Strategy Analysis on the gambling industry with the example of MGM Mirage

Résumé du document

We selected the gambling industry as a group because we thought it would be interesting, challenging and because the industry has recently felt a new impulse with the internet. The gambling industry is not one of the most recent industries though, and to understand it fully we decided to analyse the gambling industry on a global scope. The casinos & gaming sector consists of all forms of online and traditional betting on sports, lotteries and slot machines, as well as gambling in casinos or bingo halls. The online segments of the sector include revenues generated from betting on all formats via the Internet. Market values represent net winnings for all operators. Depending on the type of game and its location, net winnings are typically 15-20% of total bets wagered. The global casinos and gaming sector operates differently from country to country, according to regulatory barriers, which often reflect the cultural acceptance of gambling in a particular country. For instance, in the US, sports betting, casinos and machines are the dominant gambling format, while in Japan pachinko machines are clearly the dominant form of gaming. In Europe, lotteries remain the dominant revenue source for the industry, although online gaming has steadily become an increasingly popular segment. Whilst gambling machines continue to provide the highest revenues for the US casino market, non-gaming operations such as restaurants, hotels and retail stores are an increasingly vital source of industry profits. The further loosening of online gambling regulations would trigger massive expansion within the industry, with Internet gambling already predicted to generate $1 billion in the US. Many of the leading US players are already developing online alternatives in anticipation of such a change. Regulatory issues remain one of the key factors limiting growth in the global casinos and gaming sector despite the fact that in recent years legislation has been relaxed in many countries. For example, in the US many states are moving to legalize or expand existing gaming activities, as the industry has proven to be a highly lucrative source of tax revenue for states where it is already legal. Meanwhile, in the UK, there will be a major shake-up of gambling legislation with the Gambling Act which will be put into action on the 1st of September 2007, which promises to propel a major boom in the domestic market. The Gambling Act will allow the creation of super casinos, in the style of facilities in Las Vegas.

Extraits

[...] It is expected that the Gambling Bill will ease some of the current bars to advertising, but prohibition in this area is still likely to be rolled back only slowly over the medium and long term, particularly given the government's new desire to protect children and the vulnerable from the dangers of gambling. The overall tone of the Gambling Bill will be deregulatory in nature and is likely to lead to further growth in the gambling market as a whole, both in participation and value. [...]

[...] Deregulation The one certainty facing the UK gambling industry is that it is about to undergo radical change as the government recasts the legislation governing it for the first time in almost 40 years. What the market has considerably less idea of, however, is the impact this major change in the law will have on business, both overall and on a sector-by-sector basis. The Gambling Act 2005 will be fully effective from September 2007, its main reforms being: Changing the regulatory and licensing structure of the industry Lifting some of the current restraints on commercial gambling, such as those relating to advertising Allowing remote gambling Establishing the Gambling Commission, which has taken over the duties of the former Gaming Board for Great Britain Introducing the three casino categories of regional, large and small Increasing the three categories of gaming machines to four, defined by different levels of stakes and prizes. [...]

[...] USA Casino industry is a mature market so need to think of news ways of attracting consumers i.e. possibly diversify with restaurants, hotels etc. Advertising will also aid this strategic option to remain competitive or sponsorship, membership deals and offers for first timers. By 2008 this sector is forecasted to have a value of $ 354.9 billion with a growth rate of since 2004. The rivalry is increasing in the gambling industry because it is becoming more popular as it is seen as morally correct now-a-days which has changed over the years as it was seen as a more taboo leisure activity which was not ethically acceptable. [...]

[...] MGM Mirage has none of those to struggle with as they are already operational in the market and one of the industry leaders. To maintain the position of world's second leader in the gambling industry, the company has to fight for market share, its customers and those of their competitors. High quality service and excellent marketing will be essential to achieve that goal. How the company will exploit their recently acquired strategic properties will also be important as the outcome will either be a waste of funds or a competitive advantage. [...]

[...] Source: Mintel Strategic Group Analysis The Strategic Group chart above illustrates the positioning of the different sectors in the industry with regards to Geographic Coverage and Technological Positioning. These two factors are very important variables in the industry. As you can see there is a trend in the positioning of the groups on the chart. The more geographic coverage they have, the higher the level of technological position. This may be because the industry is very competitive and the power of the technological position is what enables them to develop into other countries. [...]