Description
Casino Case Analysis
ESTEL analysis Porte's five, strategy and recommendations
1
SUNY College at Old Westbury
Business Policy and Strategy BU5190
Instructor: Dr. Shalei Simms
Student: Nadezda Cirino
Date: February 13, 2014
Casino Case Analysis
Story of the company (Summary): Casinos are facilities that allow legalized gambling
activities. From its early beginnings, casinos have assumed that role. Recently, they have
evolved into entertainment centers while retaining their origins. Casino gaming has become a
part of the entertainment scene in many parts of the United States. But due to economic
slowdown even the most successful casinos in Las Vegas and Atlantic City suffered lost in their
revenues. In addition to the economic slowdown, these gambling locations are also facing new
competitors like Native American casinos and new international locations like Macau, the threat
on new alternatives like Internet gambling also raises the question about the future of casino
industry. Though there many external factors that effect the casino industry, the industry leaders
like Las Vegas Strip and Atlantic City casino continue they success by increasing their
attractiveness and accessibility to visitors.
Strategic Dilemma is the possible impact of rapid increase in numbers of casinos and
availability of the Internet gambling on the revenue growth of gambling centers such as Las
Vegas and Atlantic City.
External Environmental Analysis.
PESTEL analysis:
-Political Trends. The expansion of gaming will continue, but companies will be subject to
continuing critical observation by government. Although many gaming regulations are made at
the state and local level, the federal-level influence of the casinos industry has grown through
both campaign donations and lobbying efforts. Much of the motivation for this increased
spending is the desire to minimize federal regulations. Influencing legislation attempting to stem
the rise of Internet gambling is also a factor. The gambling industry includes a sub-category of
Indian gaming, which is federally regulated.
-Economical Trends. Economical slowdown caused lost of visitors for casinos. Many people
2
either delayed their trips to casinos or found casino activities closer to the place where they live.
-Sociocultural Trends. Existing casinos are becoming more expensive, luxurious and world-class
havens for entertainment and gambling. In addition to existing and thriving casino businesses in
traditional hotspots such as Las Vegas and Macau, development of new locations worldwide is
bound to push the boundaries for future growth and expansion. Social networking and electronic
gaming will make further, behind-the-scenes steps toward a convergence that could, at some
point, be the “next big thing” in gaming.
-Technological Trends. Slot Machines help casinos to maintain high revenues. Coin-operating
slot machines typically account for almost two-thirds of all casino gaming revenues. Most slot-
machine manufactures work on design of new cashless coin-free gaming by switching to the use
of tickets.
-Legal Trends. Since 1988 more and more states started legalizing the operation of business
activities. Almost in half of the states casino is allowed in some kind of form. Therefore
completion is developing all over the country, including riverboat casinos and Native American
casinos.
-Environmental trends. Recent trends suggest that major global gambling companies are looking
to move large sections of their business online but are however faced with a strict regulatory
environment.
Porter’s five forces analysis.
-Rivalry between competitors is a very strong force. The widespread of casinos including those
on riverboats lead to more heavy competition for players and forces casinos to compete in prices
and advertising battles.
-Power of buyers is strong. There are many competitors including various locations outside the
USA like Sands Macau, therefore the cost to switch casino is low.
-Power of suppliers is weak due to increase in number of casinos and decline in demand.
-Threat of new entrance is high. Due to new laws many states allow gambling activities. Many
casinos are opening all over the country, including casinos in Native American’s reservations. In
addition simple slot machines can be installed in many venues.
-Threat of substitutes is also high. Tough Internet gambling is not allowed in the US, more than
2000 offshore sites generate about $15 million in revenue using electronic payments from
3
American players. The growth of popularity of slot machine that could be installed in other
entertainment facility like race tracking may reduce casino visits.
Competitive environment.
Casinos across the country have suffered due to threat of new competition and substitute
products. Also a worldwide economic slowdown will act as a cooler for gambling profits. The
consumption of gambling is likely to be the first item that consumers will cut from their budgets.
Internal Analysis.
Strengths: Both Las Vegas and Atlantic City Casinos have strong senior management team.
Majority of these casinos are extremely well managed.
I think one of the advantages and strengths that Atlantic City has is its geographical location. It
has tens of millions of people within a very short driving distance who not only come and enjoy
a number of different gaming experiences, but a number of dining experiences and a number of
entertainment experiences.
The main strength of Las Vegas is its great entertainment and atmosphere. Las Vegas strip
casinos always offer the best entertainment. You can find a great concentration of entertainment
and options for a getaway in Las Vegas Strip.
Weaknesses: One of the weaknesses of Atlantic City is bad perception by people; it has a
reputation that the city that is not as safe and as not as clean.
The weakness of the Las Vegas casinos is their location; it’s a desert that is pretty far from many
locations. They highly relay on airlines, if airlines cut service to Las Vegas it may have
significant impact the business.
Corporate-level strategies.
- Business level strategy. Vegas and Atlantic City casinos have players from all demographical
segments, however they try to attract higher-roller segment, which could bring millions of
revenue. Also the casinos lunch new type of activities. Casinos offer hotel rooms, fine dining,
great shopping and top entertainment that lets them generate extra income. They maintain their
customer base by providing them with extra perks like complimentary beverages, rooms, show
tickets and other rewards. Las Vegas Casino tries to maintain its cool image of fun nightlife “
What happens in Vegas, stays in Vegas”. They focus on nightclubs and adult shows.
- Corporate-level strategy (diversification). Many casinos try renovating and developing of new
properties. A large number of casinos try to differentiate by creating different themes such
4
medieval castle, private ship or movie studio. Golden Nugget spent $150 million on renovation,
while the renovation of the Revel casino cost $2.8 billion.
- Geographic expansion. Vegas and Atlantic City casinos seek their expansion through more
properties and new games.
- Consolidation is another strategy that is used by casinos. In 2004 Harrah bought Caesars that
let them to become the nation’s leading operator of casinos with properties on both coasts.
Meanwhile, MGM Mirage doubled its number of casinos in Las Vegas Strip by purchasing the
Mandalay Resort Group.
Companies’ performance.
Though casinos have spread all over the country Las Vegas and Atlantic City still have a
dominating position. These two locations generate one third of the total revenue generated by all
forms of casino in the Unites states.
The spread of casinos may bring multiple benefits for its perspective stakeholders. The greatest
perceived benefits are:
- Increased employment
- Greater tax revenue to state and local governments
- Growth in local retail sales.
State governments use casino tax revenue for various programs, but public education seems to be
the favored destination for casino tax revenue in many states. In fact, states often promote how
much money from casino revenue is earmarked to public education.
There are however some disadvantages that are observed. Crime is one of them, those
who argue against the presence of casinos in their communities argue that crime rates increase.
Despite stiff gambling laws, cheating persists and some believed that some operators do not pay
full taxes. In some lax or improperly managed casinos, drugs, alcohol and prostitution exist and
are either tolerated or ignored. Addiction to gambling is another one, there are also gamblers
who become pathologically addicted to gambling that their lives and their families suffer as a
result.
Competitive Advantage.
The competitive advantage of Las Vegas casinos is its great entertainment and an
amazing nightlife. Players go there to experience the atmosphere of real gambling and Vegas
environment. One of the competitive advantages of Atlantic City casinos is their location.
5
Theses casinos are very accessible for people in east coats. These casinos in addition to great
shopping and dining can offer a beach and broadwork.
Diagnose.
Both groups of casinos successfully utilize their strengths. Las Vegas casinos remain
their leading position by generating the highest income. While Atlantic City casinos benefit from
its desirable location that is accessible to most people who live on east coats and attracting tourist
by their beautiful beach.
Casino industry has many great opportunities. For example, declining state budgets may force
them to think of more creative ways to increase revenues. One opportunity lies in casinos, which
produce immediate cash flow to states. Looks for the number and size of casinos to expand
nationwide. This will benefit any casino that wins a contract to operate. Domestic Tourism is
another great opportunity. Tourist may resist going abroad for expensive vacations, especially
in a recession, but they could be willing to visit domestic tourism spots such as Las Vegas and
Atlantic City.
However, there are also some significant threats. The biggest threat today is growing competition
from of the variety of sources. Though the biggest of them is the raising number of Native
Americans Casinos which a likely to increase their market share in the next few years. The
business also affected by operation of international gaming locations like Macau, an Asian
market that is experiencing strong and growing visitation and consumer demand trends. Another
threat is change in laws and regulations. For example if US permit online gambling it may hurt
the business by lost of income.
Feasible Solutions.
1. Redevelop players’ club benefits to appeal to local customers, including adjustments to direct
mail offers, promotions and other play-based benefits.
2. Develop TV and radio advertisements, manage bran reputation.
3. Atlantic City casino should introduce more alternative entertainment.
4. Research Potential Online Gaming Program.
5. Expansion to countries such as Japan, Korea, Taiwan, Vietnam, and Thailand.
Final recommendation.
Though there is a steady growth rate in gaming revenues taking effect in the casino
industry around the United States, Vegas and Atlantic City casinos need to be ready to compete
6
in condition of higher competition. To achieve their goal as a leader in gaming industry and
entertainment, they need to keep actively pursuing the development of new gaming opportunities
and reinvesting in the success of their existing operations. They also need to attract more people
who are interested in more than gaming, but entertainment as a whole experience. In order to
achieve these goals, casinos need to continue their financial success by:
- Offering their guests excellent customer service and the latest exciting casino entertainment
- The construction of the new waterfront casinos in Atlantic City, integrate resort and dining
reservation capabilities, utilize the benefits of beach and broadwork
- Update technology, lunch mobile apps, post pictures on Facebook and Instagram
- Use social media to promote events and promotions to local customers
- Adding value to the local communities through responsible operations, employment and
development of business associate relationships
doc_113077066.docx
Casino Case Analysis
ESTEL analysis Porte's five, strategy and recommendations1
SUNY College at Old Westbury
Business Policy and Strategy BU5190
Instructor: Dr. Shalei Simms
Student: Nadezda Cirino
Date: February 13, 2014
Casino Case Analysis
Story of the company (Summary): Casinos are facilities that allow legalized gambling
activities. From its early beginnings, casinos have assumed that role. Recently, they have
evolved into entertainment centers while retaining their origins. Casino gaming has become a
part of the entertainment scene in many parts of the United States. But due to economic
slowdown even the most successful casinos in Las Vegas and Atlantic City suffered lost in their
revenues. In addition to the economic slowdown, these gambling locations are also facing new
competitors like Native American casinos and new international locations like Macau, the threat
on new alternatives like Internet gambling also raises the question about the future of casino
industry. Though there many external factors that effect the casino industry, the industry leaders
like Las Vegas Strip and Atlantic City casino continue they success by increasing their
attractiveness and accessibility to visitors.
Strategic Dilemma is the possible impact of rapid increase in numbers of casinos and
availability of the Internet gambling on the revenue growth of gambling centers such as Las
Vegas and Atlantic City.
External Environmental Analysis.
PESTEL analysis:
-Political Trends. The expansion of gaming will continue, but companies will be subject to
continuing critical observation by government. Although many gaming regulations are made at
the state and local level, the federal-level influence of the casinos industry has grown through
both campaign donations and lobbying efforts. Much of the motivation for this increased
spending is the desire to minimize federal regulations. Influencing legislation attempting to stem
the rise of Internet gambling is also a factor. The gambling industry includes a sub-category of
Indian gaming, which is federally regulated.
-Economical Trends. Economical slowdown caused lost of visitors for casinos. Many people
2
either delayed their trips to casinos or found casino activities closer to the place where they live.
-Sociocultural Trends. Existing casinos are becoming more expensive, luxurious and world-class
havens for entertainment and gambling. In addition to existing and thriving casino businesses in
traditional hotspots such as Las Vegas and Macau, development of new locations worldwide is
bound to push the boundaries for future growth and expansion. Social networking and electronic
gaming will make further, behind-the-scenes steps toward a convergence that could, at some
point, be the “next big thing” in gaming.
-Technological Trends. Slot Machines help casinos to maintain high revenues. Coin-operating
slot machines typically account for almost two-thirds of all casino gaming revenues. Most slot-
machine manufactures work on design of new cashless coin-free gaming by switching to the use
of tickets.
-Legal Trends. Since 1988 more and more states started legalizing the operation of business
activities. Almost in half of the states casino is allowed in some kind of form. Therefore
completion is developing all over the country, including riverboat casinos and Native American
casinos.
-Environmental trends. Recent trends suggest that major global gambling companies are looking
to move large sections of their business online but are however faced with a strict regulatory
environment.
Porter’s five forces analysis.
-Rivalry between competitors is a very strong force. The widespread of casinos including those
on riverboats lead to more heavy competition for players and forces casinos to compete in prices
and advertising battles.
-Power of buyers is strong. There are many competitors including various locations outside the
USA like Sands Macau, therefore the cost to switch casino is low.
-Power of suppliers is weak due to increase in number of casinos and decline in demand.
-Threat of new entrance is high. Due to new laws many states allow gambling activities. Many
casinos are opening all over the country, including casinos in Native American’s reservations. In
addition simple slot machines can be installed in many venues.
-Threat of substitutes is also high. Tough Internet gambling is not allowed in the US, more than
2000 offshore sites generate about $15 million in revenue using electronic payments from
3
American players. The growth of popularity of slot machine that could be installed in other
entertainment facility like race tracking may reduce casino visits.
Competitive environment.
Casinos across the country have suffered due to threat of new competition and substitute
products. Also a worldwide economic slowdown will act as a cooler for gambling profits. The
consumption of gambling is likely to be the first item that consumers will cut from their budgets.
Internal Analysis.
Strengths: Both Las Vegas and Atlantic City Casinos have strong senior management team.
Majority of these casinos are extremely well managed.
I think one of the advantages and strengths that Atlantic City has is its geographical location. It
has tens of millions of people within a very short driving distance who not only come and enjoy
a number of different gaming experiences, but a number of dining experiences and a number of
entertainment experiences.
The main strength of Las Vegas is its great entertainment and atmosphere. Las Vegas strip
casinos always offer the best entertainment. You can find a great concentration of entertainment
and options for a getaway in Las Vegas Strip.
Weaknesses: One of the weaknesses of Atlantic City is bad perception by people; it has a
reputation that the city that is not as safe and as not as clean.
The weakness of the Las Vegas casinos is their location; it’s a desert that is pretty far from many
locations. They highly relay on airlines, if airlines cut service to Las Vegas it may have
significant impact the business.
Corporate-level strategies.
- Business level strategy. Vegas and Atlantic City casinos have players from all demographical
segments, however they try to attract higher-roller segment, which could bring millions of
revenue. Also the casinos lunch new type of activities. Casinos offer hotel rooms, fine dining,
great shopping and top entertainment that lets them generate extra income. They maintain their
customer base by providing them with extra perks like complimentary beverages, rooms, show
tickets and other rewards. Las Vegas Casino tries to maintain its cool image of fun nightlife “
What happens in Vegas, stays in Vegas”. They focus on nightclubs and adult shows.
- Corporate-level strategy (diversification). Many casinos try renovating and developing of new
properties. A large number of casinos try to differentiate by creating different themes such
4
medieval castle, private ship or movie studio. Golden Nugget spent $150 million on renovation,
while the renovation of the Revel casino cost $2.8 billion.
- Geographic expansion. Vegas and Atlantic City casinos seek their expansion through more
properties and new games.
- Consolidation is another strategy that is used by casinos. In 2004 Harrah bought Caesars that
let them to become the nation’s leading operator of casinos with properties on both coasts.
Meanwhile, MGM Mirage doubled its number of casinos in Las Vegas Strip by purchasing the
Mandalay Resort Group.
Companies’ performance.
Though casinos have spread all over the country Las Vegas and Atlantic City still have a
dominating position. These two locations generate one third of the total revenue generated by all
forms of casino in the Unites states.
The spread of casinos may bring multiple benefits for its perspective stakeholders. The greatest
perceived benefits are:
- Increased employment
- Greater tax revenue to state and local governments
- Growth in local retail sales.
State governments use casino tax revenue for various programs, but public education seems to be
the favored destination for casino tax revenue in many states. In fact, states often promote how
much money from casino revenue is earmarked to public education.
There are however some disadvantages that are observed. Crime is one of them, those
who argue against the presence of casinos in their communities argue that crime rates increase.
Despite stiff gambling laws, cheating persists and some believed that some operators do not pay
full taxes. In some lax or improperly managed casinos, drugs, alcohol and prostitution exist and
are either tolerated or ignored. Addiction to gambling is another one, there are also gamblers
who become pathologically addicted to gambling that their lives and their families suffer as a
result.
Competitive Advantage.
The competitive advantage of Las Vegas casinos is its great entertainment and an
amazing nightlife. Players go there to experience the atmosphere of real gambling and Vegas
environment. One of the competitive advantages of Atlantic City casinos is their location.
5
Theses casinos are very accessible for people in east coats. These casinos in addition to great
shopping and dining can offer a beach and broadwork.
Diagnose.
Both groups of casinos successfully utilize their strengths. Las Vegas casinos remain
their leading position by generating the highest income. While Atlantic City casinos benefit from
its desirable location that is accessible to most people who live on east coats and attracting tourist
by their beautiful beach.
Casino industry has many great opportunities. For example, declining state budgets may force
them to think of more creative ways to increase revenues. One opportunity lies in casinos, which
produce immediate cash flow to states. Looks for the number and size of casinos to expand
nationwide. This will benefit any casino that wins a contract to operate. Domestic Tourism is
another great opportunity. Tourist may resist going abroad for expensive vacations, especially
in a recession, but they could be willing to visit domestic tourism spots such as Las Vegas and
Atlantic City.
However, there are also some significant threats. The biggest threat today is growing competition
from of the variety of sources. Though the biggest of them is the raising number of Native
Americans Casinos which a likely to increase their market share in the next few years. The
business also affected by operation of international gaming locations like Macau, an Asian
market that is experiencing strong and growing visitation and consumer demand trends. Another
threat is change in laws and regulations. For example if US permit online gambling it may hurt
the business by lost of income.
Feasible Solutions.
1. Redevelop players’ club benefits to appeal to local customers, including adjustments to direct
mail offers, promotions and other play-based benefits.
2. Develop TV and radio advertisements, manage bran reputation.
3. Atlantic City casino should introduce more alternative entertainment.
4. Research Potential Online Gaming Program.
5. Expansion to countries such as Japan, Korea, Taiwan, Vietnam, and Thailand.
Final recommendation.
Though there is a steady growth rate in gaming revenues taking effect in the casino
industry around the United States, Vegas and Atlantic City casinos need to be ready to compete
6
in condition of higher competition. To achieve their goal as a leader in gaming industry and
entertainment, they need to keep actively pursuing the development of new gaming opportunities
and reinvesting in the success of their existing operations. They also need to attract more people
who are interested in more than gaming, but entertainment as a whole experience. In order to
achieve these goals, casinos need to continue their financial success by:
- Offering their guests excellent customer service and the latest exciting casino entertainment
- The construction of the new waterfront casinos in Atlantic City, integrate resort and dining
reservation capabilities, utilize the benefits of beach and broadwork
- Update technology, lunch mobile apps, post pictures on Facebook and Instagram
- Use social media to promote events and promotions to local customers
- Adding value to the local communities through responsible operations, employment and
development of business associate relationships
doc_113077066.docx