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Example research essay topic: The Success Of Goldman Sachs - 1,251 words

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... n the revolutionary effects of the Internet in connecting businesses and clients. This has rendered services ranging from simple banking operations to life insurance more accessible to Internet savvy customers. According to John E.

C leghorn CEO of Royal Bank Group: technology is the key to offering our customers packages of services and information tailored to their financial situation. The ability to track their stock and access to free market research is essential in serving our clients effectively (web). Financial institutions that have made investments in new information technology have been able to realize economies of scale by reducing the cost of their information processing. In addition new technologies have facilitated entry into this sector by small and medium sized firms having fewer but better trained employees providing information-based services.

The reduction of legal barriers has also contributed significantly to the wave of consolidation in financial institutions. This convergence has occurred both geographically and across the scope of financial services. For example in 1998 national interstate banking legislation went into effect. These changes allowed multi-state bank holding companies to merge their state banks. As a consequence of these mergers American banks now benefit from greater efficiency in processing transactions, improved customer service, increase in the availability of funds for research and development. One such case is the consolidation of First Union with Signet Bank and Core States Bank (first union.

com). Similarly in Canada the Chartered Banks were strictly limited to banking services. Again since the recent deregulation institutions like Royal Bank have expanded into Royal Investment Group in order to offer a full range of financial services to their growing clientele. (web) Being a first mover in the financial services industry, Goldman Sachs benefited from many advantages and quickly dominated the market. First movers as described by Chandler were companies that capitalized on economies of scale and scope, invested internationally, and recruited teams of management.

There are many factors that can affect the firms performance. These include relevant economic, demographic and political aspects and market conditions. Economic factors that can influence Goldman Sachs include the notion of the company going public creating a larger capital base (Newsweek, 1999), growing the business through acquisitions by acquiring other companies and finally by expanding the business in the United States and globally, hence increasing capital gain. Chandler emphasizes economies of scale and scope, which is one of the first steps required in achieving competitive advantage. Right now, Goldman Sachs is expanding rapidly, especially overseas. Every market they enter, they dominate (Newsweek 1999) The firm constantly strives to foresee the rapidly changing needs of their clients and to develop new services to meet those needs.

Despite the continuously changing needs, Goldman makes the best effort to sustain and expand their client relationships. However, their target market is restricted mainly to those with a high level of income. Political factors may consist of peoples interest being influenced by authoritative figures in the media. Goldman Sachs ranking in comparison to their competitors in the political realm may often influence the demand for their services. In addition, regulatory restrictions prevent firms from providing services to their clients competitors. Financially, Goldman Sachs revenue can be affected by increases or decreases in interest rates, inflation, taxation, or other sources that may alter stock markets.

Behind the story of Goldman Sachs lies a series of events contributing to their success. In the 1880 s, Goldman Sachs formed relationships with banks throughout Europe, leading to expansion, promotion and awareness of the firm. In 1970, Goldman Sachs opened an office in London, which was the initiation of their business offices opened in Europe; four years later followed Tokyo and Zurich. This drive to expand abroad has permitted Goldman Sachs to be recognized internationally as one of the most successful investment-banking firm. As proposed by Chandler, this is the next step a firm has to take in order to maintain competitive advantage. After capitalizing on economies of scale, the firm needs to expand internationally as explained above as well as recruiting teams of management leading on to the next step Goldman Sachs took.

Behind every success story lies a downfall. In 1994, Goldman Sachs was temporarily suffering very low revenues. In addition to the commotion of large trading losses and failure of poorly executed overseas expansion strategy Goldman Sachs was forced to downsize. Moreover, key partners were unexpectedly retiring early, there was careless management leading to poor morale and excessive costs resulting in weak earnings.

It was time to invest in quality management. Goldman Sachs decided that in order to recover, a good management team had to be brought in. This new team included Hank Paulson and Jon Corzine. Paulson and Corzines management techniques brought the firm out of its temporary fall and will always be remembered for their role in taking the firm public. In 1999, when Goldman Sachs issued their own IPO, management decided to incorporate employee ownership in the company. Making employees part owners, created less conflict between management and shareholders.

This helped boost employee morale creating a more dedicated and productive workplace. Stephen Friedman had summed up the benefits of ownership by saying no one washed a rental car (Endlich, 1999). In other words, employees will provide full dedication and loyalty to what is now partly theirs. Goldman Sachs culture and history have been preserved for a long period of time due to its long standing dedication to maintaining and enhancing economies of scale and scope; as well as keeping in mind the importance if good management and international expansion. It has effectively done so through many factors, but particularly the ones mentioned above such as the ability to recruit consistently some of the most talented people on Wall Street (Endlich, 1999).

With the help of these practices the firm was able to generate $ 3 billion in profits in 19997 (Endlich, 1999) Since every firms goal is profit maximization, the publicly owned Goldman Sachs can now maximize its shareholding wealth. The shareholding will help expand the growth of the company due to the fact that the company is exposed to more people throughout the market and because Goldman Sachs is growing internationally which will inevitably make it one of the most profitable organizations internationally. If only Marcus Goldman could visit the firm today he would be astonished at the amount of change in the company that bears his name. Now, 130 years later, Goldman Sachs is a newcomer in many parts of the world and [they] seek to sustain the entrepreneurial spirit that guided the founder of their firm (Endlich, 1999). Bibliography: Bibliography Books Endlich, Lisa. Goldman Sachs: The Culture of Success.

New York: Alfred A. Knopf Inc. , 1999 Articles Abbot, John S. Where Does Goldman Sachs Go From Here? Business Week. 20 (March, 1995): 104 - 110.

Abbott, John S. Inside The Securities Firms. Business Week. 22 (December, 1997): 86 - 90 Creswell, Julie. Goldman Goes Shopping. Fortune. 10 (May, 1999): 120 - 121 Goldblatt, Henry. The Big Name in Bowling is Goldman Sachs?

Fortune. 3 (March, 1997): 32 - 34 Serwer Andy. Why Goldman Sachs Matters. Fortune. 6 (July 1998): 219 - 220 Singer Mark. Penny Wise, Penny Foolish. New Turkey.

Vol. 74 no. 32 Web Pages Goldman Sachs. Online. Internet. 2000. Available: web web titles/FISA/ 5 -trends. htm web Pamphlet Goldman Sachs, The Investment Banking Division: Financial Analyst Program. (New York: Goldman Sachs & co. , 1997) Goldman Sachs, The Equities Division: Financial Analyst Program. (New York: Goldman Sachs & co. , 1997)


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