GS FINAL 1

Topics: Subprime mortgage crisis, Investment, Financial services Pages: 14 (4097 words) Published: March 7, 2015

The International Business Environment
PEST Analysis: Goldman Sachs

Meghana Jayaprakash 130578059

Word Count: 2990

NBS 8045

Date: 08/09/2014

Globalisation: the great unbundling(s) by Baldwin, R. (2006) would be a great starting point to discuss the evolution and importance of globalisation in the current international business scenario. Baldwin, R. (2006) talks about the evolution of globalisation and how it initially began with the separation of production and consumption. This was driven by the declination in transport costs. Later on the separation of factories and offices began, driven by declining trade costs leading to off-shoring of low-tech industries to low-wage countries This has given rise to movement of people, goods and ideas. Hence be it economic, financial, cultural or scientific emerging markets (India, China etc.) are gaining importance and are important global players (Trichet, C, 2007).

Founded in 1869 headquartered in New York, Goldman Sachs provides global investment banking, securities and investment management that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals (Goldman Sachs, 2014).

Goldman Sachs’ (2014) core principle lies in research from across economics, commodities and strategy research to locate investment opportunities across asset classes. They focus on key themes, recommendations and how to implement them. Which in turn has resulted in Goldman Sachs expanding into potential emerging markets, with Asia as one of the biggest targets (Goldman Sachs, 2014. The reason for this could be the impact globalisation has had in reshaping business activities there by increasing prosperity in emerging markets above all in China (W, Martin, 2013). W, Martin (2013) also points out that China is the second largest economy in the world in terms of GDP and is said to take the place of United States in the next 15years. All of these factors have played a major role in the entry of Goldman Sachs into the Chinese market.

Example 1: The entry of Goldman Sachs into the Chinese market in the year 1994 (Goldman Sachs,2014). In 1984, Goldman Sachs set up the Asia pacific regional headquarters in Hong Kong then in 1994 opened in Beijing and Shanghai representative office marking its formal entrance into the Chinese mainland market. S, Ahmed (2004) writes that Goldman Sachs has long regarded China as an important market since the early nineties. The twentieth century put China as the world key area of business development.

Goldman Sachs has gradually established a powerful international investment banking branch to occupy the Chinese government and domestic industry leading large enterprises a full range of financial services (Flanagin, P.E et.al, 2006). Deutsche Bank (2004) reports say that Goldman Sachs is also the first access to the Shanghai Stock Exchange B shared trading permit foreign investment banks and the first to obtain QFII status of foreign institutions. As compared with other former socialist countries in transition, China has done extremely well in maintaining price stability and achieving strong economic momentum. The economy has grown at more than 9% each year on an average since reform started in 1979. The average annual inflation rate in China during the period of 1979-1993 was under 9%. These achievements made many economists consider the Chinese economy a gradual success. (McKinnon and Roland., 1994). The 1994 Fiscal Reforms in China were extremely successful in meeting the immediate challenges that the economy faced at the time—a sharply dropping GDP ratio and limited ability of the government to conduct macroeconomic policies (Godwin, K., 2006). This remains the basis of prosperity in China being one of the main reasons for Goldman to enter the market.

Goldman Sachs (2014) brings its powerful competitive assets to...
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