stable, long-term partnerships, which in turn helps them to stay lean and focus on core business requirements.
This network includes manufacturers, suppliers, distributors, and financiers. But even though they have close relationships and take equity stakes in each other, they operate independently.
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2 types of keiretsu;
1. Horizontal keiretsu – The is made up of an alliance of several companies from various sectors, including a bank.
The bank acts as the financier of the other companies. For example, Mitsubishi is the largest and best-known horizontal keiretsu.
The Bank of Tokyo-Mitsubishi is the key financier of the partnership consisting of companies like Mitsubishi Motors, Mitsubishi Trust & Banking, and Meiji Mutual Life Insurance Company.
2. Vertical keiretsu – This relates to a partnership of manufacturers, suppliers, and distributors who work in conjunction to reduce costs and promote efficiency in their operations.
Oftentimes, vertical keiretsu companies are within the horizontal keiretsu. The automobile Toyota company is a good example of a vertical keiretsu.
A key advantage of the keiretsu model is that it helps companies deepen relationships with their suppliers. Even though, this type of structure is uncommon outside of Japan. Companies and businesses in the US and in Europe are adopting, resourceful elements of this model to their benefit.
For instance, Scania a Swedish bus and truck maker arranges workshops for its suppliers. This is an advantage to the suppliers, because it not only deepens relationships, but builds confidence and trust and deepens their competitive edge.
But if the Keiretsu model is so good how come it hasn’t been embraced by most businesses across the world? –
It’s because they fail to understand its strategy. When you understand and localize the Keiretsu model it will be a game changer for your business.
And that’s what this article is about – how to run your business on a Keiretsu model.
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Here is how it works;
1. Incorporate Short-Term and Long-Term Thinking
If you want to develop long-term relationships with your suppliers, it’s crucial that you take a long term approach building trust, and working on mutually benefiting strategies.
For instance, you can organize workshops for your suppliers, give them an opportunity to network and to get inspired to work better, share cost-reduction strategy benefits, and demonstrate your commitment to forming a lasting relationship
2. Get to Know Your Suppliers
Get to know your suppliers at a deeper level, understand them, know their needs, their challenges, their strengths and their weaknesses. Then work on how you can help to revamp their processes.
To do that, visit their workplaces, have a chat with them, ask them questions concerning their businesses. Interact with them without making assumptions.
Then, instead of outsourcing all of your components, agree to establish joint ventures with your suppliers in key areas of your company.
3. Assess Your Portfolio of Suppliers
Identifying your portfolio of suppliers is one thing, but deciding which ones are worth working with and improving their processes is something else.
So. how do you find suppliers you can work with under the Keiretsu model?
Look for suppliers who are willing to learn and understand and are most likely to improve their processes. They have the greatest potential of becoming globally competitive
Assign performance scores based on quality, cost, delivery, people, and development to assess their strengths and abilities.
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4. Build Personal Relationships with Your Suppliers
When you cultivate personal and lasting relationships between your company and your suppliers, this kind of relationship is befitting to your company because you’ll get to hear multiple suggestions that could solve your business challenges.
Therefore, meet your suppliers and find ways to collaborate with them. They may be the very people you need to involve in your decision making process to succeed.
Lastly, if any of your suppliers is underperforming, give them room to improve before cutting ties with them.
5. Involve Suppliers in Product Development
Involve your suppliers when turning a product idea into an actual product. This will improve your problem-solving ability, response time, and increase your competitive advantage across the supply chain.
In closing, surmounting hurdles of starting a business is hard enough, – the Keiretsu business model is a game changer for any business bold enough to embrace its principles.
It’s a profitable business model that will generate high valuations and earn massive ROI.
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