Berkshire Hathaway B (BRKb) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Prop. & Casualty)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Berkshire Hathaway B (United States)
Based on various researches at Oak Spring University , Berkshire Hathaway B is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs,
increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Berkshire Hathaway B
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Berkshire Hathaway B can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Berkshire Hathaway B, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Berkshire Hathaway B operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Berkshire Hathaway B can be done for the following purposes –
1. Strategic planning of Berkshire Hathaway B
2. Improving business portfolio management of Berkshire Hathaway B
3. Assessing feasibility of the new initiative in United States
4. Making a Insurance (Prop. & Casualty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Berkshire Hathaway B
Strengths of Berkshire Hathaway B | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Berkshire Hathaway B are -
Innovation driven organization
– Berkshire Hathaway B is one of the most innovative firm in Insurance (Prop. & Casualty) sector.
Training and development
– Berkshire Hathaway B has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Sustainable margins compare to other players in Insurance (Prop. & Casualty) industry
– Berkshire Hathaway B has clearly differentiated products in the market place. This has enabled Berkshire Hathaway B to fetch slight price premium compare to the competitors in the Insurance (Prop. & Casualty) industry. The sustainable margins have also helped Berkshire Hathaway B to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Berkshire Hathaway B are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Diverse revenue streams
– Berkshire Hathaway B is present in almost all the verticals within the Insurance (Prop. & Casualty) industry. This has provided Berkshire Hathaway B a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Digital Transformation in Insurance (Prop. & Casualty) industry
- digital transformation varies from industry to industry. For Berkshire Hathaway B digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Berkshire Hathaway B has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Berkshire Hathaway B has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Berkshire Hathaway B has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Operational resilience
– The operational resilience strategy of Berkshire Hathaway B comprises – understanding the underlying the factors in the Insurance (Prop. & Casualty) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Highly skilled collaborators
– Berkshire Hathaway B has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Insurance (Prop. & Casualty) industry. Secondly the value chain collaborators of Berkshire Hathaway B have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Berkshire Hathaway B has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Berkshire Hathaway B staying ahead in the Insurance (Prop. & Casualty) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Insurance (Prop. & Casualty) industry
– Berkshire Hathaway B is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Berkshire Hathaway B is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Berkshire Hathaway B is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Berkshire Hathaway B emphasize – knowledge, initiative, and innovation.
Weaknesses of Berkshire Hathaway B | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Berkshire Hathaway B are -
Slow to strategic competitive environment developments
– As Berkshire Hathaway B is one of the leading players in the Insurance (Prop. & Casualty) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Insurance (Prop. & Casualty) industry in last five years.
Increasing silos among functional specialists
– The organizational structure of Berkshire Hathaway B is dominated by functional specialists. It is not different from other players in the Insurance (Prop. & Casualty) industry, but Berkshire Hathaway B needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Berkshire Hathaway B to focus more on services in the Insurance (Prop. & Casualty) industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Berkshire Hathaway B has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Insurance (Prop. & Casualty) industry using digital technology.
Compensation and incentives
– The revenue per employee of Berkshire Hathaway B is just above the Insurance (Prop. & Casualty) industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High bargaining power of channel partners in Insurance (Prop. & Casualty) industry
– because of the regulatory requirements in United States, Berkshire Hathaway B is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Insurance (Prop. & Casualty) industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Berkshire Hathaway B is slow explore the new channels of communication. These new channels of communication can help Berkshire Hathaway B to provide better information regarding Insurance (Prop. & Casualty) products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, Berkshire Hathaway B has high operating costs in the Insurance (Prop. & Casualty) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Berkshire Hathaway B lucrative customers.
Employees’ less understanding of Berkshire Hathaway B strategy
– From the outside it seems that the employees of Berkshire Hathaway B don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
No frontier risks strategy
– From the 10K / annual statement of Berkshire Hathaway B, it seems that company is thinking out the frontier risks that can impact Insurance (Prop. & Casualty) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, Berkshire Hathaway B has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Insurance (Prop. & Casualty) industry over the last five years. Berkshire Hathaway B even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative at Berkshire Hathaway B, in the dynamic environment of Insurance (Prop. & Casualty) industry it has struggled to respond to the nimble upstart competition. Berkshire Hathaway B has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Berkshire Hathaway B Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Berkshire Hathaway B are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Berkshire Hathaway B to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Berkshire Hathaway B can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Berkshire Hathaway B to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Berkshire Hathaway B to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Berkshire Hathaway B to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Creating value in data economy
– The success of analytics program of Berkshire Hathaway B has opened avenues for new revenue streams for the organization in Insurance (Prop. & Casualty) industry. This can help Berkshire Hathaway B to build a more holistic ecosystem for Berkshire Hathaway B products in the Insurance (Prop. & Casualty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Berkshire Hathaway B can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Loyalty marketing
– Berkshire Hathaway B has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Berkshire Hathaway B is facing challenges because of the dominance of functional experts in the organization. Berkshire Hathaway B can utilize new technology in the field of Insurance (Prop. & Casualty) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Insurance (Prop. & Casualty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Berkshire Hathaway B can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Berkshire Hathaway B can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Use of Bitcoin and other crypto currencies for transactions in Insurance (Prop. & Casualty) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Berkshire Hathaway B in the Insurance (Prop. & Casualty) industry. Now Berkshire Hathaway B can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Berkshire Hathaway B to increase its market reach. Berkshire Hathaway B will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Berkshire Hathaway B can use these opportunities to build new business models that can help the communities that Berkshire Hathaway B operates in. Secondly it can use opportunities from government spending in Insurance (Prop. & Casualty) sector.
Manufacturing automation
– Berkshire Hathaway B can use the latest technology developments to improve its manufacturing and designing process in Insurance (Prop. & Casualty) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Berkshire Hathaway B External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Berkshire Hathaway B are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Berkshire Hathaway B in Insurance (Prop. & Casualty) industry. The Insurance (Prop. & Casualty) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– Berkshire Hathaway B high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Berkshire Hathaway B needs to understand the core reasons impacting the Insurance (Prop. & Casualty) industry. This will help it in building a better workplace.
Environmental challenges
– Berkshire Hathaway B needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Berkshire Hathaway B can take advantage of this fund but it will also bring new competitors in the Insurance (Prop. & Casualty) industry.
Easy access to finance
– Easy access to finance in Insurance (Prop. & Casualty) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Berkshire Hathaway B can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Berkshire Hathaway B in the Insurance (Prop. & Casualty) sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Berkshire Hathaway B may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Insurance (Prop. & Casualty) sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Prop. & Casualty) industry are lowering. It can presents Berkshire Hathaway B with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Insurance (Prop. & Casualty) sector.
Consumer confidence and its impact on Berkshire Hathaway B demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Insurance (Prop. & Casualty) industry and other sectors.
Increasing wage structure of Berkshire Hathaway B
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Berkshire Hathaway B.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Berkshire Hathaway B can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Berkshire Hathaway B prominent markets.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Berkshire Hathaway B.
Weighted SWOT Analysis of Berkshire Hathaway B Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Berkshire Hathaway B needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Berkshire Hathaway B is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Berkshire Hathaway B is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Berkshire Hathaway B to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Berkshire Hathaway B needs to make to build a sustainable competitive advantage.