Japanese Banks' Mergers and Acquisitions: Competitive Advantage & Organizational Recovery through Strategic Relatedness and Resource Orientation
In late 1990s, diversification was the name of the game for the Japanese banking sector. The problem in the Japanese financial system started on December, 29, 1998 with the burst of the bubble economy which resulted in Yen 75 trillion of non-performing loans among the financial sector. Simultaneously, Japanese policy makers as well as the banking institutions launched a massive restructuring, risutora drive. This study, exploratory and descriptive in nature is based on eight interviews conducted in Japan on the five Japanese mega-bank M&As. The motivations, strategic fit and resources that play a critical role towards providing a competitive advantage and organizational recovery for the Japanese mega-bank engaging in the M&A activity are presented in case study style, with a multi-cross case analysis. A conceptual model was derived from the literature, tested through this research and adapted in light of the Japanese bank M&A strategies. The results suggest that the Japanese mega-bank M&As act as a source of influencing a competitive advantage but also in tandem act as a support mechanism in 'pulling' the Japanese banking sector out of the crisis mode and thereby providing financial recovery to the system as a whole. The ranking in terms of deriving a competitive advantage among the banks is placed in the following order Bank 1, Bank 2, Bank 3, Bank 4 and Bank 5. More specifically, the competitive advantage can be derived in terms of complementarily relatedness among the combining bank strategic assets; i) markets, ii) products and services; and iii) resource traits, organizational resources including leadership style and corporate culture; and physical traits such as IT systems integration, which rose in terms of cutting costs by reducing unwanted resources. Simply put the integration level, strategic relatedness and the types of resources are classified as strategic inputs and the benefits acquired for a competitive advantage and organizational recovery are defined as strategic outputs. Secondly, the study maintains that with the change in traditional Japanese banking practises, the era of 2000 is defined by diversification i.e. M&A strategy adopted by Japanese banks in terms of strategic fit, and types of resource but also where the resources are derived from. In other words, the source of the resources where the resources are derived from i.e. combining, new and their uniqueness also acts as an imperative indicator for Japanese mega-bank M&As. Resources prominent among the Japanese mega-banks are i) keiretsu (client resources); ii) organizational (management and leadership; knowledge; culture; and human resources); iii) physical (IT systems; branch networks and other real estate assets); iv) strategic (markets and products and services) and v) financial (capital markets and cross-shareholding patterns among keiretsu and main bank affiliates). Thirdly, these banks display a unique quality - the 'dual role' that strategic relatedness traits not only act as a combination potential but also act as resources and vice versa. The motivations include government de-regulation; non-performing loans of banks; over-crowding in the banking industry; and size competitiveness and diversification; via capturing markets, increase in profitability; and aligning with the changing needs of the Japanese clients. The research also aims to bridge the gaps in Japanese banking literature by building our understanding on how the Japanese banking sector has distanced itself from the traditional banking culture since the de-regulation wave instigated in Japan in mid to late 1990s. While there has been change in terms of financial cross-shareholdings, the traditional ties in terms of sharing strategic resources continues, introducing out-side directors, breaking away gradually from the amakudari systems and the long term employment and seniority based-wage system. The Japanese banking sector learnt from its mistakes and therefore, has not only been able to escape from the sluggish international banking environment of late but has also been able to diversify into cross-border investments and act as a learning source for the global financial institutions which has been in a state of perils since 2008, on the helms of sub-prime losses and failure of major investment banks.