Victors write history. Though the Zaibatsu model of Japan was thoroughly discredited because of the Second World War and it was dismantled(it transmorphed into something called Keiretsu), it is worth noticing whether it can fit into the Indian model or not. A Zaibatsu is a self sustaining family business entity with very little or no outside dependencies whatsoever in a supply chain market. This means, for all practical purposes, it maintains a presence in all the parts of a vertically integrated supply chain and with a bank in the centre which funds the business.
The deplction below gives the structure of the Sumitomo Group. The group has a clear presence in all sorts of trade related to metals – mines, forestry, smelting, heavy machinery, electricals and electronics and even cement, glass and chemicals. There is a firm to build it’s factories, a bank to finance it, an insurance group, a warehousing system and a trading front end.
British Petroleum sort of fits into this model, with Bank of England working as it’s bank.
The advantage it gives is an island of stability which can weather all sorts of climates simply because there is no external dependency whatsoever. The disadvantage is, beside cartelization and price-fixing, it is too big and too powerful for a country to take on without seriously hurting itself. After all, there need not be any speculation as to what will happen if British Petroleum is taken down by the British Government.
A dangerous proposition though, but it is worth exploring if it is applicable to India. Tatas almost fulfil all the aspects of a Zaibatsu, except the central bank. 76% of the group is locked in trusts. They have got mines, smelting plants, sheet steel manufacturing and car manufacturing. It has got it’s own showrooms, it has got it’s own fleet of trucks, it has got it’s own communications, software firm to design software for it, insurance system, hospitality for visitors and even a city to manage. Except for the central bank and a merchant shipping fleet, it has got everything. Though fragmented now, Birla Group, JK Group and Ambanis also fit into the general profile.
By weathering all sorts of economic turmoils, these groups can give us a ray of hope prodding us to work hard in adversities. But, going by the fact that the power held by such groups is too heavy(don’t forget the Nabobs of East India Company) and the way they can misuse it, it is but natural for us to identify what can be done to have this as a successful model.
1. Market capture should be desisted. No one should have a 100% presence in a market only by Zaibatsus.
2. Cartelization should be avoided. Anything which can be classified as a Zaibatsu shouldn’t have shareholding in another Zaibatsu.
3. Funding to political parties by the Zaibatsus should be banned.
4. A separate governing code should be created for such with respect to management, taxation, approval for expansions and such.