Goldman Sachs Competition
Now Viewing Goldman Sachs's competition in: Investment Banking (primary)
Call Preparation Questions
Customers, Marketing, Pricing, Competition
Who are the bank’s major competitors? - Competitors are generally other investment banks operating in the same geographic markets or catering to the same industries.
Does the bank specialize in particular industries? If so, which? - Most large investment banks specialize in particular industries.
How active are the industries in which the bank specializes? - Industries like telecommunications are consolidating at all levels.
Is globalization a factor in the industries the bank serves? - Customers frequently establish themselves in foreign markets by acquiring companies already serving those markets.
What have been the major factors in clients selecting the firm? - Factors could include aggressive pricing, industry expertise, access to capital, and previous success with similar clients.
Does the bank sponsor key events to market its services? - Many banks are corporate sponsors of sporting (golf, tennis, etc.); arts; and charity events and use the sponsorship to get key clients in a social environment in hopes of building better relationships.
Competitive Landscape
Demand is driven by economic activity that results in company mergers, acquisitions, or public financing. The profitability of an investment bank depends on its ability to accurately assess both the value of a business transaction and the readiness of the market to buy the attendant debt or equity. Big firms have an advantage because large customer transactions require firms with substantial financial resources. Small investment banks can compete by participating in syndications and operating in regional markets or specialized industries. Although labor-intensive, the industry produces very high value: average annual revenue per employee at large firms is under $1 million.
Business Challenges
CRITICAL ISSUES
Revenue Depends on Volume of Economic Activity - Investment banking activity, along with the US economy, is cyclical and volatile. After a prosperous period in the mid 2000s characterized by innovative but risky financial investments, the top 12 investment banks saw revenues decline by double-digit percentages as the credit crisis unfolded in the late 2000s. The investment banking industry often reflects the state of the overall economy in a magnified fashion, but the depth of the late 2000s recession could signal dramatic changes for investment banking. With the conversion of the two remaining big investment banks into holding companies, more traditional commercial banking practices may return to the industry.
Regulatory Oversight and Litigation Intensify - Regulatory oversight of investment banking has become intense, particularly for large Wall Street firms that were not subject to strict regulation during the earlier part of the 2000s. In the past, regulators and examiners who understood complex products such as financial derivatives and asset-backed securities were few and far between. Investment bankers are now likely targets of litigation due to stricter federal sentencing guidelines, larger financial penalties, and greater public awareness. Three areas in particular have attracted attention: manipulation of “hot” IPO prices, biased research, and insufficient risk assessment or disclosure.
Industries Where Goldman Sachs Competes
- Financial Services
- Investment Banking
- Large-Market Investment Banking(primary)
- Securities Brokers & Traders
- Currency, Commodity & Futures Trading
- Equity Trading
- Investment Banking
