Berkshire Hathaway – an American multinational corporation holding firm, has its main office in Omaha, Nebraska. It owns over 60 businesses, including Duracell and Dairy Queen. Berkshire’s subsidiaries engage in a range of commercial endeavors. Insurance firms, a freight railway transportation company, and a collection of utility and energy producing and distribution companies are some of its biggest subsidiaries.
Businesses Profile of Berkshire Hathaway
|Iroquois Gas Transmission System
|Bank of America
|Coca Cola Company
|Flight Safety International
There are multiple other businesses owned by Berkshire Hathaway with partial or whole ownership. The business is renowned for being run and led by Charlie Munger, the vice chairman, and Warren Buffett, who acts as chairman and chief executive of the company. The executive leadership plays a vital role in choosing the CEOs for every subsidiary as well as in allocating capital and making investment choices. Early in his tenure at Berkshire, Buffett concentrated on making long-term acquisitions in publicly listed firms, but lately he’s increasingly purchased whole businesses.
As of now, Berkshire controls a wide variety of companies including those in the confectionery, retail, railroad, home furnishings, energy, encyclopedia, vacuum cleaner manufacturing, jewelry sales, uniform manufacturing and distribution, and numerous local electric and gas utilities.
Berkshire Hathaway is a market leader in its respective field. The corporation keeps its leading position in the market by thoroughly examining and revising the SWOT analysis of its potential investments. SWOT analysis is a highly interactive process that calls for efficient communication between many corporate divisions; including marketing, financing, operations, management information systems, and strategic planning. However, here we’ll be doing a SWOT analysis of Berkshire Hathaway Inc. itself.
Strengths of Berkshire Hathaway
Berkshire Hathaway, one of the top businesses in its sector, possesses a number of advantages that enable it to succeed in the marketplace. These advantages assist it not just to maintain market share in already-existing areas but also to expand into new ones. The strengths of the company are listed below:
- The firm has created such a strong culture among its distributors and dealers that there is participation and accountability. There is a strong association of distribution channels with the companies.
- Berkshire Hathaway has made significant investments, over the years, to develop a potent brand portfolio. If the company wishes to grow into other product categories, this brand portfolio will indeed be quite helpful.
- A high level of customer satisfaction among current customers and strong brand equity among future customers have been attained by the firm thanks to its specialized customer relationship management department.
- Berkshire Hathaway is investing a lot of money on employee training and development. Its workforce is not just highly competent, but also driven and motivated to do more.
- Company has strong commitments towards new initiatives and approaches. The top level executives encourage and execute initiatives that ensure a fair amount of success by creating new income sources and producing strong returns on capital investments.
- The company has a strong cash flow. The company is able to generate high free cash flows making it easier for the provision of resources required to develop new ventures.
- Automation has improved the uniformity of quality across all Berkshire Hathaway goods and allowed the business to scale up and down in response to changing market circumstances.
- The company is also quite successful in terms of developing a strong go to market strategies for its products and services.
Weaknesses of Berkshire Hathaway
The following points indicate the areas where the company can improve upon:
- The company’s product line is lacking several items. A new rival may gain ground in the market as a result of this lack of options.
- Most of the decisions taken by Berkshire Hathaway have been a well thought decision. Warren Buffett holds the major stake in decision making in the company, which demonstrates the brand’s frailty. Although this can be advantageous, it might also be hazardous to the company’s long-term viability.
- Although Berkshire Hathaway integrates small businesses well, it has struggled to combine businesses with disparate work cultures. The work culture sometimes comes in midway while incorporating other businesses.
- In order to unify the procedures across the board, Berkshire Hathaway has to invest more in technology given the scope of the expansion and the variety of regions the business plans to enter. However, the company’s ambition currently does not match the level of technology investment.
- Despite spending more on R&D than the industry average, Berkshire Hathaway hasn’t been able to keep up with the best competitors in the sector in the area of innovation. It has the appearance of a seasoned company eager to release items with tried-and-tested features.
- Berkshire Hathaway’s turnover rate is greater than that of other companies in the sector, and it must spend significantly more on staff development and training than its rivals.
- Inventory turnover is high in contrast to its competitors, which forces the business to raise more money to spend in the channel. This might ultimately have an effect on the company’s long-term growth.
Opportunities for Berkshire Hathaway
Here, we will be listing out the opportunities that the company can capitalize on. They are as follows:
- The company’s prosperity is built on successful investments. Their business model and strategies, the main factor in the brand’s expansion, take this into account. There is a terrific chance for the company to further add new companies to its portfolio of brands and subsequently boost its profitability and income stream.
- Emerging markets such as those in South America, Europe, and Asia provide the company with good investment prospects in order to significantly strengthen their brand. This is because these markets are expanding swiftly and have the potential to be profitable in the future.
- Technology is the most crucial factor for businesses like Berkshire Hathaway to become competitive in the market. The IT industry is expanding and offering investment firms several prospects for expansion. Hence, the company must make investments in the IT industry to boost its yearly revenue. They’ve already done so by investing in Apple, but there are other well known tech companies like Samsung, Nokia, Google, Amazon, etc.
Threats for Berkshire Hathaway
In addition to the opportunities, the company also has its fair share of threats that it should be considerate of. They are as follows:
- Many nations, including the United States, have altered their rules and regulations due to the financial and economic crises. As a result, both operational and other costs have grown. These factors may have a detrimental effect on the company’s financial performance as well as its net income and revenue.
- Liability laws vary by country, and Berkshire Hathaway could be subject to a variety of liability claims if the rules in those areas change.
- As each business under the corporation operates in a very competitive environment, the rising rivalry in the technology industry may result in a fall in the company’s earnings. Simply due to this aspect, they risk losing their franchises.
- Lack of trained labor in several international markets threatens the company’s ability to maintain sustained profit growth in such regions.
- In emerging economies and low income markets, imitation of counterfeit and subpar products poses a danger to the company’s goods.
- The insurance and investing industries come with a lot of uncertainties. These dangers are difficult to reduce, but they can be averted with the right planning and regulations. However, these risks have the potential to harm the corporation’s insurance and investment operations.