Free Case Study About Nature Of Business Organization
Depending on the organizational ownership, companies may be divided in the following types:
1) sole proprietorship (the given type of ownership rests on the property- and assets-related decisions of the sole owner);
2) partnership (composed of a few owners – partners of the organization, whose number may amount from a few persons to dozens of partners. Partnership in its turn is divided into several types: general partnership, limited partnership, and limited liability partnership. From the legal perspectives, in order to set up a partnership, future partners enter into the partnership agreement stipulating their rights and liabilities regarding participation in the partnership);
3) corporation (generally, corporations equity capital is distributed among the shareholders owning the particular shares of the company. Within a public corporation, the supervisory board and the board of directors are formed to oversee the business transactions entered into by the company).
Berkshire Hathaway is a public corporation with a total number of shares – 832,000 dated 23 March, 2015 (The Wall Street Journal).
1.2 Stakeholders of Berkshire Hathaway
Quantity of shares held by institutional and mutual fund owners amount to 65% of the total Berkshire’s stock. The main individual shareholders of the company are represented by:
1) Warren Buffett – 26,675,175 shares;
2) Charles Munger – 1,500 shares;
3) Donald Keough – 100 shares (Yahoo Finance).
However, Berkshire Hathaway is also owned by a string of institutions and mutual funds, among which are:
1) Vanguard Total Stock Market Index Fund – 30,783,585 shares;
2) SPDR S&P 500 ETF – 18,774,656 shares;
3) Vanguard 500 Index Fund – 18,532,985 shares;
4) Vanguard Institutional Index Fund – 17,775,457 shares;
5) Government Pension Fund – Global – 12,370,269 shares;
6) SPDR Series – Financial Select Sector SPDR Fund – 11,284,843 shares;
7) Fidelity Spartan 500 Index Fund – 8,491,174 shares;
8) The Vanguard Group, Inc. – 87,382,650 shares;
9) SSgA Funds Management, Inc. – 82,849,668 shares;
10) Bill & Melinda Gates Foundation Trust (Investment Management) – 76,985,314 shares;
11) BlackRock Fund Advisors – 66,690,097 shares;
12) Northern Trust Investments, Inc. – 20,996,535 shares;
13) Geode Capital Management LLC – 14,311,713 shares;
14) Fidelity Management & Research Co. – 13,628,266 shares;
15) Norges Bank Investment – 13,362,239 shares (The Wall Street Journal).
2.1 Organization Structures
Business and management practices define the following organizational structures:
1) bureaucratic structure (in this type of organization exists a strict system of hierarchy, there is the designated management and controlling positions to which the departments (divisional) managers are accountable and responsible);
2) functional structure (the company is divided into functional departments, every division is headed by the managers who report to the CEO);
3) divisional structure (such a company is composed of the different divisions being responsible for their workload and areas of specialization);
4) matrix structure (this type of organizational structure combines the advantages of both functional and divisional structures – companies tend to establish teams which consist of members from different divisions with different skills to successfully complete the projects).
In one of his letters dated 1979, Warren Buffett wrote:
Berkshire is run on the principle of centralization of financial decisions at the top (the very top, it might be added), and rather extreme delegation of operating authority to a number of key managers at the individual company or business unit level. We could just field a basketball team with our corporate headquarters group. (Myers, 2014).
Following the aforementioned, Berkshire Hathaway seems to have the functional organizational structure.
2.2 Frankly speaking, Berkshire is managed effectively so there is no need to adopt additional structure. Warren Buffett established the effective managerial system, his principle is derived from the belief that managers he employs should be given a freedom and trust to act to do their job (Sorkin).
3.1, 3.2 Leadership Style at Berkshire Hathaway
When seeking the future managers and employees, Warren Buffett puts a great significance in choosing the right individuals who will approach the company’s activities as if it were their own assets and property. Berkshire Hathaway turns out to have no human resources department and severe legal procedures. Warren Buffett relies on the trust and discipline when liaising with managers and employees (Sorkin).
Moreover, Berkshire’s CEO combines two important policy principles: he considers that the aged people and young people – both are a valuable investment to the company. Old individuals can bring their life experience which cannot be overestimated, while young individuals help Buffett to keep up to date. And, of course, Warren Buffett appreciates reputation even higher than money (Christian 37 – 39).
Actually, when running his company, Warren Buffett combines several leadership styles: human relations, laissez faire and democratic leadership. To my mind, the given styles mix is a lucrative fit for Berkshire Hathaway, undoubtedly.
4.1, 4.2 SWOT Analysis of Berkshire Hathaway based on PESTLE factors
The strengths of Berkshire Hathaway are represented by the following:
1) Berkshire is capable of using the working capitals to acquire new investment options;
2) Warren Buffett is known for his brilliant reputation;
3) Berkshire Hathaway delivers high profits during the last years;
4) the company owns lots of subsidiaries located in different geographic regions enabling it to mitigate political and economic risks.
Weak sides of Berkshire Hathaway:
1) the company is largely dependent on its working capitals;
2) the main executive officers of the company are too old and the company has not established any succession rules;
3) it is recommended to improve Berkshire Hathaway’s website since it does not provide sufficient information on the company’s team and management;
4) the company needs to set up a comprehensive branding and image’s policy because Warren Buffett became the company’s idol.
Recommended opportunities for Berkshire Hathaway:
1) the company should turn its look at the international market;
2) it would be reasonable to set up the policy of progressive growth (Halpin).
Christian, Derek. "Billion Dollar Giants Thriving Under Pressure: Are Warren Buffett and Larry Ellison Renaissance Leaders?" Web. 23 Mar. 2014. <http://dtpr.lib.athabascau.ca/action/download.php?filename=mba-14/open/christianderekProject.pdf>.
Halpin, Kirsten. "Berkshire Hathaway - SWOT Analysis." 7 Feb. 2015. Web. 23 Mar. 2015. <https://klhalpin2mba617.wordpress.com/2015/02/07/berkshire-hathaway-swot-analysis/>.
Mason Myers. "Berkshire Hathaway: If You Love the Management, Set Them Free." 20 Apr. 2014. Web. 23 Mar. 2015. <http://masonmyers.com/berkshire-hathaway-management-structure/>.
Sorkin, Andrew Ross. "Berkshire's Radical Strategy: Trust." The New York Times. 5 Apr. 2014. Web. 23 Mar. 2014. <http://dealbook.nytimes.com/2014/05/05/berkshires-radical-strategy-trust/?_r=0>.
The Wall Street Journal. "Berkshire Hathaway, Inc. Cl A." 23 Mar. 2015. Web. 23 Mar. 2015. <http://quotes.wsj.com/BRKA>.
The Wall Street Journal. "Berkshire Hathaway, Inc. Cl B." 23 Mar. 2015. Web. 23 Mar. 2015. <http://quotes.wsj.com/BRKB/company-people>.
Yahoo Finance. "Berkshire Hathaway, Inc." 23 Mar. 2015. Web. 23 Mar. 2015. <http://finance.yahoo.com/q/mh?s=BRK-A Major Holders>.
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