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Goldman Sachs’ Strategies, Global Role and Ethics Essay

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Updated: Aug 14th, 2020

The Goldman Sachs Group, Inc. is one of the largest banks in the United States and worldwide. It was established in 1869 and initially traded on the stock exchange. With time, the bank expanded to other areas of activity the focus of which was the investment. This paper aims at revealing the core strategies of Goldman Sachs as well as its international role and ethics.

Generic Strategy

Goldman Sachs is regarded as one of the world’s largest investment banks and a financial conglomerate that is engaged in investment of banking, securities trade, investment management, and other financial services that are primarily associated with institutional clients. Currently, the company pursues the overall strategy of an innovative culture. This refers to the utilization of new and inventive products that can help to strengthen its brand value and gain a larger market share. Following the mentioned strategy, the company declares that there is a need for transformational change (Popper, 2016).

Recalibrating its business mixture, Goldman Sachs started to offer its services to ordinary Americans. Precisely speaking, online banking service was offered to them, yet the revenues from this solution cannot be compared with those received from other sectors of the company. Popper (2016) claims that “the bank reported the lowest first-quarter profit and revenue since 2004, with declines across almost all of the bank’s major business lines” (para. 10). Nevertheless, the company’s representatives continue to promote the mentioned approach, arguing that the bank is capable of addressing this complicated situation.

In the context of the generic strategy of the company, several principles of Goldman Sachs can be noted. For instance, the company puts the interests of its clients first and meets their expectations, thus promoting healthy and collaborative relationships. Among its core assets, the bank prioritizes people, reputation, and capital (Goldman Sachs, 2016). The company strives to pursue ever-changing trends and address difficulties associated with its operating areas. However, it follows the non-aggressive way of establishing relationships with the customers and competitors as regards integrity and honesty as fundamental issues. Thus, the company’s generic structure corresponds to a marketing-oriented one (Wilson, 2010). Such a strategy helps to recognize the need for change timely and, thereby, implement the required amendments.

Diversification Strategy

Goldman Sachs pursues the strategy of diversification. The bank consists of three paramount divisions involving investment banking, stock trading, and asset management, and securities services. First of all, Goldman Sachs is one of the leading actors in the area of investment banking. In the market for bank mergers and acquisitions, it historically earned an excellent reputation by advising its clients on how to avoid hostile takeovers. This business segment brings about 15 percent of the turnover of the organization (McLannahan, 2016). Investment banking is divided into two units including financial advisory and underwriting. The first one relates to the following issues: mergers and acquisitions, investiture, restructuring, and separation from the parent company, while the latter involves public and private placements of equity instruments, securities related to the shares, and debt instruments.

Exchange-traded and investment are the largest of the three segments of the bank’s activities and also the key sources of the company’s profits. This segment is divided into three divisions: investment in fixed income along with foreign exchange and commodity activities (trade credit products, foreign exchange, and commodity transactions), securities trading, and investment activity itself. Approximately 65 percent of the bank’s profit comes from this sphere of activity. According to McLannahan (2016), “revenues in the bank’s asset management division have been squeezed by a broad shift to passive rather than active investing” (para. 6). Finally, asset management is the most fast-growing business segment of Goldman Sachs. It is divided into two key segments such as private management of assets and the so-called alternative investments that focus on hedge funds (securities with a high degree of risk), trade-in private equity, and real estate funds. This sphere of activity attracts private investors and various large organizations. This activity accumulates 19 percent of the company’s profits (McLannahan, 2016). Thus, from the above observations, it becomes evident that the company adheres to the strategy of diversification.

International Moves

Goldman Sachs is a global organization with more than 30 000 employees working in different countries of the world. The international performance of the company makes a great impact on its customers. For instance, plenty of business partners or travelers prefer to access their money being in a foreign country. At this point, they would like to collaborate with prominent and reliable companies rather than to establish new relationships with local ones (McLannahan, 2016). The international strategy of Goldman Sachs means that the customers are ensured with convenience while receiving banking services abroad. It should also be emphasized that such a global expansion view provides the company with a strong competitive advantage, leaving its rivals behind. Furthermore, the organization pursues both global compliance and investment research.

However, there is also an opportunity to continue international expansion to achieve higher profits and meet the customers’ expectations. In effect, the larger customer base along with subsequent synergy would be acquired (Goldman Sachs, 2016). Speaking in the context of the global economy, it is necessary to pinpoint that the continuation of the international expansion would lead to a more stable financial position of the bank. In particular, in case one country suffers from an economic crisis, the company can benefit from others. It should also be noted that by the following experimentation on local markets, Goldman Sachs can come up with innovative ideas and products, fitting to their peculiarities (Goldman Sachs, 2016). Another attractive direction the bank plans to develop relates to emerging markets. Likewise international expansion, emerging markets create additional demand for the bank’s services, thus leading to increased revenues. At the same time, emerging markets also benefit as the bank’s services are to enhance their industrial level.

Ethics Policies and Practices

The corporate code of ethics of Goldman Sachs designs the foundation for maintaining the highest standards of professional ethics. According to the Code of Business Conduct and Ethics accepted by the company, it is stated that the decisions are based on “legal and regulatory rules, our Code, our Business Principles, and our values” (p. 3). This code sets out the basic principles and rules of conduct that guide the employees in their work as well as in dealing with customers, suppliers, shareholders, and other employees. It applies to all managers and employees of all subsidiaries of the bank. The organization’s relationships with clients, contractors, business partners, and other interested parties are to be based on the principles of integrity, professionalism, and mutual trust and respect (Our shared responsibility to our clients, colleagues, and communities, 2016). At this point, the priority of interests of the customers, inviolability of obligations, full disclosure of necessary information, and transparency and predictability are declared as paramount principles that guide the overall performance of the company. Therefore, all the members of the organization are expected to make every effort to minimize any risk to the business partners.

Within Goldman Sachs, there are also certain ethical principles applied by the company. Among the most essential of them, one can note the fact that the bank builds its relationships with employees on the principles of long-term cooperation, mutual respect, and strict compliance with the mutual commitments (Our shared responsibility to our clients, colleagues, and communities, 2016). It prohibits any manifestations of discrimination on political, religious, national, and other similar reasons in hiring, compensation, and career development. The bank takes measures aimed at protecting the health, performance, and safety of employees. Goldman Sachs creates all the necessary conditions for the professional growth and improved social well-being of employees of the bank.

Social Responsibility

As a global company, Goldman Sachs understands the need to recognize and ensure human rights and accepts it as a responsibility to address occurring social, economical, and political challenges. Performing within the marketing-oriented strategy that was specified earlier in this paper, the organization considers that corporate social responsibility is an integral part of its policy as well as financial performance and focus on commercial success (Our shared responsibility to our clients, colleagues, and communities, 2016). The aim of the bank’s performance is not only to initiate successful projects and profitable operations but also to promote a prosperous and harmonious society.

Aiming to contribute to the sustainable development of society and ultimately improve the quality of people’s standard of living, Goldman Sachs invests in health care, sports, education, science, culture, and art continuously. For example, speaking of education, it is possible to note that the organization plans to invest in schools and universities. As for the business owners, they would be provided with investment, particularly, with lending and philanthropic support. Moreover, the organization supports vulnerable populations. It seems appropriate to point out that the company also creates jobs and offers loans to customers. Implementing these steps, it aims at the perspective of social change, in particular, the eradication of poverty, incarceration, and addiction by increasing employment opportunities.

Environmental Sustainability Practices

Being an environment-friendly organization, Goldman Sachs invests in a clean energy future. Cogentrix is one of the most famous projects invested by the bank that refers to independent power producers. This US-based subsidiary of Goldman Sachs focuses on a range of power facilities such as rapid-start peaking, solar thermal, highly efficient gas-fired combined-cycle, and others (Goldman Sachs, 2016). Also, Cogentrix offers some other solutions to improve environmental issues by using natural power. In particular, hydroelectric generating plant and wind projects, as well as numerous other projects, were signed and implemented while some of them are currently under discussion. These clean energy investments illustrate that the organization strives to promote environmental sustainability, taking into consideration natural resources along with their adequate utilization.

The environmental policy framework accepted by Goldman Sachs also assumes climate risk management that integrates climate mitigation and adaptation. Goldman Sachs joined the RE100 initiative that is a collaborative climate group. As a part of this initiative, large multinational corporations undertake a certain time to completely switch from the use of electricity-generated facilities to renewable energy sources. Among the participants and initiative partners, there are Google, IKEA, H&M, and others. The desire of Goldman Sachs to use so-called green energy which has recently become a mandatory framework is a convincing argument not only to the international market but also to politicians.

Recently, Goldman Sachs argued that by 2025, it would invest $ 150 billion in the development of clean energy of the United States (Nussbaum, 2015). This number significantly exceeds the one that was declared previously – $ 40 billion by 2022. Despite this, some environmental organizations including the Bay Area Tropical Forest Network (BATFN) note that Goldman Sachs is still investing a lot of funds in the development and use of fossil fuels, particularly, coal. According to Nussbaum (2015), this financial conglomerates should not be engaged in half-measures. Instead, Goldman Sachs is to stop rendering and supporting the projects of extraction and use of coal.

Conclusion

In conclusion, it should be emphasized that Goldman Sachs is one of the largest financial conglomerates that operates worldwide. Its generic strategy focuses on the continuous improvement and implementation of innovations. At the same time, the company promotes its marketing-oriented strategy that values the customers’ interests and truthful relationships with them. As for the diversification strategy, Goldman Sachs operates in three large sectors that comprise investment banking, stock trading, and asset management, and securities services. It was revealed that the company performs internationally and plans to enlarge its expansion. Goldman Sachs’ ethics policies are oriented at long-term cooperation and mutual respect with customers and employees. The company’s social responsibility focuses on the support of various areas of social life such as health care, education, and others. Finally, following environmental sustainability practices, Goldman Sachs invests in Cogentrix and other projects that protect the environment.

References

Goldman Sachs. (2016). Web.

McLannahan, B. (2016). Financial Times. Web.

Nussbaum, A. (2015). Bloomberg. Web.

(2016). Web.

Popper, T. (2016). The New York Times. Web.

Wilson, H. (2010). The Telegraph. Web.

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