Berkshire Hathaway Inc
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Berkshire Hathaway Inc. has almost a "personality cult" organizational culture which essentially revolves around one man and his investing prowess. The man's name is Warren Buffett, the "Oracle of Omaha." Historically, Berkshire Hathaway's business model has been to purchase insurance companies. One great thing about insurance companies is the "cash float," which works as follows. Suppose that a person purchases a $100,000 whole life insurance policy from Berkshire Hathaway and pays premiums of $4,000 per year to Berkshire for this policy. The Berkshire Hathaway company is obligated to pay the $100,000 death benefit when the person dies; in the meantime it gets to invest the $4,000 per year "float." Warren Buffett, who has been a very savvy investor, has made a huge fortune from investing this float money. But recently, Berkshire Hathaway has been moving away from purchasing insurance companies with large floats and has been buying major industrial businesses instead. In 2010, for example, it completed a $44 billion purchase of one of the nation's largest railroads, Burlington Northern Santa Fe (BNSF). Berkshire paid for this acquisition with $15.8 billion in cash it had on hand, and the remainder in Berkshire Hathaway stock. Mr. Buffett, who was born in 1930, is now well beyond the age when most workers retire.
For this activity, answer:
•How does Mr. Buffett's age affect Berkshire Hathaway's recent strategic moves such as buying Burlington Northern Santa Fe Railroad instead of another large insurance company?.
•What does Berkshire Hathaway's purchase of BNSF Railroad say about where Buffett thinks the price of energy (oil and gasoline) is going to be in the future?.
•How does the energy efficiency of shipping goods via rail compare with shipping goods via truck or airplane?.
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The response addressed the query is posted in 648 words with references
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The response addressed the query is posted in 648 words with references
//The strategic business decisions undertaken by the management can be affected due to several crucial factors. For instance the age and experience of the investors can also affect the strategic decisions of the organizations. In this regard, the presented section reflects the strategic decision of purchasing BNSF Railroad of Mr. Buffet and the strategic implications of these decisions.//
Impact of age of Mr. Buffet on his strategic investment decisions
Mr. Buffet who is now well beyond the age when most workers retire, has reflected long term approach towards the investment. Instead of buying insurance companies, which can provide large float to the company within the market, he has opted for buying safe and long term avenue. The strategic move of the company to buy Burlington Northern Santa Fe Railroad reflect the long term profits for the company, which demonstrates an experienced perspective from the side of Mr. Buffet (Amman, 2012).
Buffett undertakes business related to the field of his interest, whether it is related to an insurance business or other ...
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- MBA (IP), International Center for Internationa Business
- BBA, University of Rajasthan
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