Small Block of Supplier Shares Improve Trust Performance in Supply Chain Relationship

Abstract

By advent and development of globalization concept in economy, companies and firms around the world have entered a new era of competitive market. Sustaining in this new competitive market demands a paradigm shift in dealing with business processes within and among organizations and companies. The severe competition in new markets is driven by advances and improvements in industrial technology, increased globalization, achievements in information availability, and creative business designs (Metzner, 2004). Companies are constantly striving to redesign their processes for dealing with their suppliers and customers, to dictate their differentiator values and gain higher market share. In the late 1980s a Japanese word penetrated into business world, called Keiretsu (Miyashita & Russel, 1994). Keiretsu is recognized by networks of inter-connected firms which hold stable shares of each other and developed around a main bank (McGuire & Dow, 2009). Japanese organizations are characterized by two important forms of linkages: horizontal keiretsu and vertical keiretsu. A horizontal keiretsu is consisted of very large companies which work under close relations with a main bank and linked with each other through reciprocal shareholding, trading, and etc. These companies usually work in different segments and differ in their field of business. Mitsubishi Group of companies is a famous example of a horizontal keiretsu. A vertical or pyramid keiretsu consists of a very large company (usually a manufacturer) such as Toyota and hundreds of small companies subordinate to it. These subordinate companies usually serve as a supplier for main manufacturer.