Case Study: The Dynamic Capabilities of Warren Buffett - Total 6 Marks ks - 2Marks each Read the Case carefully and answer the questions give at the end of the Case Study Warren Buffett and chairman of Berkshire Hathaway Company, a diversified conglomerite which he runs with his long time associate and friend, Charley MungerMunger serves as vice chairman, and is years Buffett's senior Berkshire, as the conglomerate commonly based in Omaha, Nebraska . There, the similarity with other company ends More than years Warren Buffett began investing the money of residents in his home town of OmahaFew could have imagined back in 1956 that this scruffy young man would make them fabulously wealthy Over , he would gradually shift from a compay obtaining most of from investment activities to one that grows in value by owning businesses. One of these businesses was a worthless textile mill called Berkshire Hathaway, which was eventually closed. Nowadays, the company's annual meeting attracts around 40,000 shareholders. spend five hours answering questions from Shareholders , journalists, and analysts. In an age when diversified conglomerates are of fashion, Berkshire's in net worth during 2016 was a phenomenal \$27.5 bilion Berkshire owns more than sixty companiesincluding insurance, , group, and Mid American Energycompany KrafHeinzwhich co-owns with a buyout fund cortolio of investments includes large shareholdings in mainly American companies such as Coca-Cala, Wells Fargo, American Express, and recently Apple. bought Apple stock in early 2016. The in strategy for the investorwho has stuered clear of technology stocks he doesn't even own a smartphone. Buriett is keen to perpetuate the culture and character Hathaway embodies. A fellow board member is eill Gates. In 2006, Buffett donated Berkshire Hathaway shares worth over 30 billion to the Melinda Gates Foundation the biggest single chantable donanen in history. The charitable Foundation has only three trustees , Bill and Melinda Gates , and Warren Buffott. After his death he intends vast wealth to be given away. This brings up the often-avoided question of succession Buffett's role is to deliver significant growth to shareholders over time. He has only two jobs, 'to attract and keep outstanding managers to run vanous operations. The other is capital Over the past fifty years Berkshire's per share book value has to $172.108 rate of nineteen percent compounded annually. In contrast to other companies, Berkshire directors retain all earnings . This reflects the belief that they can earn a greater return capital by funds The Sage of OmahaBuffett is commonly called renowned taking the right financial decisionsIn the late 1990s Buffett warned against the excesses of the dotcom boom. While financial analysts were busy taking of a new investment paradigm he quietly at the companies he did not understandFrom 2000 Berkshire Hathaway's share price fell by fortyfour percent the same time the stock market rose by thirty-two per cent. When these 'new went bankrupt after the bubble to principles paid off was Warren Buffett's reputation which allowed him to take a shareholding in Goldman Sachs and GE on advantageous terms during the financial crisis, which proved hugely profitable. In 2017 estimated his net worth at him second richest man in the portfolio shares and bonds has continued to grow and to deliver substantive capital gains, interest and dividendshe acquire a company's shares when they are cheap, as he did with Coca-after the new CokewillBut as Buffett to taya company at a fal price than a at a wonderful pricesThe portfolio earnings have provided major support in financing the purchase of businesses. There has occurred a gradual shift from a company obtaining most of its westment activities to one that grows value by businesses. By the early 1990, the focus was changing from financial investments to the cutright ownership of Buffett believes unconventional, two pronged approach to capital allocation provides him with a real edge. By 2016, investment shares comprised only one-Berkshires Bufiett avoids the engineering and creative accounting prevalent among other conglomerates whose professed strength is transferable management capabilities successful formula is to quality companies he understands with good defentas competitors. He trusts managers to run them as before, and them for the long term. His continued success is contrary to the hypothesisThis states thatthe long teen the current market price always reflects all wailable and relevant information about a company. This implies that over the long term you cannot outperform the market, which Buffett consistently doesHis choice of acquisitions include companies with advantage competitors that are hard to replicate This might be a popular brand or companies with some degree of monopoly poweroften in mature IndustriesHe admires companies with a strong ethical culture, with managers whose focus is performing a job rather than making Andrew Campbell, coauthor of for the Corporate level states, no other firm in the past 100 years has been able to do consistently what Berkshire Hathaway has done Answer the following questions

1. How will Berkshire Hathaway survive the loss of Warren Buffett and Charlie Munger? Bill Gates