SWOT Analysis / TOWS Matrix for Berkshire Hathaway (Germany)
Based on various researches at Oak Spring University , Berkshire Hathaway is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, technology disruption, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, there is backlash against globalization,
banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Berkshire Hathaway
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Berkshire Hathaway can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Berkshire Hathaway, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Berkshire Hathaway 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 can be done for the following purposes –
1. Strategic planning of Berkshire Hathaway
2. Improving business portfolio management of Berkshire Hathaway
3. Assessing feasibility of the new initiative in Germany
4. Making a Insurance (Prop. & Casualty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Berkshire Hathaway
Strengths of Berkshire Hathaway | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Berkshire Hathaway are -
Innovation driven organization
– Berkshire Hathaway is one of the most innovative firm in Insurance (Prop. & Casualty) sector.
Ability to lead change in Insurance (Prop. & Casualty)
– Berkshire Hathaway is one of the leading players in the Insurance (Prop. & Casualty) industry in Germany. Over the years it has not only transformed the business landscape in the Insurance (Prop. & Casualty) industry in Germany but also across the existing markets. The ability to lead change has enabled Berkshire Hathaway in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Berkshire Hathaway 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 have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Insurance (Prop. & Casualty) industry
- digital transformation varies from industry to industry. For Berkshire Hathaway digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Berkshire Hathaway 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.
Effective Research and Development (R&D)
– Berkshire Hathaway has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Berkshire Hathaway 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.
High switching costs
– The high switching costs that Berkshire Hathaway has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Berkshire Hathaway in the Financial sector have low bargaining power. Berkshire Hathaway has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Berkshire Hathaway to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Berkshire Hathaway has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Berkshire Hathaway 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.
Ability to recruit top talent
– Berkshire Hathaway is one of the leading players in the Insurance (Prop. & Casualty) industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Berkshire Hathaway 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 has clearly differentiated products in the market place. This has enabled Berkshire Hathaway to fetch slight price premium compare to the competitors in the Insurance (Prop. & Casualty) industry. The sustainable margins have also helped Berkshire Hathaway to invest into research and development (R&D) and innovation.
Analytics focus
– Berkshire Hathaway is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Insurance (Prop. & Casualty) industry. The technology infrastructure of Germany is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses of Berkshire Hathaway | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Berkshire Hathaway are -
No frontier risks strategy
– From the 10K / annual statement of Berkshire Hathaway, 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.
Workers concerns about automation
– As automation is fast increasing in the Insurance (Prop. & Casualty) industry, Berkshire Hathaway needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Ability to respond to the competition
– As the decision making is very deliberative at Berkshire Hathaway, in the dynamic environment of Insurance (Prop. & Casualty) industry it has struggled to respond to the nimble upstart competition. Berkshire Hathaway has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Berkshire Hathaway supply chain. Even after few cautionary changes, Berkshire Hathaway is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Berkshire Hathaway vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Berkshire Hathaway has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Employees’ less understanding of Berkshire Hathaway strategy
– From the outside it seems that the employees of Berkshire Hathaway 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.
Aligning sales with marketing
– From the outside it seems that Berkshire Hathaway needs to have more collaboration between its sales team and marketing team. Sales professionals in the Insurance (Prop. & Casualty) industry have deep experience in developing customer relationships. Marketing department at Berkshire Hathaway can leverage the sales team experience to cultivate customer relationships as Berkshire Hathaway is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Germany, Berkshire Hathaway needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Berkshire Hathaway products
– To increase the profitability and margins on the products, Berkshire Hathaway needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Berkshire Hathaway 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 lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Berkshire Hathaway is slow explore the new channels of communication. These new channels of communication can help Berkshire Hathaway 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.
Berkshire Hathaway Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Berkshire Hathaway are -
Manufacturing automation
– Berkshire Hathaway 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Berkshire Hathaway can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Berkshire Hathaway to increase its market reach. Berkshire Hathaway 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Berkshire Hathaway in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Insurance (Prop. & Casualty) industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Berkshire Hathaway has opened avenues for new revenue streams for the organization in Insurance (Prop. & Casualty) industry. This can help Berkshire Hathaway to build a more holistic ecosystem for Berkshire Hathaway products in the Insurance (Prop. & Casualty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Insurance (Prop. & Casualty) industry, but it has also influenced the consumer preferences. Berkshire Hathaway can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Berkshire Hathaway can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Insurance (Prop. & Casualty) industry.
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 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.
Using analytics as competitive advantage
– Berkshire Hathaway has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Insurance (Prop. & Casualty) sector. This continuous investment in analytics has enabled Berkshire Hathaway to build a competitive advantage using analytics. The analytics driven competitive advantage can help Berkshire Hathaway to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Berkshire Hathaway 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Berkshire Hathaway can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Berkshire Hathaway 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Berkshire Hathaway can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Berkshire Hathaway External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Berkshire Hathaway are -
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 needs to understand the core reasons impacting the Insurance (Prop. & Casualty) industry. This will help it in building a better workplace.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Berkshire Hathaway 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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Berkshire Hathaway business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Berkshire Hathaway can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Insurance (Prop. & Casualty) industry.
Shortening product life cycle
– it is one of the major threat that Berkshire Hathaway is facing in Insurance (Prop. & Casualty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Berkshire Hathaway needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Insurance (Prop. & Casualty) industry regulations.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Berkshire Hathaway will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Berkshire Hathaway 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 prominent markets.
Environmental challenges
– Berkshire Hathaway 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 can take advantage of this fund but it will also bring new competitors in the Insurance (Prop. & Casualty) industry.
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 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.
Weighted SWOT Analysis of Berkshire Hathaway Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Berkshire Hathaway 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 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 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 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 needs to make to build a sustainable competitive advantage.
