American investment Banking Free Essay Example

Change refers to the act of moving a company from where it is now to where it wants to be. The change can be relatively small, such as improving the company’s billing procedures, to utterly transformative, such as reformulating your entire product and service offerings in the light of unexpected competition. it references an event that causes major disruption to the business’s daily operations. Change occurs when an organization improves, restructures or transforms a major part of its operations disrupting systems, people and processes.

In this essay I will be looking at the change experienced by Goldman Sachs, a leading American investment Banking firm and how this change affected the stakeholders of Goldman Sachs.

Globalization can be defined as the worldwide movement towards financial, trade, and communication integration. Globalization implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and independent world with free transfer of capital, goods, and services across national frontiers. In this essay I will refer to how a change impacted the globalisation strategy of a large multinational like Goldman Sachs.

Founded in 1886, Goldman Sachs is a global market leader in investment banking. It is a company with strong brand name, innovative work culture, and government support. However, in 2014 Goldman Sachs went through a big change. The stock market had crashed and the shares of Goldman Sachs had tremendously gone down. This change had a significant impact on the stakeholders and the way how globalisation occurred in Goldman Sachs. Previously, Goldman Sachs had been operating in places such as New York, London or Tokyo.

However, due to falling revenue (because of stock market crashing and shares coming down), the company now started to expanded in less expensive places such as Utah and Bangalore to reduce their costs. As a result, by 2016, Goldman Sachs had its largest headquarters in Bangalore with 10000 people and Utah became the fourth largest location of Goldman Sachs with 1775 employees.

In addition, due to this change (share prices falling) the percentage of income the company spent on salaries dropped from nearly 50% in 2008 to 38% in 2013, and 33% in 2014. The company also reduced the number of bonuses it gave. Therefore, this negatively impacted the employees. This is how a fall in the share prices of Goldman Sachs due to the stock market crashing(change) led to a change in the globalisation strategy and the way stakeholders worked.

However, this change positively impacted Lloyd Blankfein, the CEO of Goldman Sachs, as he now had more control over the company and its working. In addition, now decisions were now made quickly and in a more efficient manner. This change, initially, negatively impacted the shareholders as the share prices had gone down. But, after the innovative strategy (Expansion to Utah and Bangalore to reduce their costs) adopted by Goldman Sachs, the shareholders (Berkshire Hathaway, Massachusetts Financial Services, Dodge and Cox etc.) not only benefited from increase in share but also fostered by expansion of the company’s base (Globalisation). However, employees were negatively impacted by this change. Employees’ salaries dropped as mentioned above from 50%in 2008 to as low as 33% in 2014. The number of bonuses given were also reduced.

The negative impact of this sudden change was that the value of Goldman Sachs shares had gone down, from 215$ per stock to only 90$ per stock. Added to this the return of equity of Goldman Sachs reduced from over 10% in 2013 to less than 8% in 2014. Return on equity (ROE) is the amount of net income returned as a percentage of shareholders’ equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. Thus, the shareholders had faced huge losses. Lastly, the biggest disadvantage of this change was that Goldman Sachs had to lay off more than 1100 employees to cut down their mounting costs. This not only negatively impacted Goldman but the economy as a whole.

In conclusion, in the short term the shareholders and employees were negatively impacted by this change (stock exchange crashing) due to the lowering of the share prices and mounting costs. However, in the long term the innovative strategy implemented by Goldman Sachs of expanding in low cost cities such as Utah and Bangalore are beneficial. It not only leads to increase in employment but also enables Goldman Sachs to establish a wider base all over the world.

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