Berkshire Hathaway Porter’s 5 Five Forces (2021)


Berkshire Hathaway company overview:


Berkshire Hathaway is the world’s third-largest public company by revenue, with subsidiaries including Berkshire Hathaway Energy, GEICO, Dairy Queen, and Helzberg Diamonds among others. The firm also has significant investments in Wells Fargo Bank, Kraft-Heinz Company, American Express Company, and Apple Inc., among other companies. Let’s now go over Porter’s Five Forces Model Analysis of the company.



Berkshire Hathaway Competitive Rivalry:


Berkshire Hathaway faces competition from other businesses in the insurance, manufacturing, and retail sectors. The company’s competitors include other finance-related companies such as J.P. Morgan Chase & Co., Wells Fargo & Company, American Express, MasterCard Incorporated, and PayPal Holdings, Inc . Berkshire Hathaway also faces competition for all or several of its subsidiaries from other insurance companies such as Aflac, Progressive Corporation and American Family Life Assurance Company of Columbus. Berkshire Hathaway’s retail division faces additional competition in the form of Kroger, Wal-Mart Stores Inc., Target Corporation, Costco Wholesale Corp., Inc., and Home Depot Inc.




Berkshire Hathaway Bargaining Power of Suppliers:



The suppliers for Berkshire Hathaway provide raw materials, parts, and services to the company. In most cases, these inputs are required for Berkshire Hathaway’s products or services. Examples of these include steel companies such as Nucor Corporation that supply raw materials used in all or some of Berkshire Hathaway’s steel operations. This sector is characterized by intense competition among suppliers that has led to many mergers and acquisitions among the largest companies in this field. Suppliers also face pressure from customers such as Berkshire Hathaway, which seek to lower prices on their inputs.




Berkshire Hathaway Bargaining Power of Buyers:



The customers of Berkshire Hathaway include both individuals and other businesses. Berkshire Hathaway’s insurance operations face competition from other insurance companies such as State Farm Mutual Automobile Insurance Company, Allstate Corporation, Progressive Corporation, and Aflac. The automotive divisions of Berkshire Hathaway also compete with global automotive companies such as Ford Motor Company which sell a variety of automobiles. Berkshire Hathaway’s retail division faces competition from public and private companies including Kroger, Wal-Mart Stores Inc., Target Corporation, Costco Wholesale Corp., Inc., and Home Depot Inc.




Berkshire Hathaway Threat of New Entrants:



The barriers to entry in the insurance sector are high primarily due to the need for large amounts of capital and the complexity involved in pricing an insurance policy. Berkshire Hathaway also faces high barriers to entry in its manufacturing operations, primarily stemming from high startup costs. One example of this is the company’s steel division, which has the largest market share following Nucor Corporation but faces formidable competition from other companies in the steel industry. In retail, Berkshire Hathaway faces a risk of new entrants from other companies offering similar products including Inc., Wal-Mart Stores Inc., Target Corporation, and Costco Wholesale Corporation.



Berkshire Hathaway Threat of Substitutes:



The principal substitutes for Berkshire Hathaway’s products are other insurance companies. Similarly, for all or part of its subsidiaries, there are substitutes in the form of other manufacturers’ products. There are also potential substitutes for Berkshire Hathaway’s retail division including Inc., Kroger, Wal-Mart Stores Inc., Target Corporation, and Costco Wholesale Corp.



Berkshire Hathaway Porters Five Forces Conclusion:



The competitive landscape for Berkshire Hathaway is extremely complex. This is because the company operates in multiple distinct industries and faces competition from public companies with vastly different business models. Berkshire Hathaway also competes indirectly with many other companies through its subsidiaries. On balance, Berkshire Hathaway’s steel operations face significant competition that could put pressure on prices or profitability. The insurance industry is highly competitive, which could put pressure on Berkshire Hathaway’s prices or profitability. However, competition in the retail market has increased as competitors flock to this space, but it appears that Berkshire Hathaway has retained its competitive position with a strong balance sheet and established brand name.




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