e automotive and electronics industries. Overall, quality remains very high, but so do prices. As a result, Japanese consumers pay higher prices than Westerners for most goods.The vertical keiretsu are centered around a major manufacturer that is not part of a horizontal keiretsu. Unlike the horizontal keiretsu with its member companies from diverse industries, the members of a vertical keiretsu are usually drawn from a single industry. They consist primarily of supplier and distributor relationships that service the large manufacturer at the core of the keiretsu.Vertical keiretsu influence the economy in much the same way as the horizontal keiretsu. However, they tend to be concentrated in the competitive areas of automobiles and electronics. While the vertical keiretsu model is being adopted in other countries, the horizontal keiretsu system is starting to break down, partly because of the prolonged recession in Japan and partly because of the presence of more foreign competition.The Role of the Bank The bank at the heart of a keiretsu is more than just a bank. It is the "central clearinghouse for information about group companies and the coordinator for group activities." Because the early Tokyo Stock Exchange had the reputation of being a gambling casino, Japanese banks have until recently always been the source of funds. As a result, all large Japanese companies have a special relationship with at least one bank. As well as giving access to funds, advice and valuable market information, this relationship provides the company with protection and assistance in a crisis. In return, the bank gathers information and can guide or encourage the company in the choice of who it conducts business with - tending to prefer other keiretsu members. As part of the relationship, the bank is likely to be a significant shareholder in the company to provide "stability" in its shares. Because, traditionally, corporate accounting and disclosure have be...
