GOLDMAN SACHS Pest & internal analysis By: David Troxell

1. GOLDMAN SACHSPest & internal analysisBy: David Troxell

2. 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

3. 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

4. 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

5. 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

6. 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%

7. PEST ANALYSIS Technological • Mobile applications • Increasing population with smartphones that have downloadable applications

8. PEST ANAYLSIS- Summary

9. 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

10. INDUSTRY ANALYSIS Buyers: • Financial Institutions • Corporations • Governments • High-net-worth Individuals

11. INDUSTRY ANALYSIS Suppliers: • The Federal Reserve • United States Treasury Department

12. 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

13. INDUSTRY ANALYSIS Substitutes: • Other bank holding companies • Consumers- spending rather than saving • Corporations- contracting rather than expanding • Governments- budget cuts rather than spending

14. 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.

15. FIVE FORCES- Summary

16. 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

17. 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”

18. GOLDMAN SachsCompetitor & Market analysis

19. 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)

20. Competitors

21. Competitor Analysis

22. Strategic Business Grouping

23. 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

24. 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

25. Geographical Scope

26. Core Competencies

27. Size of Market

28. 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

29. 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

30. 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.

31. Target Market

32. 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

33. 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

34. Goldman Sachs Internal & swot analysis and company’s competitive positioning

35. 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

36. 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%

37. 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.

38. 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

39. 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

40. BCG Matrix

41. 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.

42. 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

43. 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.

44. 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.

45. Generic Strategy

46. Grand Strategy Model

47. 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

48. 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

49. Competitive Position • Strengthening Client Relationships • Strengthening Reputational Excellence • Strengthening Committee Governance • Enhancing Transparency of Communication & Disclosure • Strengthening Training & Professional Development

50. 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