Strategic Management

Berkshire Hathaway - Goodbye Warren Buffet?

Submission by: GROUP-G, SECTION B

Aditi 2021PGP065
Ankit Dhawale 2021PGP081
Hemant Singh 2021PGP085
Iyer Arya 2021PGP088
Raghav Charan 2021PGP111
Srijani Das 2021PGP125
EXTERNAL ANALYSIS

POLITICAL Economic Technological Social Global Demographic

Presence of the Financial Inequality Implementing new Building marketing More than 80 43:7 gender ratio in
company in number in society technological model message by subsidiaries and top management,
EXTERNAL ANALYSIS of countries and techniques understanding the present in 167 male dominating
Volatile exchange community countries
Changing scene of rate How easy it is to Around 64% of team
US politics and mimic and effect on Changing people Effect of Covid-19 is white and have
awareness in people Stress of US on cost and profit idea of need in USA positive and negative racial issue in board
NBFI sector too

INTERNAL ANALYSIS
(Value Chain)

INTERNAL ANALYSIS
(Leadership, Financial) Rivalry among Threat of New Threat of Bargaining power Bargaining power
competitors Entrant Substitutes of Buyers of suppliers

High threat from the Low threat of New High threat of Medium bargaining Low bargaining power
rivalry among the Entrant because of high substitutes for the power of Buyer as of the suppliers
competitors cost of entry company there are many options
and substitute Supplier's products are
ALTERNATIVES & 2nd
in top firm for Long time trust factor Main substitutes can be available. standardized, have little
CONCLUSION investment according is another factor that MF, ETF and other differentiation give
to Comparably report act as barrier investing options Market is highly price option to company
sensitive
 Future Objectives
EXTERNAL ANALYSIS • Lower Investment in R&D
• Creating “moats” around operational company
STRENGTHS • Maintaining strong cash flow and financial situation
compared to competition
• Developing and growing team of skilled individuals
• Less investment in latest • Making stronger and bigger acquisitions of firms
technology
• High level of Current Strategy
• Decision making limited
EXTERNAL ANALYSIS to few individuals
customer satisfaction • Divided portfolio in 5 macro groups on basis of holding
• Acquiring company with potential for long term or firms with
• Team of highly strong finance and teams
skilled individuals • Focusing on firms with strong and conscientious managers

WEAKNESSES • Portfolio of known

and strong brands
Assumptions
INTERNAL ANALYSIS • Strong future without any devastating scandals or frauds
impacting image of firm
(Value Chain) • Holding companies keep on performing with same potential
• Countries where company operates continue in same way

• Currency fluctuation Opportunities

because of global Capabilities
disturbance • The large cash flow of around 148 billion USD
INTERNAL ANALYSIS • New customer base • Highly skilled management and team
• Fighting the legal battle from online investors
(Leadership, Financial) • Diverse portfolio with strong brand in it
• Threat from high rivalry • New taxation policy

• Stable free cash flows Core Competencies

Threat • Talented investors;
ALTERNATIVES & • Unbeatable business model;
• A diversified portfolio that has performed exceptionally
CONCLUSION well.
 VALUE CHAIN ANALYSIS
EXTERNAL ANALYSIS

P
The investment they make in the research and development department remains the reason for
Research and development the competitive edge it has over its competitors. Data can be leveraged in decisions making.

R
Since the company has a lot of subsidiaries with an array of production processes involved, filling gaps in these
I processes can translate to better profits and optimal production. Production
EXTERNAL ANALYSIS
M Having had such a wide variety of products and hence customer base under its purview makes the
Marketing and Sales company adapt a lot of different kinds of sales and marketing channels in its product and marketing
A mix. The company has been using the marketing funnel approach.

R To avoid jeopardizing the company's brand reputation, it must examine its support efforts and instead
Customer Service
use them as a vehicle to spread positive word of mouth through prompt, timely, and efficient help.

INTERNAL ANALYSIS Y
(Value Chain)

S It includes quality management, legal affairs management, accounting, financing, planning, and
Company Infrastructure strategic management. With effective infrastructure management, Berkshire Hathaway may be

INTERNAL ANALYSIS
U able to maximize the total value of the whole value chain.

(Leadership, Financial) P This area happens to be a competitive edge for Berkshire Hathaway. The
Information systems and
company is leveraging the power of historical data to make financing decisions.
P Berkshire Hathaway is riding the wave of a technological revolution really well
technology
O
ALTERNATIVES & R Human resources Berkshire Hathaway may be able to reduce competitive pressure by effective HR management,
which would be based on the workforce's motivation, ambition, and talents.
CONCLUSION T
EXTERNAL ANALYSIS
LEADERSHIP ANALYSIS FINANCIAL ANALYSIS

• Team is lead by CEO and Chairman Warren Buffet • Doing financial analysis to understand companies
EXTERNAL ANALYSIS with his most trusted friend and advisor Vice current positioning and deciding whether company
Chairman Charlie Munger and other 12 seats in bad condition or not. Taking data of 2021
Financial year
• Firm follow matrix organizational structure, made
task leadership and relational leadership easier to • The ROA is 9.47% for Berkshire Hathaway, which
practice indicates that the company makes almost $0.0947
for every dollar in assets in the company
INTERNAL ANALYSIS • Most of the major decisions are taken by the few
(Value Chain) people from top of firm • Current Ratio of 1.271 proving that they have high
capability of paying off the debt.
• Follow transformational leadership style, foster a
strong culture in which employees are dedicated to • The P/E ratio of 7.57 show that investors are
giving it their all confident on the stock and are looking high
INTERNAL ANALYSIS potential in future investment
• Five officers manage the 60 direct subsidiaries in
(Leadership, Financial) Omaha • Berkshire Hathaway exhibits a ROE of 17.30%
indicating the company makes over $0.1730 for
• Each subsidiary operates independently but is every dollar in equity the company possesses
supported by a small board of directors, usually
five persons
ALTERNATIVES &
CONCLUSION

EXTERNAL ANALYSIS
• Company can choose is to
EXTERNAL ANALYSIS
• Warren Buffett is training
INTERNAL ANALYSIS
(Value Chain)
Alternative 1 Alternative 3
Alternative 2 • No-Dividend Pay- to keep
• Increasing the portfolio the investor happy and stay
continue with its current
managing power of Todd invested in the company
strategy and ride the waves
Combs and Ted Weschler, we’re suggesting that the
to success. Firm is
who are currently managing company should start paying
investing in multiple
the 10 Billion USD; dividends to its investors to
companies from different
domains right now for reducing Warren Buffett provide them with more of a
managing share in portfolio return.
diversifying the portfolio
• Giving board of directors - • Removing the No-auction
and reducing the risk
Ajit Jain and Greg Abel policy- Berkshire may be
factor. more autonomy and power in able to benefit. rom
the larger company decision, becoming more adaptable
and preparing new making the company ready and competing with other
investors to take over the for Warren’s retirement companies at auctions and
company after he retires. on the market

Conclusion
INTERNAL ANALYSIS After a thorough discussion and rating each strategy alternatives on the three criteria, which are – Consistency,
(Leadership, Financial) Adaptability, Competitive Advantage. Based on these factors we suggest that Berkshire Hathaway should go with
the Hybrid of 2nd and 3rd alternative. In this they’ll let go their old policies and should bring suggested changes and
with that they should go more power to the future of company, which will help investor to switch their confidence
from Mr. Warren Buffett to Berkshire Hathaway. If Berkshire Hathaway is forced to return to its normal strategy, it
must work extremely hard to find “elephant” size investment opportunities in order to achieve growth for the
ALTERNATIVES & company. There is potential for negative results from implementing this new strategy, but by taking this risk,
Berkshire Hathaway is opening itself up to potential for growth and outstanding financial results that will benefit
CONCLUSION the shareholders substantially.