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GOLDMAN SACHS Pest & internal analysis By: David Troxell. Company Snapshot . Founded in 1869 by Marcus Goldman Headquartered in New York City, New York Joined the New York Stock Exchange in 1896 Employees 38,700 worldwide . Company Snapshot cont.

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company snapshot
Company Snapshot
  • Founded in 1869 by Marcus Goldman
  • Headquartered in New York City, New York
  • Joined the New York Stock Exchange in 1896
  • Employees 38,700 worldwide
company snapshot cont
Company Snapshot cont.
  • 2010 total sales were $39.161 billion with $5.014 coming from the investment management division, which is 12.8% of the total
  • Ranker 1st of 148 in market capitalization
  • 10,000 Small Businesses- $500 million initiative to create the potential for small business growth throughout the United States
pest analysis
PEST ANALYSIS

Political-

  • SEC regulations
    • In 2010 charged with civil fraud over complex mortgage securities
  • FDIC regulations
    • Became a bank holding company in 2008, to provide safety from what happened to other investment banks
pest analysis1
PEST ANALYSIS

Economic-

  • Rising commodity prices
    • Through the sale of derivatives they will gain a profit
  • Global economic recession
    • In 2010 total net revenues fell by 13.3%
    • All-time high for mortgage foreclosures
  • Currency exchange rates
    • Only offer securitised derivatives to: Germany, Switzerland, France, Italy, Japan, and Hong Kong
pest analysis2
PEST ANALYSIS

Socio-cultural

  • Business Ethics
    • Used cross currency swaps to hide how much debt the Greek government had on their books to become accepted into European Union
  • Consumer becoming more savings conscious
    • From 2008 to 2010 consumers savings increased from $447.93 to $655.78, or 46.4%
pest analysis3
PEST ANALYSIS

Technological

  • Mobile applications
    • Increasing population with smartphones that have downloadable applications
industry analysis
INDUSTRY ANALYSIS

Defined:

  • Diversified Investments Industry
  • Investment Management Services Include:
    • Asset and Private Wealth Management
    • Securitised Derivatives
    • Bank Deposits
    • Closed ended investments
    • Direct private investing
    • Mutual Funds
    • Securitised products and structured fund solutions
industry analysis1
INDUSTRY ANALYSIS

Buyers:

  • Financial Institutions
  • Corporations
  • Governments
  • High-net-worth Individuals
industry analysis2
INDUSTRY ANALYSIS

Suppliers:

  • The Federal Reserve
  • United States Treasury Department
industry analysis3
INDUSTRY ANALYSIS

Competitors:

  • JP Morgan Chase & Co.
  • Morgan Stanley
  • Citigroup Global Markets Inc. (private)
  • Bank of America Securities LLC (private)
  • UBS Investment Bank (private)
  • Deutsche Bank AG
industry analysis4
INDUSTRY ANALYSIS

Substitutes:

  • Other bank holding companies
  • Consumers- spending rather than saving
  • Corporations- contracting rather than expanding
  • Governments- budget cuts rather than spending
industry analysis5
INDUSTRY ANALYSIS

Potential Entrants:

  • Very low risk of potential new entrants (since 2008 there have been approximately 320 bank failures)
  • During that time some of the biggest banks were bought out such as: Bear Stearns, Merrill Lynch, Wachovia, and National City Corp.
suggestions
SUGGESTIONS
  • Key Force- Intensity of Rivalry
  • Goldman Sachs is the 5th largest bank holding company
  • To keep a competitive advantage Goldman Sachs must evaluate their competencies to eliminate any that may drive their profits down
conclusion
CONCLUSION
  • Biggest threat is brought about by the rivals of Goldman Sachs
  • If the securitised derivatives market is profitable, expand into other countries and regions of the world instead of limiting options
  • Continue to create a positive image with public through their charitable fund “Goldman Sachs Gives”
key competitors
Key Competitors
  • JP Morgan Chase & Co.
  • Morgan Stanley
  • Deutsche Bank AG
  • Citigroup Global Markets, Inc. (private)
  • Bank of America Securities LLC (private)
  • UBS Investment Bank (private)
how the industry competes
How the Industry Competes
  • Reputation
    • Who is going to provide the best customer service to the client to earn their future business as well
  • Investment Strategies
    • Is your client willing to take on more or less risk
  • Competitive rates on savings vehicles
  • Competitive rates/fees on lending instruments
product scope
Product Scope
  • The goal of Goldman Sachs along with their key competitors is to provide the quality of customer care to each of their clients, along with competitive and affordable rates
    • Need good customer service
    • Lowest fees and interest for lending instruments
    • Higher rates of return for their savings vehicles
key trends
Key Trends
  • Rise in unemployment
    • This has caused a greater increase in demand for savings vehicles
    • From 2008 to 2010 consumers savings increased from $447.93 to $655.78, or 46.4%
  • More strict regulations due to the collapse of the housing markets
  • Research shows that over the next 10 years that global GDP will grow 4% annually
key trends cont
Key Trends cont.
  • 400 million people projected to move into Chinese urban centers by 2050, which will result in an increasing demand for commodities
  • Pools of capital in sovereign wealth funds in both developed and emerging economies are expected to grow from $3 trillion to $10 trillion over the next decade
growth in the market
Growth in the Market
  • Comparing the quarterly sales growths by each of the following organizations it is easy to see the potential.
  • Compared with their key competitors Goldman Sachs growth is limited on the basis of services provided, but there are many growth markets they are pursuing.
    • One of the biggest reasons as to why Goldman Sachs had a quarterly loss was due to the fact in 2009 their revenues had jumped by 50% from the previous year.
social media
Social Media
  • One of the most efficient ways to advertise today being able to reach everyone with the use of internet
    • Facebook
    • LinkedIn
    • Twitter
    • YouTube
    • Flickr
    • Podcast
conclusions
Conclusions
  • To successfully compete in the diversified investments market it is important to highlight the service differentiations, so that you are always separating yourself from your competition.
  • The keys to competition in this industry is reputation, investment strategies, and competitive rates on savings vehicles and lending instruments
  • Social Media is a great and cheap way to advertise, along with the potential to scout new talent for the workforce, ie. LinkedIn
business model
Business Model
  • Customer Service and Loyalty comes first
  • Their assets are their people, capital & reputation
  • Provide superior returns to shareholders
  • Great sense of pride in the professional quality of work provided
  • Creativity and imagination is in everything they do
change in sales profits
Change in Sales/Profits
  • From 2006 to 2010 there is a sales increase of approximately 4%
  • However from 2008 the sales actually decrease by 21.4%
  • Their profits have a few good years but ultimately see a decline by 17.9%
3 year agr score
3 year AGR Score
  • Goldman Sachs is currently rated as havingAggressiveAccounting & Governance Risk (AGR) they are in the 16th percentile among all companies, indicating higher Accounting & Governance Risk (AGR) than 84% of companies.
changes in distribution of sales
Changes In Distribution of Sales
  • On January 11, 2011, Goldman Sachs announced it will be making certain changes to their business segments, the company has reported the following four business segments: Investment Banking, Institutional Client Services, Investing and Lending, and Investment Management.
  • Also hoping to capitalize from more global capital markets
key assets
Key Assets
  • Cash and cash equivalents $39.788b (4%)
  • Cash & securities segregated for regulatory and other purposes $53.731b (47%)
  • Collateralized agreements $188.355b (31%)
  • Securities borrowed $166.306b (12%)
  • Receivables from brokers, dealers and clearing organizations $10.437b (17%)
  • Receivables from customers and counterparties $67.703b (22%)
  • Financial instruments owned $356.953b (4%)
  • Other assets $28.059b (5%)
    • The percentage increase/decrease is compared with 2009 value
swot analysis
SWOT Analysis
  • Strengths
    • Well diversified business mix
    • Best positioned versus its peers for long-term earnings growth due to superior business mix and culture
    • Dominant position in the most profitable segments of investment banking and trading businesses, with a history of outperforming during both strong and weak market environments.
swot cont
SWOT cont.
  • Weaknesses
    • Weakness in equity markets is likely to affect investor confidence
    • As a bank holding company, Goldman faces structural challenges including a potential shift of more of its liability mix to deposits and away from more wholesale-oriented funding
    • Also Goldman has a very high accounting and governance risk which could also affect confidence within the company
swot cont1
SWOT cont.
  • Opportunities
    • Expectation of more private equity gains, despite the flattish equity markets.
    • High leverage to the global capital markets, with a leading presence in investment banking, trading, and prime brokerage.
swot cont2
SWOT cont.
  • Threats
    • A slowing US economy could result in a softer equity underwriting business and low merchant banking gains.
    • Many of Goldman’s businesses have net long positions in various financial instruments. These investing and trading positions are marked to market on a daily basis, and declines in these asset values can directly affect Goldman’s financial performance
    • Goldman could also face challenges from Basel III and the Dodd-Frank Act.
goldman s grand strategy
Goldman’s Grand Strategy
  • Investing in Growth Markets
    • The growth strategy for Asia has been Korea, where Goldman has built a significant presence since 2007 through acquisitions, alliances, and product expansion
    • The BRICs are a major target because these growth markets are the anchors in the global economy.
      • Brazil
      • Russia
      • India
      • China
ansoff s growth matrix
Ansoff’s Growth Matrix
  • Goldman should be in the middle of this chart.
    • Market Penetration for their exploration into potential growth markets
    • Product Development to constantly try to create new solutions for their existing clients
    • Market development in emerging markets by creating strategic alliances
    • Diversification to better help international clients as they enter foreign markets
competitive position
Competitive Position
  • Strengthening Client Relationships
  • Strengthening Reputational Excellence
  • Strengthening Committee Governance
  • Enhancing Transparency of Communication & Disclosure
  • Strengthening Training & Professional Development
international performance
International Performance
  • PZU SA
    • Largest insurance company in Central and Eastern Europe, 2010 Goldman helped complete a successful IPO that launched PZU on the path to becoming an independent company
    • This was the largest IPO in Europe since 2007 and the largest ever in Central Europe, which led to Goldman Sachs International established an office in Warsaw, Poland in 2010
  • Ports America Group (PAG)
    • Goldman assisted PAG in raising $249 million for Baltimore’s Seagirt Marine Terminal, with the widening of the Panama Canal to be completed in 2014
international performance cont
International Performance cont.
  • AIA Group Limited (AIA)
    • $20.5 billion, AIA was the largest IPO ever listed on a single stock exchange, the third largest IPO globally and the world’s largest IPO in the insurance sector
  • HRT ParticipacoesemPetroleo S.A. (HRT)
    • With ambitious plans to explore and develop oil fields in the Solimoes Basin of Brazil, as well as offshore exploration areas in the Walvis and Orange basins of Namibia. Goldman helped HRT raise more than $1.5 billion through an IPO in October 2010
international performance cont1
International Performance cont.
  • Dai-ichi Life Insurance Company, Limited (Dai-ichi Life)
    • In April 2010 Goldman helped Dai-ichi Life bring an IPO to the Tokyo Stock Exchange which resulted in a $11.2 billion offering
    • This was the largest IPO in Japan since 1998, and Dai-ichi has already had the opportunity to expand internationally.
conclusions1
Conclusions
  • Major focus towards service and loyalty to their clients
  • Aggressive approach towards investments to provide superior returns to shareholders
  • The expansion of creativity and imagination to provide the best possible solutions to any problem that arises
  • Taking great pride in the professional quality of work
  • Expanding into potential growth markets, which Asia is one of the biggest targets by Goldman Sachs