BUS499 - Strategic and Competitive Analysis of Berkshire Hathaway

This report provides a comprehensive strategic and competitive analysis of Berkshire Hathaway, examining its business and corporate-level strategies. It explores the company's use of differentiation and cost-leadership models, as well as its diversification and concentration strategies under the leadership of Warren Buffett. The report compares Berkshire Hathaway's strategies with those of its competitors like Jefferies Financial Group, Allstate Corporation, BlackRock Inc., and KKR, evaluating their competitive positions. It also analyzes how Berkshire Hathaway adapts its strategies to both fast and slow market cycles, considering globalization efforts and technological changes. The analysis includes an overview of Berkshire Hathaway's utility segments, a breakdown of its mission and vision, and the application of I/O and resource-based models to assess performance.

Berkshire Hathaway 1
Strategic and Competitive Analysis of
Berkshire Hathaway

Berkshire Hathaway 2
Table of Contents
Introduction......................................................................................................................................3
Overview of Berkshire Hathaway...............................................................................................3
Purpose of the study.....................................................................................................................3
Business-Level Strategies................................................................................................................3
Corporate-Level Strategies..............................................................................................................5
Competitive Environment................................................................................................................7
Market Cycles................................................................................................................................10
References......................................................................................................................................11

Berkshire Hathaway 3
Introduction
Overview of Berkshire Hathaway
Berkshire Hathaway Inc. based in Nebraska, United States carries outs it business along different
sectors based on the operation conducted by its subsidiary units. . The company engages along
different types of businesses associated to insurance, utility based businesses and also regarding
freight transportation through rails. Berkshire Hathaway’s main focus is however on its
insurance operations where it deals with life, health and accidental insurance products. It also
operates rail road transport operations associated to the North American regions. Further,
Berkshire also focuses on the generation of electricity from non-conventional energy sources.
The company also offers brokerage services in the real estate sector while also operates along
other sectors like manufacturing, media and restaurant sector (Bloomberg , 2019).
Purpose of the study
The purpose of the study is to understand the business and corporate level strategies of Berkshire
Hathaway Inc. It would thereby focus on comparing the business and corporate level strategies
of its competitor firms while also evaluate whether the firm identified would tend effectively
compete both along fast and slow paced markets.
Business-Level Strategies
Warren Buffet acting as the CEO of Berkshire Hathaway focuses on employing differentiation as
an effective business strategy where it aims to differentiate its insurance and other financial and

Berkshire Hathaway 4
non-financial services based on the firm’s financial potential. The financial potential of the
company contributes in settling the claim along both the personal and commercial insurance
sector in both normal and adverse conditions. The second differentiating factor as indicated by
Warren Buffet owes to the firm’s potential in enhancing the level of business volumes based on
the total amount of production associated to the diverse business sectors. However, change in the
level of market prices tends to affect the total business potential of the firm in the long run
(Hoang, 2012).
The low-cost model is also observed to be in use by Berkshire Hathaway regards to its electricity
business in terms of charging low cost energy rentals from its customers. Berkshire Hathaway
Energy (BHE) the energy subsidiary of Berkshire Hathaway competes with other firms in the
sector based on comparing the energy rentals it charges from its customers where BHE is
reflected to act as a low-cost service provider. The company’s financial potential potentially only
accounts in helping the firm act in a competitive fashion regards to the generation of low-cost
competitive rentals (Barnes, 2015).
In the long run, Berkshire Hathaway is required more to focus on enhancing its differentiated
portfolio of services and financial products rather than depending on its cost-leadership model.
The cost-leadership model of the firm would tend to yield revenues for the firm under conditions
of a sustained business and financial potential for the firm and also where the market price for
such products or services has not largely decreased over a period. On the other hand, the ability
of the firm in generating differentiated products and services ideally contributes in sustaining an
effective stand amongst its competitors. The gaining of a higher position along the competitive

Berkshire Hathaway 5
marketplace would thereby help Berkshire in drawing greater revenues and yielding profits in the
long run (Chege, 2018).
Corporate-Level Strategies
The most significant corporate strategy in use by Berkshire Hathaway is associated to the
employment of the diversification strategy. The diversification strategy undertaken by Warren
Buffet as the CEO of Berkshire Hathaway essentially focuses on allocation of stocks to different
sectors of the company’s business (Seeking Alpha , 2017). Diversification based on the number
of stocks allocated to the different sectors is highlighted as follows.
(Seeking Alpha , 2017)

Berkshire Hathaway 6
The allocation of stocks made to the different sectors essentially reflect that the businesses of
different sectors like financial services, consumer defensive, consumer cyclical, industrials and
also the communication services essentially are strong and stable. The financial services sector of
the company is essentially constituted by credit card firms. The Consumer Defensive sector of
the firm is essentially constituted by retail companies like Costco and Wal-Mart. Again, the
Consumer Cyclical and also the Communication Services sector is constituted by significant
media companies while the Industrial sector is mainly constituted by airline firms (Seeking
Alpha , 2017). Further, diversification strategy of Warren Buffet’s firm is also viewed in terms of
Market Value.
(Seeking Alpha , 2017)

Berkshire Hathaway 7
The above chart reflects that significant amount of investments are made by Berkshire Hathaway
mainly along three specific sectors like financial services, consumer defensive and also along the
technology sector (Seeking Alpha , 2017).
Like diversification, Berkshire Hathaway also focuses on the employment of concentration as an
effective expansion strategy. Warren Buffet focuses on concentrating the investments based
along six main stocks. Though, Berkshire Hathaway carries outs its operation along 50 different
stocks yet in the true sense it is observed that the Lion Share of the firm’s investments mainly
accrue or are concentrated along six different stocks viz. Wells Fargo (WFC), Kraft Heinz
(KHC), Coca Cola (KO), International Business Machines (IBM), American Express (AXP) and
finally Phillips 66 (PSX). The six stocks mentioned above tend to account around 70 percent of
the total portfolio of the firm’s investment (Rich, 2016).
In terms of long-term gains it is observed that concentration stands out to be an effective strategy
compared to diversification. In that working based on the diversification strategy requires
Berkshire Hathaway for generating investments along large number of firms associated to
diverse sectors it thereby increases the level of transaction cost for the organization. The
management of Berkshire Hathaway is thus required to focus more on concentrating the flow of
investments along specific sectors that would help the company in earning greater returns in the
long-term (Glowik, 2017). Quality investments are required to be decided and made based on
taking decisions associated to growth, income and/or value generation such that enables the firm
to manage and counter the level of risk associated with the same. Solely or greatly depending on
diversification strategy is risk worthy in that the failure in market performance of potential firms

Berkshire Hathaway 8
happens to affect the performance of other firms in the firm’s diversification portfolio (Glowik,
2017).
Competitive Environment
Berkshire Hathaway as a diversified holding business institution tends to gain increasing
competition from another holding company having a diversified base, Leucadia National
Corporation (LUK) now known as Jefferies Financial Group or JEF (McLannahan, 2018).
Further, in terms of operating based on insurance subsidiaries, Berkshire Hathaway also tends to
counter competition from a significant player in the insurance industry, Allstate Corporation
(Allstate , 2019). Again, in terms of operating as a investment management firm, Berkshire faces
potential competition from Blackrock Inc. or BLK (BlackRock Inc. , 2019). Finally, regards to
Berkshire Hathaway’ operation as a player in the private equity sector it faces significant
competition from KKR and Co. LP (KKR, 2019). Thus, the diversified base of Berkshire
Hathaway has also contributed to the growth of large number of competitors operating across
diversified sectors.
Competitors Business Level Strategy Corporate Level Strategy
JEF In terms of its business strategy,
LUK focused on selling in
around 48 percent of its National
Beef business. The
deconsolidation of its beef
business was carried out for
generating simplicity in the
Regards to corporate strategy,
JEF formerly LUK focuses on
carrying out its activities along
its diversified portfolio along the
financial segment compared to a
larger diversified portfolio of
both along financial and non-

Berkshire Hathaway 9
annual statements. The
deconsolidation process was
carried out by LUK to focus
more on enhancing the financial
arm of JEF (McLannahan, 2018).
financial sector for Berkshire
Hathaway (McLannahan, 2018).
Allstate Corporation Allstate focuses on carrying out
market segmentation in that the
same helps in deciding on
differentiated product and market
offerings for its target customers
(Allstate , 2019).
Allstate Corporation focuses on
undertaking a growth strategy
based on addressing the needs of
its stakeholders that contributes
in enhancing the value in a long-
term fashion. Further, the
business is ready in bearing
needed risks while at the same
time aims at leveraging on its
present capabilities and asset
base to generate greater returns
(Allstate, 2019).
BLK BLK’s business strategy is
growth centric such that it
focuses on talent requisition and
development such that the same
helps in generating long term
growth for the firm (BlackRock
Inc. , 2019).
BLK’s corporate strategy is
linked to internationalization
where it requires its business
teams for carrying out effective
collaboration with both internal
and external partners such that
the same helps in promoting

Berkshire Hathaway 10
quality delivery of it capabilities
and services to customer groups
spread over an international
market (BlackRock, 2019).
KKR In terms of business strategies,
KKR focuses on working in n
integrated fashion for helping in
the generation of effective
financial solutions such that the
same helps the different investors
spread internationally for
meeting their diverse objectives
(KKR, 2019).
KKR’s Corporate Strategy is
associated with diversifying its
investments along different
sectors both financial and non-
financial in nature (KKR, 2019).
The analysis of the business and corporate level strategies for the different competitors of
Berkshire Hathaway with that of the firm ideally reflects that Berkshire Hathaway would be
successful in the long run. Berkshire Hathaway would gin based on a presence of an effective
combination of diversified and concentrated corporate level strategies while also the employment
of differentiated services and products in a cost-effective fashion.
Market Cycles
In that, Berkshire Hathaway focuses on diversifying into diverse sectors and businesses both
financial and non-financial so the same is evaluated to carry out its performance in an effective

Berkshire Hathaway 11
fashion in fast markets. It focuses on developing strategic alliances with new business partners
along both financial along financial and non-financial sector for generating market expansion
(Marks, 2018). In slow markets, Berkshire Hathaway needs to strengthen its concentration
strategy such that the same helps in promoting needed growth and development along the
existing business sectors and firms involved in it (Hitt, Ireland, & Hoskisson, 2016).

Berkshire Hathaway 12
References
Allstate . (2019). Our Strategic Vision . Retrieved May 22, 2019, from
https://www.allstate.com/our-shared-purpose/strategic-vision.aspx
Allstate. (2019). Our Corporate Goal. Retrieved May 22, 2019, from
https://www.allstate.com/our-shared-purpose/corporate-goal.aspx
Barnes, P. (2015). How Berkshire's Low-Cost Business Model Creates an Enduring Moat.
Retrieved May 21, 2019, from https://marketrealist.com/2016/03/berkshire-low-cost-
business-model-creates-enduring-moat/
BlackRock Inc. . (2019). Purpose & Profit. Retrieved May 22, 2019, from
https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter
BlackRock. (2019). Strategic Initiatives & Business Management Analyst. Retrieved My 22,
2019, from https://www.wayup.com/i-Financial-Services-j-Strategic-Initiatives-Business-
Management-Analyst-BlackRock-363766936380894/
Bloomberg . (2019). Company Overview of Berkshire Hathaway Inc. Retrieved May 21, 2019,
from https://www.bloomberg.com/research/stocks/private/snapshot.asp?
privcapId=255251
Chege, J. (2018). Effectiveness of Differentiation Strategy on Business Performance of Kenyan
Betting Companies. IOSR Journal of Business and Management (IOSR-JBM) , 20 (7),
22-27.