Global: Moderate to Strong
Currently Harrah’s Entertainment is the market leader in terms of net winnings worldwide with 1. 60% market share, followed by MGM Mirage with 1. 50% market share (Exhibit 9). However, with the recent acquisition of Caesar’s Entertainment, industry analysts expect Harrah’s Entertainment to further cement its market leadership (Datamonitor 2005). Exhibit 9. Global Market Share in the casino and gaming industry
While Harrah’s Entertainment is said to have the highest net winnings worldwide, our assessment of current strategic position globally is moderate given that the company is concentrated its business in the United States. The company has not expanded and developed casinos and hotels in other regions such as Europe and Asia-Pacific. Limiting its distribution network and market reach. In his book Competitive Strategy: Techniques for Analyzing Industries and Competitors, Michael Porter discusses the five forces of competition in an industry.
He illustrated the five competitive forces as: (1) Rivalry between competing sellers in an industry, (2) potential entry of new competitors, (3) the market attempts of companies in other industries to win customers over to their own substitute products, (4) the competitive pressures stemming from supplier-seller collaboration and bargaining, and (5) the competitive pressure stemming from seller-buyer collaboration and bargaining (Porter 1985). Porter’s five forces of competition is a widely used tool to determine the company’s current strengths and competitive position.
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Despite fewer competitors in the industry, competition within the industry is very stiff with a number of established competitors jockeying positions to increase market share and improve customer loyalty. Harrah’s Entertainment key competitors include MGM Mirage, Marriot Hotel, and Starwood Hotel and Resorts. These are established casino operators in the United States with strong financial position. Competitors plan to continually grow operations through acquisitions of existing casino operators and through development and expansion of existing property and facilities.
Threats of Suppliers and New Entrants: Weak Suppliers are generally consumer goods companies offering wines and beers and property developers. However, government regulation restricts operation of casinos, there are still limitations in the expansion of casinos worldwide. Nonetheless, as the US federal government recognizes casinos as a lucrative source of tax, legislation on gambling in certain states have become relaxed in recent years and a few governments are following suit. Threats of Buyers: Moderate Customers of casinos and gambling sites are generally tourists.
Because gambling has historically not been as widely accepted in Europe as in the United States or Asia-Pacific, casino operators have been deterred in expanding freely in other regions. This major cultural issue needs to be overcome before the industry can operate freely across the region. Our assessment on the strategic position of Harrah’s Entertainment in the United States is very strong given its strong casino and hotel presence in Las Vegas, Nevada. While competition within the area is stiff, the State continually attracts tourists and businessmen thereby creating room for growth in the company.
Its prime property location in the State is a competitive resource that is important in attracting customers. Furthermore, because of the high-capital investment to enter into the industry, the company is able to protect and improve market share with fewer competitors. Market Demographics: Strong Casino gambling is a very popular pass time for US adults. According the Harrah’s Entertainment report, “More than 25 percent of Americans age 21 and older gambled at a casino at least once during 2005, and Americans made more than 320 million total visits to casinos.
” Casino participation rate by income bracket shows that adults with household income exceeding $ 95,000 are more likely to visit a casino. The rate of participation of adult within this income bracket is 55 percent higher than adults with less than $ 35,000 household income. US Census Bureau reports that there are 209. 2 million U. S. adult population, with the age of 21 and above. 52. 8 million of which are casino gamblers which translate to approximately 25 percent participation rate with an average of 6. 1 casino trips per year.
Harrah’s Entertainment segments its market demographics according to life stage. The older parents with age 45 years old and above are more likely to visit and participate in a casino entertainment. 23 percent of older parents are gamblers, while 19 percent of working older couples with age 45 years old and above are also gamblers. Young singles age between 21-35 years and roommates are the least likely to participate in casinos (Exhibit 11). Exhibit 11. A typical profile of a gambler is above 21 years with household income level of more than $95,000 per annum.
Gamblers are generally more optimistic with expectation of a good year ahead of them. 17 percent of gamblers also expect to start their own business after retirement. Gamblers are generally consulted more frequently by friends and neighbors on ideas for home improvement than for non-gamblers. In general, more gamblers are using the Internet to research brands before a major purchase and are more likely to use the Internet as a source of information than non-gamblers. They generally use the Internet for planning vacations and destination information.
More frequently, they are consulted for sights to see and places to go by friends and neighbors. Typically, gamblers are also more likely to try new restaurants than non-gamblers, more fashion-oriented, and early adopters of new technology than non-gamblers. Typically, Casino participation in the United States is the highest in the West region with 33 percent, followed by North Central and North East accounting for 27 percent and 28 percent respectively. Southern US region has the lowest participation rate of 18 percent.