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Business Models Analysis and Comparison Case Study


Introduction

Deciding to be a CEO is a choice, which requires a great deal of thought. It is commonly based on a company’s position in the market, its prospects for the future, as well as the deployed business model, because CEO is the position with a robust impact on the firm’s stability and its financial health. The decision is even more complicated in case of choosing between the most influential companies due to the necessity of comparing them and deciding, which one would be more promising. Therefore, the paper at hand aims at investigating business models of three companies – Goldman Sachs, The Blackstone Group, and Blackrock. This comparison will become the basis for coming up with a vital decision: what company is the best one to join?

Business Models of the Three Companies

Goldman Sachs

Incurring significant risks combined with careful management was the foundation of the investment bank’s business model, which brought Goldman Sachs its current success (Markham 717). It was supplemented by low wages, a bonus system, and managing conflicts of interest (Mandis 64, 351). More than that, there is an online constituent of the Goldman Sachs’ business model – advertising, e-commerce, sponsorship, promotion, and direct marketing aimed at increasing revenues and becoming even more successful and influential. In addition, a wide range of online services such as online lending and deposits is offered in order to diminish the risks of being outperformed by startups and competitors (“Goldman Sachs Group Inc. Is Reinventing It’s Business Model” par. 6).

Furthermore, it is imperative to note that due to the recent financial crisis, the company was forced to alter its approach to doing business. As for now, Goldman Sachs is known for the business model, which is based on a continuous shift toward the focus on trading and lending activities, including proprietary trading, thus constantly de-risking operations. At the same time, it centers on the company’s access to early information, especially private and confidential, and focuses on creating the whole network made up of its subsidiaries and partners around the globe (Bazin 100-101).

The Blackstone Group

The specificity of The Blackstone Group’s business model is its complexity, which is commonly associated with unsustainability. The model includes several central elements. Still, the foundation of the approach is the focus on leveraged buyout because the company is a private equity firm. In this way, the basis of the business model is an investment in different companies around the globe (Directory of Private Equity/LBO Firms 83). Therefore, it is dependent upon the optimization of funding costs as well as leverage. More than that, investors are limited in their voting rights, which is essential for minimizing the risks of instability (Markham 267). Except for investing in companies, The Blackstone Group is as well known for injecting funds in real estate, making hedge fund solutions, and offering financial advisory services (Stoller par. 6). All these activities are carried out under the B2B (business-to-business) approach, i.e. direct cooperation with intermediaries. Finally, the company sets up special business units for providing services to its portfolio companies. These units are as well involved in purchasing activities (Demaria 43).

Blackrock

The foundation of the company’s business model is the approach referred to as B2B (business-to-business). It means that the company sells its investment products directly to intermediaries, which then distribute them to individual consumers. Nevertheless, it is supplemented by other elements. For instance, Blackrock is known for its vast investment in advertising aimed at reaching the end customer. In most cases, it involves the advertising of communications (Kompella 149). Moreover, it is essential to note that the company invests in both management and risk management due to the fact that it makes a major focus on customers’ interests and protecting them. In this way, it deploys a specific proprietary approach to all clients, regardless of their financial condition, i.e. to everyone from individual customers to the most influential companies and pension funds (“The Blackrock Model” 17). Finally, the company is an active investor in private equity without regard to the fact that its fund allocations are constantly decreasing (Directory of Private Equity/LBO Firms 26).

Comparing and Contrasting Business Models

Keeping in mind the findings of the conducted research, it is evident that there are both similarities and differences between the three companies under consideration. First and foremost, all of them base their activities on the business-to-business approach, i.e. give preference to direct cooperation with their intermediaries. In addition, all of them pay specific attention to investing in companies around the globe and acquiring them in order to create a global network of companies. In addition, both Goldman Sachs and Blackrock pay significant attention to advertising and reaching end customers in order to increase revenues and foster the sustainability of their development. Finally, all of the three companies recognize the significance of private information and private equity and deploy them as the foundation of their success.

Nevertheless, regardless of the numerous similarities between the three investment companies, it is critical to point to some significant differences. For instance, the business model of The Blackstone Group stands out because of its complexity. Even though Goldman Sachs’ model is complex, the first one is more diversified and includes more unrelated elements. More than that, Blackrock is special due to the belief that all clients should be treated in the same manner without regard to the volume of their assets and financial objectives. Finally, Goldman Sachs is the only company, which is characterized by drastic alterations of its business model because other firms are relatively stable and avoid changes.

Making a Decision

In conclusion, it is paramount to make a decision. Based on the conducted investigation of the three companies’ business models and comparing them, the choice is to become the CEO of Goldman Sachs. It should be noted Goldman Sachs is given preference because the performance of The Blackstone Group is complicated to forecast, i.e. such a decision imposes higher risks of failure. As for Blackrock, it was not selected because of the variety of clients, i.e. the necessity to find ways to address numerous types of customers based on one approach. That said, except for the expected prospects of success, the choice of Goldman Sachs is the most optimal option in terms of risks. This decision is motivated by the fact that this company focused on changing its business model and shifting toward de-risking activities, which is a promising experience. From this perspective, the drive is to support the company’s further growth and help it to maintain its positions as well as work on upgrading online services and develop an efficient system for organizing employees and finding new partners.

Works Cited

Bazin, Yoann. “Problematizing Goldman Sachs: Indoctrination, Paradigm Shift, and revolving doors.” Society and Business Review, vol. 9, no. 1, 2014, 98-105.

“The Blackrock model.” Leaders Magazine, vol. 33, no. 2, 2010, 17-18.

Demaria, Cyril. Private Equity Fund Investments: New Insights on Alignment of Interests, Governance, Returns, and Forecasting. Palgrave Macmillan, 2015.

Directory of Private Equity/LBO Firms. Boogar Lists. Technology Media and Communications, 2011.

“Goldman Sachs Group Inc. is Reinventing Its Business Model.” BidnessEtc. 2016, Web.

Kompella, Kartikeya. The Brand Challenge: Adapting Branding to Sectorial Imperatives. KoganPage, 2015.

Mandis, Steven G. What Happened to Goldman Sachs: An Insider’s Story of Organizational Drift and Its Unintended Consequences. Harvard Business Review, 2013.

Markham, Jerry W. A Financial History of the United States: From Enron-Era Scandals to the Subprime Crisis (2004-2009). Routledge, 2011.

Stoller, Bill. The Motley Fool. 2014, Web.

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