By : Salsabiella Ramadhanti Abadi

Goldman Sachs
Introduction
The Goldman Sachs Group, Inc. is a leading global investment banking, securities, and
investment management firm that provides a wide range of financial services to a substrantial
and diversified client base that includes corporations, financial institutions, governments, and
individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in
all major financial centers around the world.

Industry Analysis
As one of the largest investment services companies in the USA, The Goldman Sachs Group
has $300 billion in AUM (Assets Under Management) and 500 wealth managers operating in
13 branches. Its main competitors sit within various strategic groups encompassing
specialized wealth management, investment banking, sustainable investment, sales & trading,
and treasury services such as JPMorgan Chase & Co. and Morgan Stanley.

In evaluating the industry, the environmental factors that are most important are demographic
trends, socio-cultural influences, technological development, economic impacts, and political-
legal pressures (Exhibit 1). Macroeconomic factors will cause impacts on aggregate demand,
aggregate investment, and the business climate. They have the potential to make a company
highly profitable or extremely likely to incur a loss. As in the socio-cultural influences, the
marketing activities of Goldman Sachs are really depending on the understanding of
customers, their lifestyle, level of education, and segment of society. Meanwhile, FinTech
disruptors are fast-moving companies, often start-ups, and having their own innovative
technology or process. They have been attacking some of the most profitable elements of the
financial services value chain. Furthermore, cyber-security will be one of the top risks facing
the financial institutions. From the demographic trends, retiring Baby Boomers considers the
option of investing more in healthcare funds, consumer sector, and retirement program. The
Millenials would be the ones who are career-productive, which actively generate income.
This can boost the investment in agriculture, household commodity, telecom, and banking
sectors.

A Porter’s Five Forces (Exhibit 2) further solidified this reasoning. The industry positioning
of Goldman Sachs is quite strong in the industry. As of December 2019, Goldman Sachs is on
the second rank of global market share of revenue of leading investment banks, after
JPMorgan and before Morgan Stanley (Statista, 2020). The company operates in an industry
where it has high capital expenditures due to the high costs of R&D, high differentiation, few
competitors, and strict licensing & legal requirements. These make the level of threat of entry,
threat of substitutes, bargaining power of buyers, and bargaining power of suppliers are low.
Thus, the rivalry among competitors is quite high since they are all unique in terms of each
other’s strategies. The high exit barriers also makes firms within the industry reluctant to
leave the business. Here, firms are pushing to full capacity because the fixed costs in this
industry is high.

Strategic Groups & Positioning

Since it was quite hard to search for their services’s prices, the strategy map is plotted by the
number of customer segments, number of revenue streams, and number of products offered.
Compared to other large competitors, Goldman Sachs’s results the most among all of the axis
indicators. Thus, in the market, Goldman’s Sachs business strategy is categorized in
differentiation strategy. They offer wide segments of customer in premium price from their
unique features, high quality services, and prestige. They generate rents from higher
consumer’s willingness-to-pay.
Competitor Analysis
Further analysis of competitive forces reveals that Goldman Sachs is in good position to push
back against the market share in the industry. JPMorgan & Chase Co. and Morgan Stanley
were chosen to represent the typical competition that is faced by Goldman Sachs (Exhibit 4).
While its competitors appeal in large-scale investment and wealth management, Goldman
Sachs has significant competitive advantages by being more reliant on investment banking
and securities trading segments and more focused on upside potential in lending, private
equity, and hedge funds. Goldman Sachs offers high-risk and high-reward investment while
Morgan Stanley has a more conservative business model because in recent years, Morgan
Stanley had begun to move away from the high-risk and high-reward financial sector in order
to focus more on its money management, which is dependable though with less opportunity
for quick profits. Even though Goldman Sachs has lower revenues than Morgan Stanley, their
model has helped them be more profitable.

The target market that Goldman Sachs has is broader than its competitors, ranging from stock
market operators, investment banks, to individuals. This because Goldman Sachs also offer
advices in mergers and acquisitions to their clients. But, because in recent years both
Goldman Sachs and JPMorgan have benefitted from low-interest rates and certain Fed
policies, their return on equity are nearly identical. Lastly, Goldman Sachs really invest in
best people. They have employee affinity networks and interest forums which offer training
and educational programs, host leadership conferences, and sponsor clients events.

Competitive Positioning
Goldman Sachs has been making an entry into the personal finance market with an online
banking platform called Marcus. Marcus offers no-fee, unsecured personal loans; a high-yield
Online Savings Account and certificates of deposit; and Clarity Money, a personal financial
management app. They also have their Global Investment Research which provides original,
fundamental insights and analysis for clients covering areas such economics, portfolio
strategy, derivatives, and equity and credit securities. This is such a great way to compete
with JPMorgan because they already had their bank services. Goldman Sachs also hold a
good position by developing the recent Apple Card credit card in partnership by Apple. By
offering a much more precarious investment model, though cylical, but this does offer
Goldman Sachs the possibility of fast earnings. This thing is also proved by how fast
Goldman Sachs have rebounded from the 2008 financial crisis that it posted its largest profit
in the summer of 2009, shortly after the financial crisis came to an end. As long as Goldman
Sachs remains on its business model and keep updating to be in line with the recent market,
the firm should continue to enjoy a dominant competitive position in investment services
industry.
Exhibit 1

Environmental Analysis:

- Intersection of 3 population shifts (Baby Boomers, Millenials,

Demographic Gen-Z)
Trends - Increase in financial literacy and investment awareness among
young generation
- The existence of a company’s protection on Intellectual
Property (IP)
Political-legal
- Political stability the country has in recent years
Pressures
- High level of taxation
- Risk of military invasion
Socio-cultural - Class distribution among the population
Influences - Educational background differences
- FinTech will drive the new business model and revenue
Technological streams
Development - The transform of customer experience by AI and machine-
learning
Macroeconomic - Rate of GDP growth
- Country’s interest rates
- Foreign exchange rate
- Level of unemployment
Exhibit 2

Porter’s Five Forces Analysis:

- Many FinTech start-ups are entering

the market
- Capital requirements within the
industry are high
Threat of Entry
- High R&D costs
- Strict licensing & legal requirements
- Fairly difficult to achieve the
economies of scale
- Very few substitutes and most of
them either operate in low-profit
Threat of Substitute
earnings or high quality but are way
more expensive
- Number of competitors is very few
and most of them are large
companies
- Substantial market growth
Intensity of Rivalry
- Products are highly differentiated
- High exit costs
- The strategies of the firms within the
industry are diverse
- Products provided are less
differentiated, fairly standardized,
and have low switching costs
Bargaining Power of Suppliers - The industry is very important to
suppliers
- No substitutes for the products which
the suppliers offered
- High differentiation
- Buyers only have few other options
- Low switching costs for clients
Bargaining Power of Buyers
- The quality of the products is
important to buyers
- Buyers cannot backward integrate
Exhibit 3

Strategy Map Analysis:

Goldman
Sachs

Morgan
JPMorgan Stanley

Area of circle = Number

of customer segments

Source 1vizology.com
Exhibit 4

Competitor Analysis:

Goldman Sachs JPMorgan Chase & Co. Morgan Stanley

- High quality - A holding company - Focus more on
- Broad segments of of JPMorgan and financial holdings
consumers Chase - Mostly caters to
- More focused on - Is also a corporations,
upside potential in commercial bank governments, and
lending, private (has ATM services wealthy individuals
Value
equity, hedge funds and online banking) - Conservative business
Proposition
- More reliant on - Large-scale model
investment banking investments - More reliant on long-
and securities trading term wealth & asset
segments management
- High-risk, high-
reward investments
- Debt issuers - Small and large - Corporations
(corporate & business - Government
governments) - Institutional - Institutions
- Stock market - Government - Individuals
Target
operators
Market
- Commercial banks
- Investment banks
- Corporations
- Individuals
Capabilitie - Advise companies on - Deliver strategic - Wealth management
s buying & selling advice and solutions - Investment banking &
businesses, raising including capital capital markets
capital, and managing rising, risk - Sales & trading
risks, which enables management, and including cash
them to grow trade finance to equities, equity
- Help local, state, and corporations, derivatives, prime
national governments institutions, and brokerage, electronic
finance their governments trading, commodities,
operations so they - Support corporate macro products, global
can invest in clients and credit products, and
infrastructure institutional distribution
- Equities, bonds, investors in their - Investment research
currencies, investment cycle and in-depth analysis
derivative, and with market-leading of companies,
commodities research, analytics, industries, markets,
transaction and trade execution and world economies
- Provide investment across multiple - Investment
management services asset classes management including
and offer investment - Support investors in private credit &
products global markets and equity, solutions &
- Offer wealth advisory fund services for multi-asset, real assets,
services, including investments, agency global liquidity, global
portfolio lending, collateral fixed income, and
management and management, and active fundamental
financial counseling, depositary receipts equity
 and brokerage - Provide cash
- Consumer banking management,
- Direct Private liquidity, trade, and
Investing escrow solutions to
resolve working
capital and
efficiency in
treasury
- Invest in best people - Unique networking: - Very friendly &
- Dealing with business resource open culture
different cultures in groups - Very team-
an informed and - Employee programs specific / very
nuanced manner to (Advancing Black convival / very to-
clients Leaders & Women the-point
Culture /
- Sustainable, inclusive on the Move) - Communication is
values
environment and - Office of disability open horizontally
support employee’s inclusion and laterally
differences - Mentoring & skilled - Result-oriented
- Employee affinity volunteerism
networks and interest
forums
Geographic - 84 branch offices - 113 branch offices - 58 branch offices
Presence - 33 countries - 49 countries - 35 countries
 References
https://www.goldmansachs.com/our-firm/index.html

https://www.statista.com/statistics/875605/percentage-share-of-world-population-by-age-and-
by-world-region/

https://www.boj.or.jp/en/announcements/press/koen_2018/data/ko181119a.pdf

https://poseidon01.ssrn.com/delivery.php?
ID=544017099074094114023118098016069011027055029016031058025073017064121026
095092110074110122119106047059058117065118127121081030102009075041077099104
020118111071025006031016046086008125117007120115117125107029099101111015125
127093066002096114025100082106&EXT=pdf

https://www.pwc.com/gx/en/industries/financial-services/publications/financial-services-
technology-2020-and-beyond-embracing-disruption.html

https://www.statista.com/statistics/271008/global-market-share-of-investment-banks/

https://www.advisoryhq.com/articles/jp-morgan-vs-morgan-stanley/

https://www.jpmorganchase.com/corporate/About-JPMC/client-solutions.htm

https://www.morganstanley.com/what-we-do