Berkshire Hathaway essay

In a recent Annual General Meeting, Buffett confessed that the improvements on Artificial Intelligence (AI) had made him reflect on the impact that technology could have on his businesses (Finkle & Thomas, 2008). During the meeting, Buffett noted that despite the many advantages of technology, it posed a great threat to Berkshire Hathaway. For instance, he noted that the technology of self-driving vehicles alone had the capability to cause a devastating setback to Berkshire Hathaway in many industries in which it competes (Finkle & Thomas, 2008). Buffett noted that they were likely to lose a large proportion of their shipping customers if goods were to be transported by driverless. As a result, Geico which is a subsidiary of Berkshire Hathaway could become less profitable. Companies that adopt strategies that aim that increasing their competitive advantage tend to control the market and eventually they are able to kick out companies with no competitive advantage.

Good leadership is key to every firm’s competitive strength. Through the good leadership of Warren Buffett and his able vice chairman Charlie Munger, excellent decisions have been made which have contributed to the strengthening of the company’s competitive advantage (Woodbury, 2017) At Berkshire Hathaway, a considerable portion of revenue generated from its many operations is reinvested back to finance projects that have on average earned more than their cost of capital. Reinvesting cash in such projects has helped in protecting them from succumbing to the high competition they face (Woodbury, 2017). One of the strongest strategies by Berkshire Hathaway aimed at dealing with competitive rivalry is that the management prioritizes acquiring only those firms that are economically doing well and have high returns.

Considering the financial muscles of Berkshire Hathaway, the management could adopt strategies such as buying out businesses that seem to pose a great threat to the company. By doing so, Berkshire Hathaway will cement its place at the market as the leading supplier of its products and services. To remain competitive, Buffett and his management team should also consider increasing the share of profit that is reinvested to finance projects that are doing averagely well. Increasing capitation to these projects helps increase their growth rate and thus enable them to face competition effectively. To retain its suppliers, the management of Berkshire Hathaway should at all times ensure that supplies are paid in good time. Despite this being a broad step towards economic success, it has brought with it numerous challenges that pose a threat to the company.

Key among the challenges has been currency fluctuations especially in countries with unstable political climate. Currency fluctuations are a major threat to any company’s profitability. Despite the increased sales and cost of production, products sold to countries experiencing currency fluctuations rarely earn profits. The management of Berkshire Hathaway should, therefore, assess the stability of a country’s currency before investing in its market. Driverless vehicles transport cargo at a lower cost and this would increase the company’s profits drastically (Kepler, 2015). The management of Berkshire Hathaway should also take advantage of the increased use of internet worldwide to advertise their products. As a result of online marketing, the company’s sales are likely to rise and thus increase in profits.

The financial muscles of Berkshire Hathaway provide an opportunity for the company’s greater success. Using its finances, the company has the ability to expand its market to many more countries. The reputation of these two leaders has boosted the supplier’s and consumer’s confidence in the company. As a result, the company is able to run its affairs smoothly with minimal worries and its sales have continued to increase annually. Over the years, Berkshire Hathaway has been able to live up to its mission who is designed to address efficiency, customer satisfaction, and continuous improvement. As a consequence, the company has been able to cement its good relationship with consumers. Consumers, therefore, prefer buying products from Berkshire Hathaway’s chain of business outlets as they are assured of quality.

The value of these shares is $8. 7 billion which translates to 3. 88% of the total share capital. The second largest holder is Capital world investors with 21,490 class’s shares. These shares have a value of $5. By increasing its market base, Berkshire Hathaway will be able to effectively reduce its competitors’ competitive advantage. As a result, the company will cement its position as the leader in the market. Reducing the competitors’ competitive advantage also helps reduces the threats that may face the company as a result of increased competition. The ability of Berkshire Hathaway to create value from its resources, capabilities, and competencies Management is at the heart of the success journey of any company. It is the mandate of the management of any entity to come up with strategies and policies aimed at steering the entity towards success.