Exercise-04

Intensity of competition in the casino industry

Ch. Sai Varun
191146
Sec-C

1) Rivalry among the existing customers.

Considering the number of casinos in the U.S, especially the no of commercial
casinos in the Las Vegas, we can clearly say that the Rivalry among the existing
customers is HIGH.

a) Define the Casino Gambling Industry.

The industry is highly regulated and the highest tax collected industry which
made 35.54 billion dollars in the year 2011 having presence in 22 states of the
United States.

b) What is its level of concentration?

Out of 50 states in the U.S, 22 states have approved commercial casino
gambling through 2011. By the Indian gaming regulatory act 1988, more than
200 of 550 native American tribes own or operate local casinos in the U.S. The
highest casino projects are in Connecticut.

2)Threat of new entrants.

Mainly considering the heavy capitol investment in starting a casino and heavy
taxes levied on the casino’s we can say that Threat of new entrants is HIGH.
a) What are the barriers to entry into the industry?
The main barriers are government Regulations and policies because gambling is
illegal in some areas and legal in some regions. After getting followed or
approved by the govt bodies the next most important barrier is capital
requirement considering meeting the assumptions of people how casinos should
look and operate.

3) Bargaining Power of Suppliers.

a) Who are the suppliers?
In the gambling industry the suppliers are the manufacturers of the gaming and
gambling equipment. IGT, Novomatic AG, Intralot SA, Universal
Entertainment corporation, Scientific games corporation are the leading
suppliers in the gambling industry.
b) Discuss Supplier Bargaining power.
Having large number of casinos around the world and their growth in the
coming future but there are few good manufacturers of the gambling
equipment’s, slotting machines like IGT, Novomatic AG etc., The barging
power of suppliers is HIGH.

4) Bargaining Power of Buyers.

a) Who are the buyers?
In this gambling industry, buyer are visitors, players and travelers.

b) Discuss whether the buyers have bargaining power?

There are many numbers of casinos or gaming centres in different states of the
U.S and there is rapid growth of users or players in the online gambling as well.
The customers have large number of choices, so the Bargaining power of buyers
is HIGH

5) Threat of substitutes.
a) What other substitutes limit the sales and profits for firms in this industry?
The substitutes for the gambling or casino industry are Horse racings, dog
racings and jai-alai, but these games are very low when compared with the
presence of casinos. So, Threat of substitutes is LOW.

6) Relative Power of Other Stakeholder.

a) Who are the other major stakeholders?
 Governments
 Local Communities
As these have the highest influence in the development of gambling industry, so
the Relative Power of Other Stakeholder is HIGH.

7) Relative Power of Complementors.

a) Who are the complementors?
Transportation and Tourism are the complementors because they help in growth
of the gambling industry. So, the Relative Power of Complementors is HIGH.
8)Now that you have analysed each of the forces of competition, Discuss the
implications of the above levels of intensity.
a) Which forces of competition are most threatening now? Which do you expect
will change over the next, say, five years?
Rivalry among existing firms & Bargaining Power of Suppliers because there
are many competitors existing & very few equipment manufacturers.
Considering online Gambling approval In Delaware, there is a chance that many
more states are ready to legalize it. As a result, there will be decrease in the
casinos.

b) What are the implications in terms of profit margins in this industry today?
Over the next five years?
 Government regulations on legalizing the gambling industry.
 Taxes levied by different states.

c) As the CEO of a firm in this industry, what actions does this analysis suggest
you implement to strengthen your competitive strategy?
As there is a rapid shift of customers from casinos to online gambling, I would
try to implement a strategy like connecting online gambling players to the
casinos as WMS did.

d) As an advisor to a potential entrant, would you recommend entry? What

steps would you advise them to take?
As an advisor to a potential entry, I would recommend the client to understand
the industry in terms of growth and shifts(changes) in the industry to invest.