Casino Industry Case - Case studies vary from subjects and topics PDF

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CASE # 19 THE GLOBAL CASINO INDUSTRY The Global Casino Industry Case is an interesting study in the argument for establishing of an in-depth analysis of the US casino industry. The case sheds light on essential aspects of the casino industry in order to understand the factors responsible for driving the casino industry, as well as, provides valuable information regarding different initiatives taken by the firms in this industry, and yet it also suggests some alternatives to ameliorate the situation. US have been a leading player in the casino industry for more than five decades. It was able to grab half of the global casino revenues till 2010. Las Vegas and Atlantic City were the blue eyed boys of the global casino industry and ruled it for a long period. Over the last decade, the dynamics of the casino industry have changed significantly and have resulted in declining of profitability of the US casino industry. There are a number of factors that have led to such shift; therefore, it is immensely important to have a meticulous analysis of all those factors which have, covertly or overtly, led the industry to such a situation. These factors are analyzed using Porters five forces model in this paper. The most significant factor, among all others, is the acute increase in competition in this industry. Initially, Las Vegas and Atlantic City were the hub of gambling for gamblers coming from all over the world. But as gambling legalized in several other states: to mount the collection of tax revenues and promote tourism, their market share declined. The competition was further fueled by entrance of the across-the-border competitors. A major blow to the revenues of the US casino industry was received by the development of casinos in Macau. Now, Macau has become the market leader with revenues of $48 billion, pushing US to number two in the ranking with 1

the revenues of $35 billion. Other competitors in the global casino industry are: Singapore, Australia, South Korea, Malaysia, Philippines as well as Japan, Vietnam, Taiwan and Sri Lanka are among potential competitors. In casino industry, the bargaining power of the buyers is very high as the switching costs for the customers are very low. Moreover, there are a number of substitutes available to them. For instance: online gambling, lottery tickets etc. Premium services are offered by different casinos to attract and expand their customer base. Solaire, recently opened in Manila offered a private jet pick up service to big spenders from all across the China. Similarly, many other attractive offers are made by casinos all over the world to enhance their market share in the global casino industry. The bargaining power of the suppliers in this industry is less as most of the casinos offer similar services. It is very difficult for them to differentiate themselves on food or gaming, yet the competitive advantage of one casino over the others relies on providing higher level of entertainment it by contracting popular entertainers and creating exotic entertainment opportunities. Now, to counter the changing dynamics of the casino industry, many firms have taken numerous initiatives to reduce the industry forces. The existing players have invested heavily to restrict the entry of new entrants. The entry of the new competitors is reduced by development of extravagant new properties by existing players. For instance, the development of $8.5 billion minicity spread over 67 acres that includes luxury hotels, shops and restaurants in Las Vegas by MGM. Premium incentive plans are offered to big spenders by the casinos to retain them. Rewards offered in the forms of loyalty programs are also a useful tool to reduce competition in

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the industry. Mergers and acquisitions of large casino and hotels chains has also proved to be an important instrument used by existing player to discourage new entrants as well as competition in the industry. Also, the increase in campaigns against corruption all over the world has resulted in decline in traditional gambling and an increase in non-gambling activities in the casino industry. Consequently, the important question is: what steps should be taken by the managers to enhance the profitability of the US casino industry? The answer to this pertinent question lies in the very basis principal of life that states that it is always the fittest who survives. Therefore, it is essential to adapt to the changes in the industry. There is an urgent need to focus on the new segment of customers that has emerged in this industry with demands other than gambling. These customers are younger compared to traditional old gamblers. They demand non-gambling activities such as cinemas, shops, restaurants, spas and even concerts, boxing matches, bollywood award ceremonies and other recreational activities. For instance, about $2 million revenues were collected by shops inside the Sands Casinos in Macau. Las Vegas and Atlantic City provide less entertainment opportunities to its customers other than gambling. Other than that, there is a need to build more extravagant properties that offers state of the art luxuries and also fulfill the intense responsibility of quality assurance in the services offered to its customers. Some scrupulously designed loyalty programs, coupled with careful implementation and followed by systematic review by the casinos will result in an enhanced retention rate of the customers. Nevertheless, US is still one of the big sharks in the global casino industry and by incorporating aforementioned measures, it will restore its position.

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