Goldman Sachs Group in Investment Banking Industry | Free Essay Example

Goldman Sachs Group in Investment Banking Industry

Words: 1405
Topic: Business & Economics
Updated:

Introduction: Industry Analysis

The investment banking industry has been experiencing tremendous upheaval throughout the end of the 20th century and the beginning of the 21st century (Danquah 36). Despite the fact that the economic environment of the global market has witnessed several massive crises, the companies operating in the banking industry managed to not only survive but also strive. The identified phenomenon can be attributed to the fact that the environment of the global economy opened a plethora of opportunities for organizations to evolve, including mergers, acquisitions, initial public offerings, etc.

As a result of the increasingly large number of mergers in the industry, the consolidation thereof can be deemed as the primary trend. As a result, the cooperation between the organizations representing the industry became an opportunity. The rapid development of relationships and links between the companies operating in the industry created prerequisites for its maturing, which can be witnessed at present. Furthermore, the industry can be defined by comparatively stable customer performance rates, yet there is a need to boost them slightly so that the progress could occur at a faster pace. Furthermore, while the principles of long-term sustainability remain a trend, they seem to be wearing off their welcome and will soon have to be replaced with an innovative approach toward financial resources management (Rahman et al. 87).

Deloitte is one of the organizations that operate in the IB realm. Among the key competitors of Deloitte, one must mention JPMorgan Chase, Bank of America Merrill Lynch, and Morgan Stanley. The companies in question manage to incorporate an innovative IT-based approach and a memorable brand image into their competitive advantage and, therefore, pose a threat to GSG’s success.

Problem Definition: What Needs Fixing

GSG has had a long history in the context of the global economy and, therefore, has gained impressive experience over the years of its operations. The company survived the infamous financial catastrophe of 2008, which affected nearly every single organization in the world, making companies across the globe lose huge amounts of money. GSG, however, put a heavy emphasis on the financial technology sector, which helped it maintain its top position in the list of the world’s most successful organizations.

However, at present, the direction in which the firm will be moving within the next few years is, perhaps, the point of lengthy discussions and numerous conflicts. The focus on the introduction of a new financial policy and the reduction of the expenses taken by the organization has been suggested actively by one of the firm’s leaders, Lloyd C. Blankfein. However, the need to expand into the global economic environment, in general, and the company’s recent ambitious project that will allow attracting middle-class customers, in particular, will require substantial funding. Therefore, it is imperative that the framework for the further operations of the company could be defined and that GSG’s priorities should be set straight.

Analysis: Goldman Sachs Group’s Efforts

The efforts made by GSG so far are visible and seem to have a tangible effect on the company’s position in the global market. Its cost-cutting strategy clearly works as the means of keeping the company afloat and allowing it to use the available financial assets to penetrate the global market and attract new customers. However, the use of the identified approach comes at a price, exhausting its resources, and draining it:

Goldman Sachs (GS, -1.51%) reported a higher second-quarter profit on Tuesday, as it benefited from a sharp decline in expenses and more activity in some parts of the fixed-income markets, but most of its businesses came under pressure. (Oran and Singh)

Consequently, there is a need to develop the framework that could relieve GSG of some of the stress that it has been experiencing in the context of the global economy. The reason for the organization to experience significant challenges concern its policy of meeting the employees’ needs. Striving to provide the staff members with the benefits for which they are eligible, GSG creates prerequisites for numerous financial problems and nearly erases the effects of the current cost-cutting approach.

Implementation Challenges: The Obstacles to Overcome

It should be noted, though, that the current state of the company does not allow for an impeccable implementation of the suggested strategy. Some of the factors that are affecting the company’s progress are internal. For instance, the lack of clarity in the company’s operations and its propensity toward the use of dubious approaches, such as insider trading and underwriting bonds, have triggered a drop in loyalty rates among potential customers.

Therefore, it is crucial at present that GSG should be able to alter its public image and position itself as a trustworthy organization with high transparency rates. The identified objective will require a significant change in the firm’s vision, philosophy, and ethics; furthermore, a change in information management will have to be made. In other words, it is very difficult for GSG to afford to be honest and open about its operations in the context of the highly competitive global market environment.

The debt crisis, which has been witnessed in Europe over the past eight years, should be listed among the external challenges that GSG will have to face when adjusting to the global investment banking market. Being an extraneous factor, the crisis jeopardizes the stability of the banking system. It is bound to slacken down the progress of the industry making it impossible for GSG to succeed

Results: Defining Goldman Sachs Group’s Success

Despite the fact that the approach designed by GSG seems quite sensible in the context of the global market, with its increasingly high risks and competition rates, it still lacks efficiency. Instead of providing GSG with extra opportunities, it merely helps it remain afloat for a while. As a result, the firm clutches at straws, and the suggested approach only prolongs the inevitable.

One must give the company and its leaders credit for reducing the expenses to a considerable extent, though. As stressed above, a significant reduction in the costs taken by the firm in the global market has been reported recently, which is quite impressive given the high competition rates and the fact that the firm remains active in the target market. A recent report points to the fact that GSG has also attempted at changing its employee policy slightly, firing some of the staff members as a coercive measure: “Its cost-cutting program has involved staff reductions, and will have related severance expenses of about $350 million, Schwartz said. As a result, the bank will only see about half of the annual savings of its cost-cutting initiative in 2016” (Sachs). Therefore, it can be assumed that the foundation for reshaping the current financial approach of the organization and introducing the tools that will help it retain its position in the global economy has been created.

However, one must also admit that the drastic actions taken by the firm could use a better explanation and a more compelling commentary. Given the fact that the current public image of GSG leaves much to be desired, dismissing employees for no reason other than facing financial challenges is bound to leave a mark on the firm’s public image. Therefore, better thought out framework for employee relationships must be designed by the organization (Marino).

Conclusion: Further Course of Actions

Given the fact that the employee-related expenses are currently the primary stumbling block on GSG’s way of implementing its expense-reducing strategy, it will be reasonable to advise that the firm should alter its stakeholder-relate policy slightly. While limiting the opportunities of the staff members is a rather undesirable step to take given the unavoidable drop of loyalty levels and satisfaction rates among the target population, it will be necessary to consider either salary cuts or dismissing the staff.

It is expected that the change in the employee-related policies of the organization will inevitably create a hostile environment in which the communication between the company and its staff will occur. Therefore, the identified issue must be addressed accordingly by ensuring the remaining staff members that they will be provided with the opportunities for professional growth that they need. Furthermore, it will be crucial to adopt a different leadership strategy that will help motivate the employees and prevent them from becoming suspicious about the methods of the company. In other words, the levels of trust between the company and its staff must be maintained high, for which transformational and visionary leadership approaches can be used.

Works Cited

Danquah, Emelia. “Analysis of the Impact of Emotional Intelligence on Organisational Performance: A Banking Perspective.” British Journal of Marketing Studies, vol. 2, no. 3, 2014, pp. 34-50.

Marino, Jon. “It’s the End of Goldman Sachs as We Know It.”CNBC. 2016. Web.

Oran, Olivia and Sweta Singh. “Goldman Details Cost Savings Plan After ‘Challenging’ Quarter.” Reuters. 2016, Web.

Rahman, Mara R. C. A., et al. “Disclosure of Human Capital Information in Annual Reports: A Case of Malaysian Banking and Financial Institution Sector.” International Journal of Business Management (IJBM), vol. 1, no. 1, 2016, pp. 83-104.

Sachs, Goldman. “How Goldman Posted Strong Numbers Despite a ‘Challenging’ Revenue Backdrop.” Fortune, 2016, Web.