Essay Instructions: My job for this paper is Part 5 and only part 5, I'm just showing you the whole project.
The two companies we are using are goldman sachs and wisdomtree investments
Specific Scholarly Research Paper Guidelines:
1. Introduction (why do you choose this topic, motivational aspects, benefits to learning, relationship to operations and supply chain management) ?" You MUST cite references in your narrative (2-3pp)
2. Discussion on various supply chain stages: That is, detail
Supplier ?" Manufacturer ?" Distribution ?" Retail ?" Customers
How these are accomplished now? What are the gaps, if any?
Also, pay attention to Up Stream and Downstream Strategies,
Which also means, Front Office and Back Office Strategies.
Remember, you should consider material, information, and service flows. You MUST cite references in your narrative (3-5 pages)
3. Integration (or, lack of integration) of E-Commerce and Globalization
aspects in Supply Chain Management. Why? Why not? How do they
manage capacity and demand imbalances? ?" include citations (3-4p)
4. What Business Model Pursued by your company, or, topic? Provide a figure or chart to illustrate the model. Is it working? Is it creative? Does it add value? Do they create multiple values at various stages of supply chain? ?" include citations (3-5 pages)
THIS IS THE ONE YOU HAVE TO DO------->5. Suggest improvements to existing Business Model, which includes improvements in Operations/Supply Chain activities, both physical and information flows, and strategies (figures) ?" citations (2-3p) ..Format for the paper is question #. Next line "written by": in the center and then rewrite your question and then write your paper and than add your bibliography.
Here is part 4's final paper without the graphs if you want to take a look for reference.
Brendan Petersen
Team 1 ?" Paper Part 4
4. What Business Model pursued by your company, or topic? Provide a figure/chart to illustrate the model. Is it working? Is it creative? Does it add value? Do they create multiple values at various stages of the supply chain? Include any citations.
The two firms discussed in this paper operate using two completely different business models with varying success in the same industry. A business model is the methodology/process of operations which the firm expects to generate revenue. Goldman Sachs’ business model has more depth and spans a broader range on the financial services and products industry, whereas WisdomTree Investments has a specific and focused approach to a singular financial product. It’s also clear that different levels of success accompany these two vastly different models.
As stated earlier, the business model applied by Goldman Sachs generates revenue from numerous areas of the financial service and products industry. The firm is continually looking for ways to improve the business model to fit current economic and political environments to find ways to best serve their clientele (Touryalai, 2011). Goldman Sachs’ business is broken into multiple segments; the four segments which provide the firm with revenue are Institutional Client Services, Investing & Lending, Investment Management, and Investment Banking. The chart below provides sub-sections which each of the four areas of the firm, and it’s clear that Goldman Sachs is an integral part of much of the supply chain within the financial products and services industry.
Next we will look at the annual revenues earned by each of the four business segments of Goldman Sachs from 2010 to 2012.
Institutional Client Services is where Goldman Sachs earns the majority share of its revenue. In this business segment the firm provides clients interested in buying or selling financial products (derivatives, equities, capital market securities, etc.), managing financial risk, or raising funds with various services. The firm takes on the integral role of the market maker, essential to the supply chain within the financial products and services industry. Market makers help put buyers and sellers of financial products together while managing the flow of transactions dealing with financial products. Without market makers, institutions, investors and other businesses would face limited liquidity and the markets would be inefficient. Goldman has proven to be very successful in this area of the supply chain, and have delivered great value to its clients by continuing to improve the efficiency of price discovery while facilitating a smooth flow of funds through the financial products market (Goldman Sachs 2012 Annual Report). To provide a specific example, let’s look at an airline that faces fuel price volatility risks. They could come to Goldman Sachs whom would tailor make a derivative financial product which would eliminate a great portion of that risk, while collecting a small fee for doing so. Without this expertise the airline company would be forced to pay whatever the market rate was for fuel which could lead to higher ticket prices that consumers wouldn’t pay. Or in the case of a farmer who will be farming corn in the future, he can come to Goldman Sachs and lock in a price today that he will sell his/her corn at in 6 months when harvested. Now this farmer will know exactly how much income they can expect to have from the harvest allowing for less risk and greater ability to plan for the future. Clients derive great value from Goldman Sachs playing a pivotal role in this area of the financial products and services supply chain.
Goldman Sachs Investing & Lending department focuses on the development and management of a globally diverse portfolio in securities ranging from debt to equities, while also fostering client relationships through lending practices. By providing clients with loans, the firm keeps the clients in house for as many as their needs as possible. Typical borrowers include high-net worth individuals (whose assets the firm may manage) as well as corporations. The firm’s Investment Banking sector fills a necessary role within the financial services industry. Here the firm provides corporations and governments around the world with financial advisory services on business issues including mergers and acquisitions and restructuring, while helping manage capital and liability exposure. These services provide an essential aspect of the supply chain within the financial services industry that left undone, would hinder expansion, increase risk, and limit investment opportunities. Underwriting is the process of being the intermediary between a firm who is trying to raise capital, and the market who would be lending to or buying the firm. Goldman Sachs manages all the relevant underwriting aspects of initial public offerings (IPO’s) for both debt and equity securities. For example, if a private company wants to go public, Goldman Sachs would handle the legal and financial analysis aspects of an initial public offering for the firm. Without expertise in this area of the financial services supply chain, firms would face numerous potential legal and financial liabilities exposing them to far greater risk. The firm generates fees for underwriting as well as any consulting/advisory services rendered to clients. The last sub-section of Goldman Sachs business is Investment Management, where the firm provides wealth and investment management services to high-net worth individuals. The firm can customize exposure and risk to fulfill each clients specific demands over a broad range of financial products including real estate, commodities, currencies, and mutual funds/hedge funds. In many cases, the firm also works to limit tax liabilities through the use of trusts and derivatives to reduce client’s effective tax rates (Goldman Sachs 2012 Annual Report).
Goldman Sachs business model, and the four sub-sections they derive revenue from, is evidently successful. The firm routinely makes billions in profit per quarter, while being one of the most efficient and highly respected firms in the industry. They’ve been able to boost their success with a realignment of their clients’ interests alongside their own, producing a client first rather than firm first approach (Rothnie, 2008). Goldman Sachs is involved in most, if not all aspects of the financial services and products industry supply chain including financial product origination, advisory services, loans/fund generation, and overall banking needs. Clients clearly reap benefits and value from these services or the firm wouldn’t continue to be so regularly employed for advisory services, underwriting, or other areas of their business.
WisdomTree Investments is a firm whom focuses on the creation and development of exchange traded funds, a specific sub-section of the financial products industry. In their simplest form, exchange traded funds are essentially mutual funds which are traded on an exchange. WisdomTree Investments earns ETF advisory fees for the generation of ETF idea’s which are implemented into actual funds. These financial products provide higher liquidity and lower expense ratios than mutual funds, making them an attractive alternative investment product (WisdomTree Investments 2011 Annual Report). The firm delivers value in a niche area of the supply chain of the financial products industry. The products developed by the firm fill the needs of individual investors, a variety of investment funds, and institutions who desire specific financial exposures (Business Wire, 2006). For example, if an individual wants some exposure to Japanese equities, but isn’t sure of which specific stocks to choose, the investor could purchase WisdomTree’s DXJ Japanese Hedged Equity ETF to get a basket of Japan tied securities. The firm prides itself on being the only publicly traded asset management firm that focuses only on ETF’s, and are one of the few firms offering actively managed ETF’s. Standard ETF’s use index’s for weighting the securities held in the fund, whereas actively managed fund’s rely on a set of guidelines for asset allocation as set by the ETF generator. Below is a graph showing ETF Advisory Fees generated by WisdomTree Investments and the firms Net Income (Loss) over the same time frame.
As is clear in the graph shown above, WisdomTree lost money in 2009 and 2010 but was able to just pull off a slight profit in 2011 (WisdomTree Investments 2011 Annual Report). It’s quite clear that the WisdomTree isn’t nearly as successful as Goldman Sachs, who generates billions in profit per year.
Goldman Sachs and WisdomTree Investments are two vastly different companies within the financial services and product industry. They operate using different business models and the scope of operations varies widely between the two companies. WisdomTree’s sole source of revenue is ETF advisory fees for ETF product development whereas Goldman Sachs has numerous revenue streams from taking part in many areas of the financial services and products supply chain.
Bibliography
1) Touryalai, Halah. "What's Worrying Goldman Sachs These Days?." Forbes.Com (2011): 41. Business Source Premier. Web. 10 Mar. 2013.
2) Rothnie, David. "Goldman Sachs Braced For 'Momentous' Change." Euroweek 1073 (2008): 73. Business Source Premier. Web. 10 Mar. 2013.
3) Goldberg, Lena G., and Tiffany Obenchain. “Goldman Sachs: A Bank for All Seasons (B).” Harvard Business School Cases (2009): 1. Business Source Premier. Web 12 Mar. 2013.
4) "WisdomTree Trust Creates New Investment Category with Launch of 10 International Sector ETFs." Business Wire: 0. Oct 13 2006. ProQuest. Web. 12 Mar. 2013 .
5) Steinert-Threlkeld, Tom. "Next Big Thing? Actively Managed ETFS. Maybe." Money Management Executive 20.19 (2012): 1-10. Business Source Premier. Web. 12 Mar. 2013.
6) Goldman Sachs 2012 Annual Report (10-K) sourced from - http://www.goldmansachs.com/investor-relations/financials/current/10k/2012-10-K.pdf
7) WisdomTree Investments 2011 Annual Report (10-K) sourced from-
http://files.shareholder.com/downloads/AMDA-FPEXM/1x0x568762/1A0004CB-48EC-4C2E-B5F6-0C3FE462003F/WisdomTree-Annual-Report-Form-10-K.pdf
