GOLDMAN SACHS

International investment bank, Goldman Sachs

International investment bank, Goldman Sachs

Introduction

Investment banking is a key activity in the provision of corporate financial services in all countries which have a developed private sector economy. The principal activities of investment banking are the raising of capital for corporations and the provision of advice on mergers and acquisitions. To raise capital, investment bankers originate, structure and sell corporate securities in order to raise funds for client companies. Additionally, providing advice on initiating and implementing mergers and acquisitions involves investment bankers in identifying suitable partners or target companies for acquisition, valuing the transaction and negotiating appropriate terms.

During the past 20-30 years there has been an ever growing demand for these services and, more recently, major changes have been occurring leading to rapidly increasing competition and over-capacity. This has led to a recognition of the potential contribution of marketing to the industry.

This article examines the marketing of investment banking services and reviews critically the theoretical frameworks provided by the literature in the marketing of services field. Through this and based on in-depth research interviews with 12 of the largest London-based investment banks, a discussion of current marketing practices identifies the critical marketing management issues facing the industry. Finally, an attempt is made to suggest an “infant” theory of marketing of investment banking services that can guide the analysis of marketing practice in this industry.

Goldman Sachs seems to have it all. They have the respect of their customers and their competitors on a global scale. They achieve consistently outstanding trading results. Surprisingly in the macho world of banking they offer enlightened human resources practices. Growth is a given. Managing risk is embraced as part of the landscape. Can it last? It would certainly seem so, although admittedly with a few worrying signs to the contrary. Going public in 1999 stripped away some of the cloak of secrecy and invincible mystique. Yet even when a torch is shone into the darkest corners the prognosis still looks reasonably good. So what is their secret?

Risky business?

In summing up the progress thus far, a picture emerges of a business that is driven to succeed, willing to take risks, but has taken the necessary steps to open up the talent pool. It is a business that has thrived in some very good times on the capital markets. Recently the picture has become less certain. Will the good times continue to roll?

Certainly the risks are getting bigger for Goldman Sachs and their mainstream competitors. Strategies adopted to continue the growth include:

* as previously discussed, investing the banks' own money internationally, including in some of the world's most volatile markets;

* using the banks' own cash to facilitate clients' large scale trades, including in the risky area of hedge funds;

* putting up the finance for hedge funds;

* creating hedge funds of their own; and

* acquiring struggling companies (including in markets such as China) and seeking to achieve corporate turnaround and a profit on the ...