Casino Industry Case Analysis

Topics: Gambling, Barriers to entry, Native Americans in the United States Pages: 6 (1739 words) Published: May 2, 2011
Casino Industry Case Analysis
There is a steady growth rate in gaming revenues taking effect in the casino industy around the United States. A number of factors are tied into the increase including new entrants to the casino industry and rival casino expansions. Through aspects of Porter’s Five Forces Model of Industry Competion: Rivalry among existing firms, the threat of new entrants, and the threat of substitues, this case analysis addresses key problems the casio industry is facing and implements stratiges they may use to tackles thoses issues. In addition, SWOT analysis (Strengths, Weaknesses, Opportunites, and Threats) will be used to facilitate the discussion. Through the Porters Five Forces Model of Competition, were identified three main problems: the threat of new entrants, the threat of new substitutes, and intensity of rivalry among competitors in the casino industry. The threat of new entrants refers to barriers that the competitive enviornment is placing on the potential newcomers. There are six sources of entry barriers: economies of scale, product differention, capital requirements, switching costs, access to distribution channels, and cost disadvantages independent of scale. The threat of substitutes refers to products and services that satisfy the customer in a manner that they provide a higher level of service and better economic competitiveness. Rivalry among existing firms refers to the fueds that takes place among competition in an industry which include the likes of price competition and advertising battles. The Strengths and Weaknesses of SWOT refer to the internal conditions of the firm-where your firm excels (strengths) and where it may be lacking relative to competitors (weaknesses). Opportunities and Threats are enviornmental conditions external to the firm. These could be factors either in the general environment or in the competive enviornment. The product differentiation is forcing casino industries to expand on existing resorts or build new more expensive and extravagant resorts in order to compete with it rivals. MGM Mirage is building the “City Center”, a $7 billion resort in Las Vegas. It will feature over the top qualities that will top all previous privately financed projects in American history. Byoyd Gaming is developing the “Echelon Place” which is the most expensive single casino at $4.4 billion in Las Vegas. In addition, Las Vegas Sands and the Palazzo based in Las Vegas are making expensive additions to their properties. Along with the increasing revenues in Las Vegas, waterbourne casinos have produced the greatest growth producing casinos at various rivers and lakes. They have generated $11 billion in revenue in 2006. Furthermore, The Borgata Hotel Casino in Atlantic City is in the process of a $2 billion renovation trying to make it a better place to visit. Additionally, casino hotels in Atlantic City are making rennovations to help bring in more customers such as Caesars, Trump Plaza, and Hilton. Finally, Native American casinos are increases across the U.S. and are becoming a powerful threat in the industry. Competition among existing firms is one of the key problems facing the casino industry. Based on 2006 revenue and income from Casino Journal’s National Gaming Summary, the top 5 leading casino industries in revenue were Native American casinos, Nevado casinos, Atlantic City casinos, riverboat casinos, and Western town casinos. (See graph below for figures). There is a large number of competition making the rivalry more intense. The top two revenue leaders Native Amercian casinos and Nevada casino are leaders for a reason. The general enviornment has influenced Native America casinos to become number one in revenue. With the passing of the Indian Gaming and Recreation Act of 1988, Native Americans now have authourization to offer gaming on tribal lands as a way to encourage their self-sufficiency. In addition, Native American casinos are exempt from federal...
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