Berkshire Hathaway is one of the largest multinational companies in the world when it comes to market capitalization. Their main office is located in Omaha, Nebraska in the United States. Berkshire Hathaway mainly deals with things like manufacturing, utilities, and energy, providing causality in insurance and reinsurance, finance and other services. Apart from investing in other major companies, Berkshire Hathaway also has its own holdings as per the year 2017. They include long and Foster, Dairy Queen, Net Jets, Fruit of the Loom, Flight Safety International and many others. Being one of the biggest Companies in the world, both by revenue and assets, Berkshire a few secrets to its enormous success.
Two Reasons for the Success
Trust
It is one of the biggest secrets used by Warren Buffet to run one of the most successful companies in the world. Nobody would fully trust a client or workmate when it comes to money handling, but Warren Buffet has demonstrated it and came out to be a success (Parrish, 2014). Despite managing one of the biggest bureaucratic organizations in the world, he has demonstrated trust to be a much better approach. He is well-known with his managerial skills where he lets the subsidiary CEOs run the company run the affairs independently and what he only asks for is money they cannot use. It is very obvious the subsidiary CEOs would resign if they were closely monitored by Warren Buffet. This system of trust has helped Buffet in managing his time. He does not have to do lots of things like, reading power points and sending memos and therefore having enough time to read, think and even strategizes on other important stuff.
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Remove ignorance from investing
Berkshire only makes smart investments. It has consistently managed to do this fete by continuously learning. The learning ensures that the company does not invest blinds and ignorantly, hence “removing ignorance from investing.” At one of the Berkshire shareholders’ meetings held in the year 2014, Munger one of Buffets long standing associates said “if there is any secret we have, it is ignorance removal. And the nice thing is we still have a lot of ignorance left to remove” (Parrish, 2014). Berkshire Hathaway would not be this thriving if it were not for the buying of Coke Company in the year 1988. This was a clever move which helped Warren Buffet about branding. For any company to prosper, it needs to remove ignorance by continuously learning.
Recommendations for Improving International Business
Consider the Economic and political factors
It is important to consider the economic and political climate of the country in which Berkshire desire to invest. The economic environment influences the cost of operating a business and similarly influences the purchasing power of the consumers of a company’s products (Hamilton, & Webster, 2012). Politics are strongly tied to the economy and also influence business. Stable political climate creates a stable economic environment while political unrest disrupts the economy and business.
Consider the Influence of regulation
Many nations have various regulations stipulating how international business should conduct their affairs (Hamilton, & Webster, 2012). In this regard, Berkshire should always look at how a country’s legal regime encourage or discourage foreign investment. It should also look at that way the legal regime treats holding companies of its stature.
Conclusion
Berkshire Hathaway is a unique company with a unique business model that has earned it a local and international success. The main sources of the company’s success have trust in able managers and avoiding ignorance while investing. For this company to continue enjoying success abroad, it should look into various trends in these countries such as the economic conditions and geopolitics, and the legal environment.
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References
Hamilton, L., & Webster, P. (2012). The international business environment . Oxford: Oxford University Press.
Parrish, S. (2014, May 7). The secret behind Berkshire Hathaway's success. The Motley Fool Retrieved from https://www.fool.com/investing/general/2014/05/07/the-secret-behind-berkshire-hathaways-success.aspx
