Goldman Sachs’ Generic Strategy and Diversification Essay

Exclusively available on Available only on IvyPanda® Made by Human No AI

Company’s Generic Strategy

Goldman Sachs is aware of the competitive market forces and it knows that it must come up with an appropriate marketing strategy that can enable it to overcome challenges in the external environment. Sinn (2014) says that it is particularly important for a firm to come up with an appropriate generic strategy based on its strength and vision. The figure below shows four different approaches that a firm can take when choosing an appropriate generic strategy.

Porter’s Generic Model.
Figure 1: Porter’s Generic Model. Source (Williams, 2016).

When choosing the appropriate strategy, Scherf (2014) advises that a firm must take into consideration its internal capabilities and external weaknesses. Goldman Sachs uses cost leadership as a way of gaining a competitive edge over its market rivals. Rumelt (2011) says that cost leadership can be achieved by “increasing market share through charging lower prices, while still making a reasonable profit on each sale because you’ve reduced costs” (p. 78). Goldman Sachs has been using this strategy as a way of attracting more clients to use its services.

When describing how Goldman Sachs was able to overcome the 2008 global economic recession, Hall and Yip (2016) say that “its involvement in subprime mortgages, Goldman Sachs was hit hard by the 2008 economic crisis” and the government had to come to its rescue (p. 54). This is a clear confirmation that the firm has been targeting clients with low purchasing power as a way of increasing its market share. The only way of attracting this market segment is to offer them products at relatively low prices. When the price is lowered, more clients are able to afford the products hence sales improve. This strategy is very dangerous, especially in cases of economic downturn because it is the middle class and the poor who are often worst affected. Their inability to pay back the loans may force the firm to write off their loans as bad debts. Such eventualities may lower the profitability of a company. Currently, the firm is still using the strategy, but in a cautious manner.

Diversification at the Company

Goldman Sachs believes in diversification as a way of earning more profits and increasing its market share. According to Mandis (2013), Goldman Sachs offers a wide range of financial products in the market. Initially, this firm primarily focused on commercial banking as the main product for its customers. This product is still available and is earning the firm’s attractive income. However, it has continued to diversify its products in its quest to meet the new needs of clients in the financial market. Asset management is one of the products currently available for the clients of this company.

Although it was affected by the recent economic recession, this product is currently earning this firm’s attractive income. Investment banking is another product that is becoming popular in the financial sector. It is available at this firm. Other products available at Goldman Sachs include commodities, investment management, prime brokerage, and mutual funds. The need to diversify product offerings in the market is very important because of the volatility of the market. With a large pool of products in different categories, a firm gets to benefit in case there are problems with one sector of the market. It is also one of the best ways of expanding market share in a market that has become very competitive due to the emergence of new firms.

References

Hall, D., & Yip, J. (2016). Discerning career cultures at work. Organizational Dynamics, 45(3), 174–184. Web.

Mandis, S. G. (2013). What happened to Goldman Sachs? An insider’s story of organizational drift and its unintended consequences. New York: Cengage.

Rumelt, R. (2011). Good strategy, bad strategy: The difference and why it matters. London: Profile.

Scherf, G. (2014). Financial stability policy in the Euro zone: The political economy of national banking regulation in an integrating monetary union. Wiesbaden: Springer Gabler.

Sinn, H. (2014). Austerity, Growth and Inflation: Remarks on the Eurozone’s Unresolved Competitiveness Problem. The World Economy, 37(1), 1–13.

Williams, E. F. (2016). Green giants: How smart companies turn sustainability into billion-dollar businesses. New York: Cengage.

More related papers Related Essay Examples
Cite This paper
You're welcome to use this sample in your assignment. Be sure to cite it correctly

Reference

IvyPanda. (2020, August 14). Goldman Sachs' Generic Strategy and Diversification. https://ivypanda.com/essays/goldman-sachs-generic-strategy-and-diversification/

Work Cited

"Goldman Sachs' Generic Strategy and Diversification." IvyPanda, 14 Aug. 2020, ivypanda.com/essays/goldman-sachs-generic-strategy-and-diversification/.

References

IvyPanda. (2020) 'Goldman Sachs' Generic Strategy and Diversification'. 14 August.

References

IvyPanda. 2020. "Goldman Sachs' Generic Strategy and Diversification." August 14, 2020. https://ivypanda.com/essays/goldman-sachs-generic-strategy-and-diversification/.

1. IvyPanda. "Goldman Sachs' Generic Strategy and Diversification." August 14, 2020. https://ivypanda.com/essays/goldman-sachs-generic-strategy-and-diversification/.


Bibliography


IvyPanda. "Goldman Sachs' Generic Strategy and Diversification." August 14, 2020. https://ivypanda.com/essays/goldman-sachs-generic-strategy-and-diversification/.

If, for any reason, you believe that this content should not be published on our website, please request its removal.
Updated:
This academic paper example has been carefully picked, checked and refined by our editorial team.
No AI was involved: only quilified experts contributed.
You are free to use it for the following purposes:
  • To find inspiration for your paper and overcome writer’s block
  • As a source of information (ensure proper referencing)
  • As a template for you assignment
Privacy Settings

IvyPanda uses cookies and similar technologies to enhance your experience, enabling functionalities such as:

  • Basic site functions
  • Ensuring secure, safe transactions
  • Secure account login
  • Remembering account, browser, and regional preferences
  • Remembering privacy and security settings
  • Analyzing site traffic and usage
  • Personalized search, content, and recommendations
  • Displaying relevant, targeted ads on and off IvyPanda

Please refer to IvyPanda's Cookies Policy and Privacy Policy for detailed information.

Required Cookies & Technologies
Always active

Certain technologies we use are essential for critical functions such as security and site integrity, account authentication, security and privacy preferences, internal site usage and maintenance data, and ensuring the site operates correctly for browsing and transactions.

Site Customization

Cookies and similar technologies are used to enhance your experience by:

  • Remembering general and regional preferences
  • Personalizing content, search, recommendations, and offers

Some functions, such as personalized recommendations, account preferences, or localization, may not work correctly without these technologies. For more details, please refer to IvyPanda's Cookies Policy.

Personalized Advertising

To enable personalized advertising (such as interest-based ads), we may share your data with our marketing and advertising partners using cookies and other technologies. These partners may have their own information collected about you. Turning off the personalized advertising setting won't stop you from seeing IvyPanda ads, but it may make the ads you see less relevant or more repetitive.

Personalized advertising may be considered a "sale" or "sharing" of the information under California and other state privacy laws, and you may have the right to opt out. Turning off personalized advertising allows you to exercise your right to opt out. Learn more in IvyPanda's Cookies Policy and Privacy Policy.

1 / 1