Gambling industry is quite new, but it is rapidly developing. Companies operating in the business manage to gain billions in revenues, but they also face serious competition. In 2008, the industry went through hard times, but now new casinos are being opened.
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More so, the industry is becoming more diverse in terms of its products and more consolidated due to acquisitions. New areas become available to gambling facilities (for example, Native Americans’ areas, China, and so on). It is possible to state that this industry is booming again.
Like any other industry, the gambling industry has buyers. These are large corporations and groups like Harrah Entertainment, Inc. or Galaxy Entertainment Group. These corporations can acquire smaller companies or casinos.
The bargaining power of the buyers is quite high. In the first place, these corporations are big and have significant funds (as well as revenues) which can be used for development (and acquisition of new companies, properties, and so on). These buyers are well-known and have lots of loyal customers and can attract new customers. People tend to get services and products from companies operating for a while.
More so, these buyers can lower prices and still have considerable profits due to numerous units, diverse products, and buying in large volumes. This will also attract more consumers. Besides, buyers can also make suppliers low down the prices. Buyers can do this as lots of suppliers try to enter the market and are eager to work with well-established firms. This will make suppliers known to the rest of the companies operating in the industry.
As far as suppliers in the industry are concerned, these are companies providing equipment, designs, software, transportation services, and so on. One of such companies is International Game Technology (IGT). The bargaining power of the supplier in the casino gambling industry is also high.
This can be achieved through several strategies. First of all, diversification of products and services provided and selling in large volumes can increase bargaining power. The company can also lower prices due to high turnover and lower production costs. The supplier can increase its bargaining power by offering a unique service or product.
This can be specific software or some patented novelty. It is also predicted that soon casinos will have to change certain equipment (as new technologies appear) and the supplier will be able to provide a variety of new designs and machines.
Such suppliers as companies offering transportation services are facing more constraints due to higher gas prices. Nonetheless, charter flights and organized tours to casinos or gambling areas can increase the bargaining power of such suppliers.
It is necessary to note that there are numerous companies which want to enter the casino gambling industry. First, these are companies in emerging markets. In China, local firms have started the certain expansion, and US gambling corporations face a lot of tension and competition. Casinos in Native American areas can also want to enter the industry. These new entrants can face certain obstacles.
One of the barriers they can face is serious competition. Huge corporations and well-established firms have loyal customers and are well-known worldwide, which attracts new customers. Thus, new entrants will have to ‘win’ their customers. In some areas, new entrants may face legislative barriers. Thus, in Native American Areas, non-Native Americans cannot own gambling companies.
Apart from this, activists can prevent new casinos from entering the industry, especially when it comes to new areas. Different groups of activists try to address authorities and explain that casinos lead to addiction among the population as well as negative outcomes for the local governmental budget.
The level of threat of new entrants can be defined as a medium, and in some areas (where legislation is on the side of new entrants) it can be higher. New entrants have to face certain barriers, and this gives extra opportunities for settled companies operating in the industry for longer periods.
Apart from new entrants, companies operating in the casino gambling industry face competition created by substitutes. These are companies offering online gambling options for consumers. These companies can be seen as substitutes of casinos as people can often get similar services they get from such gambling facilities. The level of threat to the sales and profits of buyers is medium.
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Lots of people will find it more convenient to gamble without living their homes. This accessibility can attract a lot of consumers who do not like or try to reduce transportation costs.
However, casinos are not only about winning or losing money, but it is also about a very specific atmosphere and being among people who share certain values or interests. Hence, lots of people will still go to casinos rather than try to substitute this experience with the help of online gambling services.
The casino gambling industry can be defined as a group of companies providing gambling services and products. Harrah’s Entertainment Inc., Galaxy Entertainment Group and MGM Mirage are some of the major gambling companies. It is also necessary to note that the industry includes numerous suppliers, companies producing designs, software, equipment, and so on. One of these companies is IGT.
The level of intensity of competition in the casino gambling industry is quite high. There are loads of well-established firms which have operated in the industry for decades. Notably, some companies operate globally and enter new markets (in Asia and the USA).
There are also new entrants who enter the market and offer new services and products. New types of casinos appear. For instance, casinos on boats are becoming increasingly popular in the USA and worldwide. Appearing substitutes also increase competition in the market. Thus, online gambling can be seen as a serious competitor to conventional casino facilities.
I have learned a lot about the casino gambling industry and its operators and existing trends. However, this analysis made me understand the way markets operate. I have understood what factors affect the development of the industry. I have learned to use five force analysis, and now, I will be able to analyze any industry. Besides, I have learned about obstacles gambling companies are facing now.
The importance of public opinion is clear in this case. Legislation can also affect industries, and it is clear that any industry can be regulated effectively. I would like to learn more about possible ways to predict threats of substitutes. Thus, DVD rent has not replaced cinemas yet as these are seen as quite different things.
I believe online gambling options are also likely to be regarded as a different kind of option. However, the development of technology can make this substitute stronger in many ways and replace conventional gambling facilities.