SWOT Analysis / TOWS Matrix for Goldman Sachs (United States)
Based on various researches at Oak Spring University , Goldman Sachs is operating in a macro-environment that has been destablized by – there is backlash against globalization, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, wage bills are increasing, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China,
geopolitical disruptions, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Goldman Sachs can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Goldman Sachs, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Goldman Sachs operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Goldman Sachs can be done for the following purposes –
1. Strategic planning of Goldman Sachs
2. Improving business portfolio management of Goldman Sachs
3. Assessing feasibility of the new initiative in United States
4. Making a Investment Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Goldman Sachs
Strengths of Goldman Sachs | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Goldman Sachs are -
Operational resilience
– The operational resilience strategy of Goldman Sachs comprises – understanding the underlying the factors in the Investment Services industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Cross disciplinary teams
– Horizontal connected teams at the Goldman Sachs are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Effective Research and Development (R&D)
– Goldman Sachs has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Goldman Sachs staying ahead in the Investment Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Goldman Sachs is one of the most innovative firm in Investment Services sector.
Highly skilled collaborators
– Goldman Sachs has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Investment Services industry. Secondly the value chain collaborators of Goldman Sachs have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Goldman Sachs
– The covid-19 pandemic has put organizational resilience at the centre of everthing Goldman Sachs does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Investment Services
– Goldman Sachs is one of the leading players in the Investment Services industry in United States. Over the years it has not only transformed the business landscape in the Investment Services industry in United States but also across the existing markets. The ability to lead change has enabled Goldman Sachs in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management in the Investment Services industry
– Goldman Sachs is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Goldman Sachs in the Financial sector have low bargaining power. Goldman Sachs has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Goldman Sachs to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Goldman Sachs in Investment Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Goldman Sachs has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Diverse revenue streams
– Goldman Sachs is present in almost all the verticals within the Investment Services industry. This has provided Goldman Sachs a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses of Goldman Sachs | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Goldman Sachs are -
Aligning sales with marketing
– From the outside it seems that Goldman Sachs needs to have more collaboration between its sales team and marketing team. Sales professionals in the Investment Services industry have deep experience in developing customer relationships. Marketing department at Goldman Sachs can leverage the sales team experience to cultivate customer relationships as Goldman Sachs is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Goldman Sachs has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Investment Services industry over the last five years. Goldman Sachs even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Goldman Sachs has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Workers concerns about automation
– As automation is fast increasing in the Investment Services industry, Goldman Sachs needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Low market penetration in new markets
– Outside its home market of United States, Goldman Sachs needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Goldman Sachs has a high cash cycle compare to other players in the Investment Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, Goldman Sachs has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Investment Services industry using digital technology.
High bargaining power of channel partners in Investment Services industry
– because of the regulatory requirements in United States, Goldman Sachs is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Investment Services industry.
Employees’ less understanding of Goldman Sachs strategy
– From the outside it seems that the employees of Goldman Sachs don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on Goldman Sachs ‘s star products
– The top 2 products and services of Goldman Sachs still accounts for major business revenue. This dependence on star products in Investment Services industry has resulted into insufficient focus on developing new products, even though Goldman Sachs has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Goldman Sachs is dominated by functional specialists. It is not different from other players in the Investment Services industry, but Goldman Sachs needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Goldman Sachs to focus more on services in the Investment Services industry rather than just following the product oriented approach.
Goldman Sachs Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Goldman Sachs are -
Creating value in data economy
– The success of analytics program of Goldman Sachs has opened avenues for new revenue streams for the organization in Investment Services industry. This can help Goldman Sachs to build a more holistic ecosystem for Goldman Sachs products in the Investment Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Goldman Sachs has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Investment Services sector. This continuous investment in analytics has enabled Goldman Sachs to build a competitive advantage using analytics. The analytics driven competitive advantage can help Goldman Sachs to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Goldman Sachs can develop new processes and procedures in Investment Services industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Investment Services industry, but it has also influenced the consumer preferences. Goldman Sachs can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Goldman Sachs can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Leveraging digital technologies
– Goldman Sachs can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Goldman Sachs to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Goldman Sachs to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Goldman Sachs can improve the customer journey of consumers in the Investment Services industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Better consumer reach
– The expansion of the 5G network will help Goldman Sachs to increase its market reach. Goldman Sachs will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Goldman Sachs to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Manufacturing automation
– Goldman Sachs can use the latest technology developments to improve its manufacturing and designing process in Investment Services sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Goldman Sachs can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Goldman Sachs to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Goldman Sachs can use these opportunities to build new business models that can help the communities that Goldman Sachs operates in. Secondly it can use opportunities from government spending in Investment Services sector.
Threats Goldman Sachs External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Goldman Sachs are -
Easy access to finance
– Easy access to finance in Investment Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Goldman Sachs can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Goldman Sachs in the Investment Services sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Goldman Sachs will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Goldman Sachs.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Goldman Sachs needs to understand the core reasons impacting the Investment Services industry. This will help it in building a better workplace.
Consumer confidence and its impact on Goldman Sachs demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Investment Services industry and other sectors.
Environmental challenges
– Goldman Sachs needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Goldman Sachs can take advantage of this fund but it will also bring new competitors in the Investment Services industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Goldman Sachs in Investment Services industry. The Investment Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Investment Services industry are lowering. It can presents Goldman Sachs with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Investment Services sector.
Stagnating economy with rate increase
– Goldman Sachs can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Investment Services industry.
Technology acceleration in Forth Industrial Revolution
– Goldman Sachs has witnessed rapid integration of technology during Covid-19 in the Investment Services industry. As one of the leading players in the industry, Goldman Sachs needs to keep up with the evolution of technology in the Investment Services sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Shortening product life cycle
– it is one of the major threat that Goldman Sachs is facing in Investment Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Goldman Sachs Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Goldman Sachs needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Goldman Sachs is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Goldman Sachs is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Goldman Sachs to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Goldman Sachs needs to make to build a sustainable competitive advantage.