Porter’s Five Forces Analysis of Goldman Sachs
|Headquarters||New York City, US|
|Revenues||US $ 47.4billion,Dec 31st2022|
|Profit||US$ 11.3 billion, Dec 31st2022|
|Competitors||JP Morgan, Morgan Stanley, Deutsche Bank|
Headquartered in NewYork, Goldman Sachs is one of the leading global financial institution with banking, investmentmanagement, advising,and underwriting and different platform solutions. The Goldman Sachsended the Financial Year end with US$ 1.4 trillion of Assets. The bankreached the 57th place in the Fortune 500 List and 37th in Forbes Global 2000 – Year 2022.
The Bank holds an employee count of 48500.
Porter’s Five Forces Analysis of Goldman Sachs
Porter’s Five Forces Analysis is used to determine the competition and profit margin in the Industry and guide the company’s to keep strategizing its operations in a better competitive position. It is invented by Professor Micheal E. Porter in 1979,at Harvard Business School.
Goldman Sachs Rivalry among Existing Competitors
- Goldman Sachs:The Goldman Sachs is amongst the top 15 banks in the United States of America. The Goldman Sachs holds 7.8% market share in the global investment banking industry which is the second largest share after JPMorgan which is 8% respectively.
Goldman Sachs is also famous for it’s Merger and Acquisition Advisory Services and Underwriting Services for Initial Public Offerings (IPOs).
- Goldman Sachs Business Segmentation: The Company operates in three major business segmentation including the follow
- Global Banking and Markets: This segment generates Investment Banking Fees including Advisory –Underwriting – Equity Underwriting and Debt Underwriting, FICC –Fixed Income Clearing Corporationincluding FICC intermediation- Interest Rate Products-Credit Products – Mortgages- Currency Option and Commodity Derivatives andEquity Financing.
- Assets and Wealth Management:This segment supports in managing financial assets and generates revenue through providing Management Services Fees, Incentive Services Fees, Private Banking and Lending,Equity and Debt Investment.
- Platform Solutions:This segment generates revenue through launch of different credit cards and point of sale solutions for individual clients.While other different cash management solutions are devised for corporate clients.
- Goldman Sachs-Rivalry among Existing Competitors: Goldman Sachs is facing close competition from US based Banks and International Banks from different markets like Deutsche Bank from Germany and PNB Paribas from Paris.
Also by fee revenue earning JP Morgan is leading with a fee revenue record earnings of 6.9 billion U.S.dollars while Goldman Sachs following it by gave a record fee revenue of 6.5 billion U.S. dollars declared by Statista.
- JP Morgan gave a record revenue of US $ 121.64 billion with a net profit of US$ 48.33 billion and net asset of US $ 3.7 trillion as of FY 2021.While the reported revenues are US$ 119.95 billion with a net profit of US $ 29.13 for FY 2020.So JP Morgan reported a revenue growth of 1.3% while the net profit increased by 60.27%.
JP Morgan ranked number 10th by Fortune magazine’s Most Admired Companies List.
- Bank of Americagave a record revenue of US$ 18.1 Billion with a Net Income of US$ 27.5 Billion and with a Net Asset of US$ 3 trillion as of FY 2022.The Bank of America is highly focused on it’s digital banking development and increased it’s users to 56 Million verified users in 2022.
Goldman Sachs Threat of New Entrants
- Global Investment Banking Industry: The Global Investment Banking Industry is standing at 80.54tr USD global value with tough international competition.
The leading banks other thank JP Morgan and Goldman Sachs are Bank of America Securities with a market share of 5.9%, Morgan Stanley 5.4% and Citibank 4.1% respectively.
The other international players are as follows: Barclays with a market share of 3.2%,Credit Suisse with 2.5%, Deutsche Bank with 1.9%, Jefferies LLC with 2.2% and RBC Capital Markets with 1.9% respectively.
- Digital Bank and DisruptionsDue to Digital Banking Solutions and Technological disruptions in the Business World the threat of new entrants is viable especially in the presence of Artificial Intelligence and Block Chain Technologies.
Goldman Sachs Bargaining Power of Suppliers
- Diversified Supplier Portfolio: Goldman Sachs has different programs for Vendor and Partners.The Corporation faces regional and international competition vice versa has regional and global partners. Goldman Sachs is providing goods and services in more than 160 cities around the world.
- Global Banking-US Government Bonds and ProductsIn the category of Global Banking there are several products and offers are US Government linked which automatically having effects of US Monetary Policy and Interest rate like FICC Products –Interest Rate Products and Mortgages (including commercial mortgages and government linked mortgages and loans) have some decision bargain effects on Goldman Sachs strategies.
- Stakeholder’s Portfolio It is also noticeable that Goldman Sachs was able to give $ 3.2 Billion dividends to it’s shareholders with a 3.5 Billion common stock repurchase in FY 2022.As due to the Financial Model of a Financial Institution the Investment and Shareholder Portfolios are also important.
Goldman Sachs Bargaining Power of Buyers
- Customer Satisfaction: Goldman Sachs ranked # 1 in the category of Midsize Credit Card Issuer by the “J.D. Power 2022 U.S. Credit Card Satisfaction Study” as Apple Card and Issuer.Apple became a partner of Goldman Sachs for the issue of Apple Card for the additional financial services for Apple Customers without any fees and 3% daily cash back on Apple Purchases.
- Customer Base: Goldman Sachs has a wide range of services pool for a vast range of customer base including the big corporations to normal consumers so threat in this area also get diluted. Also Goldman Sachs is present for different under writing services in Global Investment Market for last 25 years and remain top ranking which increased it’s reputation and give it a more influential power over it’s customers.
Goldman Sachs Threat of Substitute Products or Services
- Ukraine Russia Invasion – World Economy The Ukraine Russia Invasion with after effects of COVID-19 recovery economies will further slowdown the economic growth of developed countries to 0.5% in 2023 from 2.5% in 2022 which will impact the transaction support activities including the Banking Activities.
Also the energy market has been affected badly due to this invasion which in response affected the inflation rate which resulted in the monetary policy tightening.
- Digital Trends in Bank Industry- Tech Giants As per the digitalization is highly in trending and disrupting the normal business environment even changing the complete business transactional models through digitalization or offering alternate models.
- It may be expected that any such move from digital giants specially companies like Amazon which are dealing in heavy cash transactions and offering Digital Bank Launch Services may affect the traditional and normal banking services.
- Forbes, Goldman Sachs Group, Available at Forbes
- Fortune 500, Goldman Sachs Group, (2/1/2023) .Available at Fortune 500
- Goldman Sachs, Annual Report 2022. Available at Goldman Sachs
- Goldman Sachs, Annual Revenues 2022.Available at Goldman Sachs
- Bankrate,(March 14,2023) The 15 largest banks in the US. Available at Bankrate
- Statista (January 2, 2023) Global market share of revenue of leading investment banks as of December 2022| Statista. [Online].Available at Statista
- Statista Goldman Sachs Statistics and Facts |Statista. [Online]
- Statista (January 31, 2023) Leading investment banks worldwide in 2022, by fees (in million U.S.dollars).Available at Statista
- Statista Investment banking – statistics & facts .Available at Statista
- Goldman Sachs, Media Relations (August 18, 2022) Apple Card and Issuer Goldman Sachs Ranked No.1 in Customer Satisfaction. Available at Goldman Sachs
- JP Morgan Annual Report, JP Morgan
- Goldman Sachs, Our Vendor Program
- Bank of America, Annual Report
- Amazon, Digital Bank Launch
- World Bank (January 10,2023) Sharp, Long –lasting Slowdown to Hit Developing Countries Hard. Available at World Bank
- PWC , Retail Banking 2025 and Beyond ,Five scenarios for the future of retail banking