Berkshire Hathaway Case Study

Berkshire Hathaway is an American conglomerate holding company based in Omaha, Nebraska. It fully owns more than sixty companies such as like Dairy Queen, Duracell, Fruit of the Loom, Burlington Northern Santa Fe Railroad, Pampered Chef, Lubrizol, Long and Foster, and Geico (Forbes, 2017). BH owns 38.9 percent of Pilot Flying and Kraft Heinz Company with 26.7 percent. It holds 17.6 percent of the American Express, 9.9 percent Wells Fargo, 9.4 percent of Coca-Cola Company and 3.3 percent of Apple. The company is also the largest shareholder in Delta Air Lines, American Airlines, United Airlines, and Southwest Airlines which it acquired since 2016 (Forbes, 2017).

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Warren Buffet is one of the most successful investors and is ranked among the richest individuals. He is 87 years old and serves as the chief executive officer and the chairman in Berkshire Hathaway. During his early carrier years in BH, Buffett's focused investing in publically operated companies. He concentrated on long-term investments, but as time went by, he bought the whole companies. He has turned Berkshire Hathaway into a successful company, and currently, it operates a diverse range of businesses such as railroads, jewelry sales, uniforms manufacture and distribution, retail, home furnishings, vacuum cleaners manufacturers, confectionery and newspaper publishing. Berkshire Hathaway is among the largest company in work making around 73.3 billion per year (Forbes, 2017).

Tracing BH history, it began as a textile manufacturing company in 1839 and was started by Oliver Chase at Rhode Island. Berkshire merged with Hathaway in 1955 after its profits began to decline due to the effect of the first world way. In 1962, Buffett started buying BH shares after noticing that the company is improving. He then expanded to the insurance company and other well-known investments. Berkshire Hathaway has been operating successful investment for long period and this had really contributed to its success. The company grew from a minor textile manufacturing to a conglomerate that owns multiple business units. BH is highly decentralized since business units operations are minimally supervised from the headquarters. These units make their own decisions on what to produce and the price they would fix for their products. When business units are left to manage themselves, they increase revenues as compared to when every decision is made at the headquarters for example companies such as IBM (Miller, 2018).

The four major businesses of BH include insurance, energy, manufacturing and airline businesses. The structure of BH contribute to its success, and in an article by the Harvard Business Review, three major aspects of company structure make it successful. These aspects include company culture, long-term orientation, and autonomy (Larcker & Tayan, 2015). The company has a strong culture as it stresses acting ethically, integrity, customer satisfaction and, long-term orientation. This culture flows from Buffett, and he confirms that it is spread throughout the company. Employee plays a vital role the success of an organization and BH treat them and tries to motivate them as a way of improving their production. The company makes sure those customers are satisfied with their services and are treated with great respect. The company understands those customers are the main factor to their success and tries to maintain them at all costs. They try to listen to customers need and layout strategies to solve those needs.

One aspect why BK successes in its four major business are the long-term orientation put by Buffett. He does not focus on short-term investments and ask his business unit managers to look for investments that are long term. It is clear that BH investments are long-term because they do not happen overnight. The last structure aspect is autonomy where the insurance, manufacturing, and energy companies are given freedom to operate the way they want. There are no interference from the headquarter and units operate the way they wish, and this allows them to be creative and innovate which increases their profits (Miller, 2018).

Shareholders of BH insurance companies such as Berkshire Hathaway Primary Group (BH Primary) and GEICO among others benefits from hue divided since Buffett use their money to acquire other insurance companies. The shareholders enjoy double benefits because he holds shares in two business units. Insurance is the cornerstone of BH and Buffett continue investing in it due to its huge profits.

Conclusion

Berkshire Hathaway Energy is a company that is 90 percent owned by Berkshire Hathaway and shareholders earn more profits than in other business that company does not own. Shareholders are free to sell their shares whenever they want as they only have to contact BH. The company shareholders benefit from clean and affordable energy from the company solar grid. In the manufacturing businesses, the most popular perk is that customers can get an 8 percent discount if they are Berkshire Hathaway shareholders. Airline business is the fourth major business that BH operates, and it records growth of 19 percent per year. Although the company is not the whole owner of these companies, it manages to pay its shareholders 0.2 of the total profits made by these businesses.

References

Miller, M. (2008): Structured for Success: Berkshire Hathaway.retrieved from https://www.volarisgroup.com/blog/article/structured-for-success-berkshire-hathaway

Larcker D. & Tayan B. (2015): What It's Like to Be Owned by Berkshire Hathaway. Retrieved from https://hbr.org/2015/12/what-its-like-to-be-owned-by-berkshire-hathaway

Forbes. (2017) "Berkshire Hathaway".. Retrieved June 6, 2017