| Summary: | 碩士 === 國立臺灣大學 === 企業管理碩士專班 === 101 === Over the past 48 years, under the leadership of Warren Buffett, Berkshire Hathaway has established itself into a fifth largest company in America from a small textile factory largely through acquisitions and investments. During the period of 1965-2012, this holding company created an outstanding compounded annual gain rate 19.7% on the book value per share, outperforming S&P 500’s 9.4% by an average of 10 percentage points per year.
However, for its unusual and unique way of operation, Berkshire Hathaway is possibly the most-talked-about and the least-understood company in the world. By employing Business Model Canvas developed by Alexander Osterwalder, this thesis aims to map out the comprehensive business model of Berkshire Hathaway by using Business Model Canvas and identify the key factors contributing the success of Berkshire Hathaway.
This thesis finds that unlike other asset management peers measuring the economic significance by its size or increase on market value, Berkshire employed the annual returns of the intrinsic value, substituted by book value and benchmarking S&P 500, on per share basis, as the ultimate goal in the value proportion they set. The customers Berkshire aims to serve focused on a small group of long-tern oriented investors, which is naturally selected by deliberately lower turnover rate and no-dividend policy. Berkshire’s shares constantly traded in a lower turnover rate, coupling with corporate governance, board management, and candor communications with shareholders through annual meeting and Buffett’s annual letters to shareholders, proved the invention a success. To outperformance the average large American corporates, Berkshire hired M&A and investment as the key activities, which are fueled and supported by three major resources, capitals, management and leadership of Warren Buffett. Along with the rise of capital infusion from acquired companies and returns on investments, the size of book value, as well as the revenue, climbed accordingly.
Besides, this thesis also concluded three successful factors of Berkshire Hathaway’s M&A activities. First, lower-cost capital from insurance business and handsome returns of investments provide the essential fuel to drive the expansion of Berkshire. Second, under the leadership of Buffett, Berkshire accurately pinned targets and acquired companies with good earning powers. Third, the company successfully retained good management after merger and acquisition.
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