Business Overview - Goldman Sachs

Following is the Goldman Sachs analyses in the light of Porter forces.
             1. Competitive Rivalry.
             Research has shown that pricing is not the competitive point in the investment banking market. However, the main driver of competitive rivalry can be determined through the number of competitors offering, undifferentiated products and services to capture market attention. The rivalry among the competitors in this industry is relatively high and Goldman Sachs faces some fierce competition from JPMorgan Chase, Bank of America Merrill Lynch, Citi Group and Morgan Stanley. There are some other smaller players like Credit Swiss and Deutsche Bank AG but their investment-banking arm is much smaller than Goldman. After 2008 financial crisis, All the Goldman major competitors except Morgan Stanley went in to tight scrutiny by SEC due to their lending ability from their commercial bank and most of them have limited their investment banking operations. The biggest Goldman rival has always been Morgan Stanley but Morgan has a much smaller capital base and an undiversified business. Even though they have acquired Smith Barney capital but that only strengthen their asset management business not their investment banking wing. Thus, Goldman is a last pure-play big investment bank that has created competitive advantage by focusing on their core business.
             2. Threat to Entry .
             The barrier of entry is relatively very high for the new players in this industry. Starting a new investment bank requires enormous amount of capital, highly competitive professional team and very established goodwill. On the other hand Goldman Sachs is already established institution and has a very loyal customer base. Clients firmly believe that Goldman will handle their investment professionally and create exceptional returns so just because of this simple reason new entrants in the industry do not threaten giants like Goldman Sachs. However, the market can overturn in the future especially due to the innovative technological breakthroughs.