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Exercise Intensity of Competition in the Casino Industry STRUCTIONS Read the following description of the casino gambling industry Prespond to the Questions that follow in order to evaluate the intensity of the forces and the impact on the profitability that can be attained in the industry The Casino Gambling Industry in the United States: Expansion and Competition he overall gaming industry consists of Casinos, par mutuel wagering those racine dog racing, and jaialail, tribal gaming operations, and loteries Casino mingi the largest part of the overall gaming industry, and the most recognitable form of the casino segment is the Las Vegas-style properties. Also included in the segmentare riverboats, card rooms, and racetrack casinos (known as racines Although the economic recession over the past few years resulted in les casino revenues for the industry, 2011 showed a slow but steady recovery. In 2011, grogaming revenues amount of money wanted less the winning paid to players totale $35.64 billion increase of 3% compared to 2010. hle 6,1 is a breakdown of casino gambling revenge TABLE 6.1 CASINO GAMING REVENJE TREND BILLIONS 2002 528) 2000 2001 39117 2001 $32.77 2000 $3527 2007 $37.52 2000 50023 2000 342 2011 33564 The casino gambling Industry is highly regulated and is one of the most used industries in the United States State governments are the primary regulations, and as wary by state. The money collected through state and local taxes fonds programech * education, infrastructure projects, youth and senior service and public safety. At the federal level, casinos are required to comply with regulations cated with financial institutions (banks and money lending organizations due to the large amount of money Session Forms. Aftecting Competitive Strategy that is transferred on the casino floor. The 1983 Bank Secrecy Act amendment added casinos to the financial institution list to prevent money laundering. The act requires that casinos report every deposit, withdrawal, exchange of currency, or any other transfer of more than $10,000. Of the 22 states that have approved commercial casino gambling through 2011, 15 had increases in gross gaming revenues in 2011 and 13 had increases in gaming tax contribution Entertainment Complexes Commercial casinos in Las Vegas and other centers have added congaming entertainment components, such as spas, retail shopping, restaurants, golf course, and theaterstyle shows. These nogaming components provided a way for properties to differentiate from the competition and to boost the bottom line. Native American Casinos The Indian Gaming Regulatory Act of 1988 gave Native American tribes the right to negotiate for the development of a gaming facility. Based on data from the federal regulatory agency known as the National Indian Gaming Commission, more than 200 of approximately 550 Native American tribes in the United States own and/or operate caninos in the nation. The highest volume projects are on Mohegan and Mashantucket Pequet land in Connecticut The growth of Native American-owned gamint creates opportunities for other casino companies to provide management services. Although outsiders cannot own Native American gambling facilities, they are allowed to manage properties under contract. It is expected that the Indian Gaming Regulatory Act will be extended to cover Internet gambling Industry Structure The U.S. casino gambling industry has become more consolidated over time due to acquisitions and internal growth. The largest company, ranked by casino winning is Coeurs Entertainment Corp. This company was takim private in 2007 Internationally, the industry is growing through expansion of U.S. casino companiet Asian markets have experienced very large growth. Macau, which is the only place in China with legaliad casino betting had gambling revenue of $34 billion in 2011, a 42% increase from the year before. Because of the less favorable global economic conditions, growth is forecasted to cool down to 18% in 2012. Other markets such as Taiwan and Korea are reviewing casino gaming and properties in Singapore should expand the Asian gaming industry. Development plans for the Primore Gambling Zone in Russia, near the castern port of Viadivostok, also have potential for expanding Asian gaming industry Suppliers Gaming equipment manufacturers supply electronk gaming devices, systems, table games, key components, and support products and services to the casino gaming industry These suppliers are part of a global industry, and they design, manufacture, and market computerized gaming equipment, wystems, and serviceAlthough a larger number of manufacturers have entered the gaming equipment industry, International Game Technology (GT) is the nation's largest slot machine maker and is one of the leading suppliers of gaming products to the world. With a strong presence in the United States and operations and sales offices in the Asia Pacific region, the company posted revenues of approximately $2 billion in 2011. It has a strong focus on research and development, with 1.500 employees dedicated to R&D efforts involving engineering, hardware, electrical systems, and software. As a result of the economic downturn, the company reduced its dobal workforce through restructuring efforts and closed its operations in Japan. The CEO of IGT (Patti Hart) identified a new strategy to transform the company through cloud technology to deliver casino games remotely. In January 2012, the company bought Partit Dengning Double Down Interactive, which runs a Facebook poker game. The application mimics casino games but is legal because there is no priemoney. Users pay to buy virtual chips, producing revenue. So while Internet gambling is still mostly illegal in the United States most gambling companies and suppliers to the industry are preparing for states or the federal government to change regulations. The other four other major gaming equipment manufacturers are Novomatic AG in Austria; Intralot S.A. in Athens, Greece, veral Entertainment Corporation in Tokyo and Scientific Games Corporation in New York. Internet Gambling In December 2011, the U.S. Department of Justice issued an opinion that provided states and lotteries with the opportunity to begin legalizing cline gambling for casino games. Proponents argue that online gambling will be a source of tax revenue Deware lawmakers passed a law in June 2012 that would make Delaware the first state to lealine online gambling, including Internet blackjack, poker, and slot game. The Delaware law requires the lottery to verify that residents are within Delaware and to exclude more Opponents of online gambling include convenience stores that sell lomery ticket, Native American Indian tribes, local casino companies, and activists concemed about gambling addiction Globally, the online gambling market experienced strong growth in 2011 with wins of $33.6 billion. Furope portion of the total was $16 billion and Asia Pacific markets totaled 58.9 billion. The sports betting woment equaled 48.9% and the casinogen totaled 25.5% of the markers wall value. The market is fragmented with someone totally prohibiting online gambling and others having specific restrictions. In 2010,70 jurisdictions worldwide allowed online gambling operations. Government regulation strict, however, due to the nature of the Internet, policing of various laws is not easily done Social Gaming A new business model for gaming equipment manufacturers involves the creation of social networking sites. In addition to IGT's acquisition of Double Down Interactive desented earlier, WMS Industries, the nation's second largest dot machine manufacturer created the site called Payer's Life. It is more than just a place for site members to chat and share videos the site is connected to a server linked to the company's more advanced slot games. Members play casual online games and then get the opportunity to play bonus rounds when they return to the property-based chines Casino owners are not agressively pursuing WMS machines because they are based on a revenue sharing model. Besides not wanting to share rever, the casino owners are concerned that it online gambling becomes legal in the United States, companies such as WMS will be have advanced positioning in the online gambling business Transportation For many of the large gambling properties.customers arrive by airline, especially business and vacation travelers. Although fare for air travel rose substantially in recent years, airlines have offered fare sales Automobiles are the primary means by which comes travel to casinos. The smaller ronal, and Native American gambling markets are negatively affected by the goline price Activists Althoogh many residents of communities where commercial casinos are located support chine gambline, many other groups do not. Various churches, ad hoc citiems group and national organisations such as the National Coalition Against Legaliud Gambling protest legalized gambling because it comes with a high social cost in the form of addiction Protestets argue that youth are drawn into compulsive gambling habits at doble there of adults, and that gambling has hidden negative economic impacts, such as diventing revenue that would be spent at local business. This, in turn, res in increased costs to the state from bankropecies, addiction treatment centers, and the penal system. These 46 Session FormActing Competitive Strategy organizations also point to the fact that when state governments depend on casinos for tax revenue, it puts the government in a compromised position. Government now has a vested interest in encouraging its citizens to lose money Casinos have attempted to address these concer much like the alcohol companies that encourage responsible drinking Mest casinon post phone numbers for Gamblers Anonymous at their cashier windows and provide literature with information on problem gambling. Underage gambling is not allowed, and many casinos will not even permit minors in the gambling areas Complete the following and identify the intensity of cach of the forces of competition 1. Rivalry among Existing Firms a) Define the casino gambling industry High Medium Low b) What is its level of concentration? High Medium Medium 2. Threat of New Entrants a) What are the barriers to entry into this industry Low High Medium Low 2. Threat of New Entrants a) What are the barriers to entry into this industry? o 2014 enero Learning. All right reserved. May not becamet, copied et duplim problems, in while e in part Partit Designing Strategy 47 3. Bargaining Power of Suppliers a) Who are the suppliers? High Medium Low b) Discuss supplier bargaining power