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Wynn Macau Case Study: Change in Macau Gaming Industry

Question

Task: This assessment is designed to evaluate students’ ability to apply their understanding of international business strategy concepts covered in the course to a real case.

Read the case study “Wynn Macau: Gambling on the Edge of China” in the textbook (pp. 412-417) and answer questions 1-4 that follow the case study.

Answer

1. Apply Porter's 5 Forces to the question
The competition in the casino gaming industry in Macau is characterized with the help of Porter’s five forces model is as follows-

Suppliers: The employment rate in Macau is low as it is difficult for them to recruit new employees, which affects business expansion. Particularly, the junket operators need to be professional and to do that they are charging high commissions. As a result, higher incentive has paid by Wynn to attract the junket operators.

Buyers: Buyers have other choices to choose the casinos. The principal players are only six in Macau and only one casino is coming under Wynn (Liu et al. 2015). Buyers have their own customized choices to get more entertainment and due to this reason, Wynn has to face some difficulty to maintain its competency in the current market.

Rivals: Wynn has strong competitors due to its uniqueness and strong positioning to compete. For instance, a good customer service is provided by Melco; Galaxy expands their business in Asia, Venetian penetrates to Cotai with their non-gaming segment.

Potential entrants: The Government has allowed having casinos in Macau; this is the main reason that they have low potential entrants as Macau is the only place in China (Wu, 2017). That is why there are no prospective entrants in the mainland. Allowing to have casinos in Macau is controlled by and permitted by Special Administrative Region (SAR). So, it is not easy to open new casinos in Macau for new entrants. Moreover, the number of gaming table also has to be allowed by Special Administrative Region (SAR). Furthermore, this rule reduces the chance to have new entrants.

Substitutes: There is always a substitute for every entertainment. For instance, the buyers can choose traveling, sports and others rather than gambling. Moreover, every individual cannot afford to gamble due to lack of source of income or lack of interest. As a result, other entertainments are taking place.

Although it is very tough to enter the current environment by the potential entrants (Simpson, 2018). On the other hand, Wynn has hard competitors and for this reason other entertainments and laborers are increased.

2. Institution-based view
The Individual Visit Scheme (IVS) have helped the international as well as mainland tourists a huge boost in the gaming industry in Macau in 2003. This scheme also helped the local people to enter and participate in the games. Macau is the only place where casinos are allowed in China and the Government of China also regulates the local people to participate in the casinos (Unit, 2015). The rise of Chinese currency about pataca which Macau currency and standard of living of the Chinese people is have created great opportunity for Macau to attract potential customers to their casinos. The dynamics of supply-side regarding gaming operations are usually controlled by various institutional factors like Administrative regulation number 26/2001 and Law number 16/2001. The contract of concessions was signed in March 2002 by Macau SAR government with SJM to operate the casinos. The contract signed with Galaxy and Wynn by the Macau SAR government was in June 2002. The SJM also signed a sub-concession in April 2005 with MGM, in December 2002 Galaxy signed sub-concession contract with Venetian and between the Wynn and Melco the sign was placed in September 2006.

Over the years the number of tables used for casino is increased in Macau which also helped the casino gaming industry to develop (Zhou, 2017). As a result, the revenue collected from games also increasing continuously. Later in 2010, also been legalized which as a result increased the revenues collected from the games. Most of the casino tables are VIP tables and the revenue generated from these tables are 70% of the overall revenue collected from this industry. According to history, most of the revenue comes from game of baccarat. The revenue structure of the VIP tables in Macau is Venetian (17%), Melco (17%), Galaxy (16%), SJM (28%), Wynn (13%) and MGM (9%). The competitive dynamics in casino game takes place in various locations in Macau SAR. The plays have properties distributed in the Macau SAR. The SAR can only control the players and does not play any role in determining the market. This structure where rivalry without market domination creates great opportunities for the industry to develop and increase competition. The Chinese government also intervenes in the development process by supporting and developing Cotai location for expansion of the casino business. Local government also play a crucial role in the Macau casino industry by providing strong foundation to it.

3. Resourced based view
In recent years, Wynn Macau is considered one of the most productive and famous single casinos reported by the Macau business. The gross gaming revenue is at 4.375 billion USD as reported by the Macau business. The success key of Wynn is nothing but the high yield among its mass, slots, VIP, non-gaming businesses. The resort can earn more non-gaming revenues with the help of allowing the gaming table in the casinos (Simpson, 2019). In terms of the gaming industry, gross revenue generated by Wynn’s market share along with share for the table count is the highest regarding this industry players in the year of 2011. As a result, having a cautious expansion plan in terms of the global recession helps them to expand their business in a large paradigm. Having a strong balance sheet position shows that the net cash of Wynn has more than 4 billion USD, which remains in an enviable financial resource, 2011.

A great differentiation has been observed in Wynn from their competitors as they are displaying enthusiasm towards cultural sensitivity. Contributing the social dividends through appreciating and preserving the Chinese art by the Wynn resorts. This contribution has done through generous donations of Buccleuch vases by displaying them at the Wynn hotel lobby. Moreover, Wynn has purchased Chinese vases for 12.8 billion USD at Christie’s London auction to organize the future Cotai party. It is the chairman and CEO of Wynn, who is trying to save their heritage along with the entertainment by showing them among the People’s Republic of China (Ng & Austin, 2016). Having strong value proposition helps to penetrate upper-end customers. Whenever Wynn has a transparent target market, they can concentrate on customer satisfaction. As a result, it invests in the facilities less still more profit can be gained. The company gains capital due to the market penetration in the U.S and Hong Kong, which helps them to expand their business in the global market.

Wynn is the most profitable and productive single property casino player in Macau. According to report, the fair share ratio for Wynn is highest than other casino players like Melco, Galaxy, SJM and others in 2011. They considered to provide dividend to the shareholders and contribution to other donations made them popular in the market. Strong leadership and by transformation Macau into a travel destination for international travelers which help them to become most successful casino player in Macau. They have invested US$1.1 billion to buy 380 gaming tables, 205,000 sq. feet of casino space, 1,270 slot machines and 46,000 sq. feet of retail space which have helped them to expand their business in Macau.

4. What has changed since the case study
An important factor that has changed the structure of the Macau gaming industry is the Wynn incident. According to Wynn company, Mr. Kazuo Okada has violated the American Law. The tension between Okada and Wynn have created a significant amount of tension in this industry. This has also created an impact on the profitability of the casino industry in Macau. The Government of China has recently decided to build casinos in Shanghai like Macau, which can create great potential threat to the Macau (Zhang, Tam & Zhou, 2016). Shanghai has a better location based on geography and popularity in all over the world. It is situated in the mainland and Shanghai is known for its popularity in the shopping and other facilities. Macau has to take different approaches to recover the industry from falling, and if needed, they have to change the structure of this industry. The tension between Wynn and Okada can create concerns for Wynn’s future operations and reputation. Another inportant factor which is changing gaming industry in Macau is decreasing revenue VIP tables in casinos. The players have to take strategies to bring general people in this industry to boost the revenue collection. Chinese government is trying to create another casino place in shanghai which will create great issues for Wynn.

Wynn was concentrating their business mainly on VIP customers in their casinos but decrease in VIP revenue signifies that Wynn have to change their strategy from concentrating their business only on VIP to general people who can enjoy playing gambling and casino games. They can also change the Macau as an international tourist spot to attract international travelers to Macau. Busy work culture change in mentality of the people have decreased the revenue collection of the Macau gaming industry. The competition also changes a lot with introduction of new competitors in the casino industry in Macau.

Players like SJM, Wynn, Melco, Galaxy, and others have to assess their market condition and make their employees who maintain the casinos efficient and professional to deliver better service and care to the customers. Players like Wynn also have to focus on the VIP customers to regain their presence in the casinos like before and to achieve that they have to offer more privilege services to them. However, in 2015, the revenue generated through gambling and casino games have decreased by 17.4% as compared to the year 2014. The declination was created due to decrease in the activity of the VIP casino tables in 2014-15 (Rosenbaum & Wong, 2015). The Chinese Government has suggested to minimize the VIP tables and increase the number of general casino tables where general people can spend money on the games. Because of the over-dependence on VIP tables, general people get neglected, and they do not spend much on these tables. The government wants to change the Macau casino industry from VIP centric revenue collection to become more general tourist spots for international tourists and family tourists. Wynn macau case study assignments are being prepared by our management assignment help experts from top universities which let us to provide you a reliable best assignment help service.

Reference list
Liu, M. T., Chang, T. T. G., Loi, E. H., & Chan, A. C. H. (2015). Macau gambling industry: current challenges and opportunities next decade. Asia Pacific Journal of Marketing and Logistics, 27(3), 499-512. Retrieved on 7 Jun 2019 from: https://www.researchgate.net/profile/Edmund_Loi/publication/277981487_Macau_gambling_industry_ Current_challenges_and_opportunities_next_decade/links/57c7a5df08ae9d64047ea457.pdf

Ng, D., & Austin, I. (2016). Integrated resorts and hotel (gambling) service enterprises in Singapore, Macau and Australia: the changing policy landscape. Asian Journal of Political Science, 24(1), 42-62. Retrieved on 8 Jun 2019 from: https://www.researchgate.net/profile/Danny_Ng6/publication/290476484_Integrated_resorts_and_ hotel_gambling_service_enterprises_in_Singapore_Macau_and_Australia_the_changing_policy_landscape /links/5ab124620f7e9b4897c37904/Integrated-resorts-and-hotel-gambling-service-enterprises-in-Singapore-Macau-and-Australia-the-changing-policy-landscape.pdf

Rosenbaum, M. S., & Wong, I. A. (2015). When gambling is healthy: the restorative potential of casinos. Journal of Services Marketing, 29(6/7), 622-633. Retrieved on 8 Jun 2019 from: https://www.researchgate.net/profile/Mark_Rosenbaum/publication/282908476_When_gambling_is_healthy_ the_restorative_potential_of_casinos/links/565ed9fb08aefe619b273ddf.pdf

Simpson, T. (2018). Neoliberal exception? The liberalization of Macau’s casino gaming monopoly and the genealogy of the post-socialist Chinese subject. Planning Theory, 17(1), 74-95. Retrieved on 7 Jun 2019 from: https://journals.sagepub.com/doi/pdf/10.1177/1473095216672499

Simpson, T. (2019). From Casino Wars to Casino Capitalism: Sovereignty and Gaming in Macau. Retrieved on 7 Jun 2019 from: https://digitalscholarship.unlv.edu/cgi/viewcontent.cgi?article=1052&context=occ_papers

Unit, E. E. I. (2015). Country Report Macau 4th Quarter 2015. Retrieved on 7 Jun 2019 from: http://nationallizenzen.zbw.eu/bitstream/10836/52734/2/Country%20Report%20Macau%204th%20Quarter%202015.pdf

Wu, J. (2017). Examining the High-End Gaming Segment: Toward a Shift in Market Focus. Retrieved on 7 Jun 2019 from: https://digitalscholarship.unlv.edu/cgi/viewcontent.cgi?article=4201&context=thesesdissertations

Zhang, J. H., Tam, K. P., & Zhou, N. (2016). Do smoking bans always hurt the gaming industry? Differentiated impacts on the market value of casino firms in Macao (China) (No. 2016-21). Economics Discussion Papers. Retrieved on 8 Jun 2019 from: https://www.econstor.eu/bitstream/10419/140891/1/859640558.pdf

Zhou, F. (2017). How anti-corruption policy of mainland China affects Macau gaming industry. Retrieved on 7 Jun 2019 from: https://lib.dr.iastate.edu/cgi/viewcontent.cgi?article=6485&context=etd

Wynn Macau Case Study


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