Contemporary Business Issues - Berkshire Hathaway - Case Study Example

Berkshire Hathaway Document Berkshire Hathaway’s Business Berkshire Hathaway is a holding company with interests in different sectors of the U.S economy ((Rittenhouse, 2013:28). The company is better known for its chairman, president, and CEO, Mr. Warren Buffet. Through wise and strategic investments in profitable and high-growth companies, the company has experienced exponential growth and has played a central role in Mr. Buffet’s rise to the top of the global business. Berkshire Hathaway has full or partial control in a few, highly profitable companies (Skousen, 2013:48). For example, it holds stock in Coca-Cola, IBM, Wells Fargo, American Express, and Restaurants Brands International. Over the years, through the brilliant leadership of Mr. Buffet, the company has remained one of the most profitable enterprises in the world. Berkshire Hathaway’s stocks have been one of the most expensive in the U.S for a long time, and all indications are that this position will not change soon. Railroad Business Via BNSF (Burlington Northern Santa Fe) LLC Railway, Berkshire manages a railroad network in the US with roughly 32,500 track miles (Asefeso, Parry, & Lund, 2013:26). This does not include main tracks, sidings, as well as yard tracks. As at 31ST December, 2012, BNSF operates in 28 US states and 2 Canadian provinces. Manufacturing, Service and Retailing Businesses Berkshire has many diverse manufacturing, retail, and service divisions. For example, Marmon Holdings constitutes roughly 150 manufacturing and service companies that run autonomously in 11 different commercial segments (Campbell & Craig, 2012:57). These segments include plumbing products, highway technologies, water treatment, distribution services, transportation services, retail home improvement products, electrical goods, retail store fixtures, industrial products, engineered products, engineered wire and cable products, crane services, and food service merchandise. Property/Casualty Reinsurance Berkshire’s General Re division, which deals with property and casualty reinsurance, conducts its North American activities via GRC. In addition, property and casualty activities in North America are managed via 16 divisional offices in the US and Canada. The company markets reinsurance operations directly to customers without engaging intermediaries (Johnson & Oberwise, 2012:21). General Re’s North American operations also comprise specialty insurers – especially the Genesis and General Star firms. Such specialty insurers focus on underwriting liability and employees’ compensation packages based on extra and surplus frameworks as well as bonus insurance for programs that are self-insured. Other Manufacturing, Service, and Retailing Businesses Berkshire Hathaway has textile manufacturing businesses that constitute producers of different clothing and footwear. Firms involved in the manufacture and supply of clothing merchandise include Garan & Fechheimer Brothers, Fruit of the Loom, Vanity Fair Brands, and Russell Brands (Kumar, 2014:16). The holding company’s footwear divisions comprise Brooks Sports, Justin Brands, and H.H. Brown Shoe Group. On the other hand, Fruit, Russell, and VFB is mainly a vertically integrated manufacturer and supplier of sports apparel, underwear, and associated products. Utilities and Energy Businesses Berkshire manages MidAmerican’s divisions as distinct operating segments. The local controlled energy operations of MidAmerican comprise two regulated service companies that cater to more than 3 million retail clients, a fifty percent stake in electric distribution businesses, 2 interstate natural gas pipeline firms with pipeline totalling 17,000 miles and a daily design capacity of about 8 billion cubic of natural gas (Kurucz, Wheeler, & Colbert, 2013:71). Its UK electricity transmission divisions have about 4 million consumers, and this represents a large market share. Insurance and Reinsurance The company’s insurance and reinsurance commercial operations are conducted via many local and foreign insurance groups. These insurance businesses offer global insurance and reinsurance of assets, health risks, casualty risks, and accidents (Leonard & Gonzalez-Perez, 2013:63). The firm’s insurance underwriting activities comprise GEICO and its divisions, Berkshire Hathaway Reinsurance Group, Berkshire Hathaway Primary Group, and General Re and its divisions. Life/Health Reinsurance The North American disability, health, prolonged care, and international life reinsurance packages are based on a personal and group framework. Most of these coverages are developed using a balanced treaty framework, with the exception of the American group health and disability divisions, which is mainly based on an excess treaty framework (Loomis, 2014:36). Few life and disability enterprises are based on a facultative framework, and the life and health businesses are sold directly to consumers. Finance and Financial Products and Services Berkshire’s finance and financial products and services comprise Clayton Homes (manufactured homes and finance), XTRA (logistics equipment hiring), CORT (furniture hiring) and different miscellaneous financing services. Clayton Homes is a vertically integrated manufactured home firm. As at 31st December 2012, the company manages 34 factories in 12 US states (Rittenhouse, 2013:46). Clayton’s houses are sold in 48 states via a chain of almost 1,500 retailers, including about 330 company-owned home depots. The company has a steady growth pattern that supports Berkshire’s competitive strategy and complements its overall product portfolio. Document 2: Ethics and Corporate Social Responsibility at Berkshire Hathaway Berkshire adheres to labour and employment laws by avoiding any form of discrimination and providing an appropriate working environment for all its employees. Equal pay, gender balance, and equal opportunity employment are core elements of the company’s code of ethics. Since the company Warren Buffet famously stated “it takes 20 years to build a reputation and five minutes to ruin.” This is his, and his company’s, guiding principle when it comes to ethics and customer relations (Baron, 2014:26). The company always puts the customer first regardless of prevailing conditions. It focuses on satisfying customers before any other stakeholder, and uses its excellent ethical image to attract and retain customers. Customer complaints are handled by the customer relations department, and customer feedback is shared with the relevant employees to help the company improve the quality of its services. Berkshire maintains a feedback mechanism that allows customers to forward their complaints and opinions to the customer service division, which then takes the necessary measures to address their concerns. Buffet’s high regard for and practice of integrity has defined Berkshire Hathaway’s ethical and social responsibility practices. The company has a comprehensive ethical framework that has guided its ethical practices for decades (Bansal & Hoffman, 2012:35). However, this framework is regularly revised to adapt to industry requirements and competitors’ developments. Since he became chairman, Mr. Buffet has ensured that his personal commitment to ethics is translated throughout the company. Industry observers have regularly stated that Buffet’s personality has been central to the company’s almost untarnished image when it comes to ethics. The company’s code of ethics was developed by a team of internal and external practitioners who combined industry experience with an unparalleled understanding of the firm’s, history, ethos, and mission. For a company as large as Berkshire, it is remarkable that it has never faced any serious case of ethical malpractices (Pride, Hughes, & Kapoor, 2013:29). As previously mentioned, Berkshire regularly updates its code of ethics to meet internal and external requirements. This is one of the numerous strategies the company employs to ensure that it does not succumb to the same ethical dilemmas that have wrecked companies like Enron. Supplier relationships are one of the most important features of Berkshire Hathaway’s code of ethics. Since the company cannot manage all its suppliers from its headquarters, it communicates its ethical requirements and the ramifications of flaunting those requirements to all its suppliers. It regularly implores suppliers to avoid malpractices and to uphold the company’s image in all their activities (Bansal & Hoffman, 2012:82). Berkshire also takes strict measures whenever suppliers violate its code of ethics; this prevents random incidents from setting precedents. Finally, the company has cultivated sustainable relationship with its suppliers; one that is based on mutual benefit, respect, and adherence to ethical requirements. Berkshire’s suppliers recognise that they are valued by the company and they are expected to reciprocate this gesture. The company also conducts regular training of new and existing staff to teach them the company’s fundamental mantras and their obligations as its employees. For new employees, coaching involves an indoctrination in and induction into the company’s ways. For existing employees, training is regularly held to ensure they are “ethically alert.” In both cases, domestic, regional and global ethical trends are taught and employees are required to uphold these values at all times (Kuiper & Clippinger, 2013:52). An interesting strategy adopted by Berkshire to maintain its high ethical standards involves detailed scrutiny of potential employees’ backgrounds. For example, the company requires interviewees to demonstrate high levels of integrity, self-control and commitment to fit into the organisation’s current and future ethical plans. At Berkshire, professional competency is not enough to work for the company. Mr. Buffet ensures that new and existing employees live up to the company’s ethical standards. Mr. Buffet wrote a letter to the company’s shareholders and, by extension, the general public, in which he explained his ethical expectations of the company’s managers (Cheeseman, 2013:39). He told them to jealously protect the company’s reputation, emphasising that while money can be lost and gained, reputation is extremely difficult to redeem. The herd mentality that informs the “everybody is doing it” slogan does not apply at Berkshire Hathaway. As a matter of fact, it does not apply in any business decision the company makes, whether it involves ethics or not. Any action or declaration that carries the slightest sense of illegitimacy is avoided at all costs, and necessary measures are put in place to guide responses in case any violations occur. While the company already has a publicly available code of ethics that spells out the rules of conduct, Buffet’s later showed that he takes personal responsibility for the company’s reputation and expects employees to do the same (Rittenhouse, 2013:18). At Berkshire Hathaway, ethical responsibility transcends the written rules. The company’s ethical responsibilities are first to itself then to its shareholders. It is worth remembering that the Berkshire Hathaway brand is bigger than any individual, including Mr. Buffet. It deserves all the protection it can get. Document 3: My Experience of the Module My experience of the module has been very enriching. As a matter of fact, this has been one of the most fulfilling modules I have undertaken since I joined the University. I have completed the module feeling more knowledgeable about and capable in important concepts affecting contemporary business. I have also become more confident through the numerous presentations and group sessions I have participated in. The module featured a balanced combination of individual and group work, allowing me to benefit from my classmates and influence them as well. I must admit that prior to starting this course I was not very confident in my presentation skills and had struggled to integrate with colleagues in other modules. However, at the moment I feel extremely phlegmatic when going in front of people. This feeling is not just restricted to the lecture hall; it also extends to the public. I can face any crowd and move them with presentation skills. Throughout the entirety of the module, I have polished my communication skills to such an extent that I feel comfortable relating to people from diverse backgrounds. At the start of my time at the University, I felt constrained in terms of intercultural communication. However, this module, with its rich cultural composition and emphasis on teamwork, has pushed me to shatter the cultural limitations I felt in the beginning. These skills will be invaluable in my professional and personal growth because employers prefer workers who can deliver results in diverse settings. An employee should not feel intimidated by multicultural workplace environments, and I feel that this module has empowered me in that aspect. My interactions with my tutors and classmates have also been very productive. Throughout the module, I have built fruitful relationships with my tutors; relationships that will remain intact irrespective of future academic commitments. This also applies to my classmates, some of whom I will remain in contact with until I complete my studies. I have learned new, progressive, social and academic concepts that have enlightened me on module concepts. The module was not strictly academic as is the case with other courses. This means that we were not restricted to taking notes, doing assignments, and doing tests and examinations. The tutor occasionally took breaks to teach non-academic topics like responsibility, character, mental strength, and determination. At the end of the module, I felt more than a student. I felt like a social being with an appreciation of life and social consciousness that transcended the lecture hall. In terms of academics, I have gained immeasurably from the module. Topics on globalisation, ethics and social responsibility, management and leadership styles, sociological trends, internet marketing, and the application of business in technology have given me a sound academic foundation upon which I can build my professional career. Currently, I possess excellent theoretical and practical knowledge on these topics and others, and I believe that I am well placed to use them in the modern business environment. The use of demonstrations during the module was instrumental in helping me understand and relate to contemporary business issues. For example, some lectures incorporated both theoretical and practical activities that required students to display their soft and technical business skills. Question and answer sessions were especially challenging but, more importantly, positive. Our tutor was proactive and engaging; I do not recall having dull moments during lectures. I also do not recall “switching off” from lectures and concentrating on other things. The sessions were too engaging to allow that, so I found myself paying attention most of the time. The tutor was always available for consultation after lectures, and I took advantage of this to expand my understanding of certain concepts. I found globalisation to be the most interesting topic in the entire module. The course content, aided by the tutor’s delivery, made this topic my favourite. I became particularly intrigued by the ability of businesses to manage divisions thousands of kilometres away from their headquarters. I learned how logistical, human resource, legal and regulatory, and cultural challenges are all confronted to deliver goods and services to consumers in far-flung parts of the world. Case studies enabled me to assimilate module concepts faster than I thought. Each case study allowed me to progress further in every business concept. For example, I remember a case study we did on PESTLE analysis that enabled me to finally understand the dynamics involved in the business environment. Previously, I had struggled with the subject and found myself lagging behind other students in assessments. However, after applying myself to case studies and consulting with the tutor, I found myself gradually developing an excellent understanding of PESTLE. Answering follow-up questions also accelerated my comprehension of the business environment and its implications on successful business operations. Group sessions were some of the most memorable yet productive aspects of the module. It was exciting to witness different students using their intelligence to develop better understanding of module concepts. As a matter of fact, I felt challenged by some brilliant classmates who were always alert and engaged in all group activities. I was amazed by the tutor’s understanding of the different personalities and intellects in the module, because I always found myself in groups where I learned something new each time. The groups had great balance in terms of personalities and academic ability. Each group included strong, weak, and average students and all members were required to cooperate with each other to achieve course deliverables. I recall a time where I was grouped with three other students in a globalisation assignments. I knew that I understood the subject better than all the group members, while the other students possessed limited acuity in that regard. However, none of this mattered to the tutor because the assignment was to be delivered with maximum input from all participants. This experience taught me the value of intellectual tolerance and humility. While I thought I was the best student in the group, I had to cast aside all perceptions of superiority and rally my team members to meet assignment requirements. Over time, the other participants started improving in their comprehension of the subject. I no longer dominated proceedings; other group members started demonstrating such acuity that I was compelled to tone down my participation in the group. Students who were previously unreceptive to the assignment were now eager to showcase their abilities. This experience showed me that nobody is naturally unintelligent; for some it is only a matter of attitude. I learned a lot from topics on ethics and social responsibility. I realised that despite the fast-paced nature of the modern business environment, some aspects will always remain constant. For example, business malpractices will remain undesirable fifty years from now and will be punishable in whichever ways deemed appropriate. As a result, it is up to businesspeople to ensure that they stay on the right said of the law when it comes to ethics. Technology, business types, and opportunities may change, but the fundamental principles of business will remain unchanged. Finally, I have to mention the unforgettable experiences I had outside the lecture halls. Once in a while, as part of the course module, we participated in debates with students from other courses and shared knowledge on different topics. These experiences further stretched the intellectual boundaries I had gotten used to in my module, and gave me a new perspective of course concepts. I thoroughly enjoyed arguing course concepts with other students and developed a holistic outlook of the module. References Asefeso, A., Parry, H. & Lund, S. (2013) The emperors new clothes: a contemporary business life edition. New York: Lulu.com. Bansal, P. & Hoffman, A. (2012) The Oxford handbook of business and the natural environment (Illustrated ed.). Oxford: Oxford University Press. Baron, R. (2014) Enhancing entrepreneurial excellence: tools for making the possible real (Illustrated ed.), New York, Edward Elgar Publishing. Campbell, D. & Craig, T. (2012) Organisations and the business environment (2nd, Revised ed.), London, Routledge. Cheeseman, H. (2013) Contemporary business and online commerce law (7th ed.), Upper Saddle River, N.J., Pearson Education Limited. Johnson, R. & Oberwise, R. (2012) Developing global leaders: a guide to managing effectively in unfamiliar places, New York, Palgrave Macmillan. Kuiper, S. & Clippinger, D. (2013) Contemporary business reports (5th ed.), Mason, OH, South-Western, Cengage Learning. Kumar, R. (2014) Strategies of banks and other financial institutions theories and cases, San Diego, Academic Press. Kurucz, E., Wheeler, D. & Colbert, B. (2013) Reconstructing value leadership skills for a sustainable world (Illustrated ed.), Toronto, University of Toronto Press. Leonard, L. & Gonzalez-Perez, M. (Eds.). (2013) Principles and strategies to balance ethical, social and environmental concerns with corporate requirements, Bingley, U.K., Emerald. Loomis, C. (2014) Tap dancing to work: Warren Buffett on practically everything, 1966-2012: A Fortune magazine book (Illustrated ed.), New York, Penguin Group (USA) Incorporated. Pride, W., Hughes, R. & Kapoor, J. (2013) Business (12th ed.), Chicago, Cengage Learning. Rittenhouse, L. (2013) Investing between the Lines with Warren Buffet, Chicago, Routledge. Skousen, M. (2013) Economic logic (Revised ed.), Washington, DC, Regnery Publishing. Read More