GEBerkershireHathawayAnalysisStrategicMGMTSummer2020 x
All requirements are inside the file. It′s asking to answer the question of ″why Berkshire Hathaway has performed so much better than General Electric during the past twenty years when both companies have had similar strategies.″
FINAL CASE ANALYSIS, STRATEGIC MANAGEMENT-G.E. AND BERKSHIRE HATHAWAY-SUMMER 2020
The General Electric Company and Berkshire Hathaway are both companies that have many unrelated businesses. They both also have similar corporate strategies but have had markedly different financial results over the past twenty years.
G.E.’s total revenues grew from $90.8 billion in 1997 to $122.1 billion in 2017 (34% over the 20 years); Berkshire Hathaway’s revenues grew from $10.4 billion in 1997 to $242 billion in 2017 (a growth of 222.7% over 20 years).
Over the same period twenty-year period, G.E.’s net profits grew from $8.2 billion in 1997 to $8.0 billion in 2017 (before massive write-offs due to restructuring and other related costs, which resulted in a net loss of $6.2 billion). At the same time, Berkshire Hathaway’s profits grew from $1.9 billion in 1997 to $44.9 billion in 2017, or by 226%.
G.E.’s stock price at the end of 1997 was $24.76 and, at the end of 2017, was $17.45. A loss of 30% over the twenty years. G.E. shares now trade between $7.00 and $8.00 a share. G.E. shares traded at an all-time high of $155 per share (split-adjusted) in 2000.
Berkshire Hathaway’s stock price (class B shares) at the end of 1997 was $22.74 and $198.22 at the end of 2017. A gain of 89% over the 20 years.
Thomas Edison founded G.E. in 1892, and Berkshire Hathaway was founded and is still run by Warren Buffett in 1965, but began as a cotton mill in 1888.
G.E. and Berkshire Hathaway have (or have had) both consumer goods and industrial businesses.
G.E. has 313,000 employees world-wide, and Berkshire Hathaway has 360.000.
Both companies have had an unrelated diversification strategy for some time, and both have made numerous acquisitions in unrelated businesses as well as some related businesses, and have interests in various segments of the financial services industry (banking, insurances, and financing). Both companies also have investments and interests in international operations.
The overriding question to be answered by this analysis paper is why Berkshire Hathaway has performed so much better than General Electric during the past twenty years when both companies have had similar strategies.
To find some answers to this question, this paper should look at the following issues:
1. Leadership: What role did leadership play in the long-term financial performance of the two companies? What has been the G.E. leadership style? What has been Berkshire Hathaway’s leadership style? How would you describe the differences in the leadership style of the two companies during the twenty years? Do these differences affect long-term financial performance? Explain how and why.
2. Culture: Are their differences in the culture of each of the organizations that might explain performance differences? What is G.E. culture? What is the Berkshire Hathaway culture? What are each company’s values? Do these differences explain performance differences? Explain how and why.
3. Compensation: What are differences in compensation and compensation plans for the CEO’s and other executives of the two companies, and how might that contribute to differences in performance? Explain how and why.
4. Management Oversight: Are there differences in the way each company manages and oversees each of the operating businesses? Do the differences contribute to differences in performance? Explain how and why.
5. Approach to Acquisitions: Both G.E. and Berkshire Hathaway have made many acquisitions over the twenty years. Is there a difference in how each company approaches acquiring other companies? Do they have the same criteria? How may the differences in approaches affect long-term financial performance? Explain how and why.
ASSIGNMENT DETAILS
Prepare a paper addressing the above issues of 4-7 pages in length (double-spaced and excluding the title page, abstract page, and reference page), that follows the course Guidelines for Written Assignments, including APA format.
The paper should include a Cover Page; an Abstract; an Introduction (stating purpose of the paper and analysis process); Background of each of the companies; a section for Analysis of each of the five questions; a section of the Summary and Conclusions (one to two paragraphs summarizing the key points and conclusions of the paper); and a Reference page. The paper must use a minimum of four (4) credible outside reference sources, and follow APA writing style requirements. Refer to Course Guidelines for details of APA writing style requirements.
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https://www.investopedia.com/terms/b/berkshire-hathaway.asp
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https://www.britannica.com/topic/holding-company
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https://www.newworldencyclopedia.org/entry/General_Electric
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https://ivypanda.com/essays/leadership-in-general-electric/
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https://hbr.org/2020/03/jack-welchs-approach-to-leadership
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https://www.nytimes.com/2017/06/12/business/general-electric-history-of-innovation.html
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https://www.thestreet.com/investing/history-of-berkshire-hathaway
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