Introduction: Situation overview
The casino industry has been booming during the last decade of the 20th century and the beginning of this new millennium. In the United States it began in 1931 when Nevada legalized gambling and up to today still is the state which has more revenues from gambling, almost $12 billion per year. Then New Jersey with Atlantic City and subsequently, since 1988, many other states, 20 in total, followed the trend. The reason behind the legalization of casinos was their ability to generate employment opportunities and enhance tourism (Ansoff, 1990, p. 23). This situation made possible the enormous industry growth for decades. Also, during the past, five to seven years casinos became more attractive to customers as they diversified their products becoming more attractive to families with attractions such as circuses, animal reserves, and pirate battles (Reger & Huff, 1993, p. 2). This has been a characteristic of casinos especially in Las Vegas but other places followed. Overall, the casinos are trying to increase their visitors by offering food, beverages, shows, and other perks (Klepper, 1996, p. 556.).
Macro environment analysis
Several external factors are influencing the development of the gambling industry. Political and legal factors are part of them. As it is mentioned above, the political factor has been serving as an incentive for the gambling industry for the past 30 to 40 years. Gradually, many states have been passing legislation to legalize gambling within their territories. Furthermore, they have been coming to help this industry even in the case of natural disasters. This is the case of casinos devastated by hurricanes.
For example, the Mississippi state senate passed legislation allowing casinos to be build up to 800 feet offshore, to be more protected from hurricanes (Mintzberg, 1994, p. 56).
Other important factors are the technological socio-cultural ones. Technology has been changing rapidly and casinos have been at the forefront of implementing new techniques and machinery of gambling. The advent of slot machines as a way of gambling has been one of the innovations technology has brought to gambling. The socio-cultural factors also have been positive for this industry in the United States. People see gambling as a way of relaxation and pleasure. Furthermore, casinos are perceived as places where one not only can gamble but also spend time with family and friends for recreation or leisure. We mentioned above how casinos introduced new ways of attracting people like a circus, live performances, etc.
And two final external factors influencing this industry are international and economic. Unfortunately, these have been the two main reasons for the problems that the gambling industry is facing. Internationally, competition in the gambling industry has been rising. For example, one can mention the city of Macao in the South China Sea region as a rising force in the gambling industry. Since the opening of the first ‘Las Vegas-style casino, it has been attracting more and more visitors (Markel et al, 2000, p. 34). Nevertheless, still it is not clear whether the casinos in this region will be able to compete with their similar in Las Vegas. Economic factors have been negatively impacting casinos, especially during the last two years. The difficult financial situation has impacted the budget of many families and individuals in the United States thus decreased their potential as customers for the gambling industry (Lawson, 2002, p. 22).
Industry analysis
The industry analysis starts with the rising competition that casinos have been facing. The growth that casinos have had on the ‘traditional’ centers of Las Vegas and Atlantic City has been matched by the spread of casinos all around the country. Especially, a large volume of gambling business comes from riverboat casinos. Rivalry is also becoming fiercer from Native American casinos. They have proved to be a good substitute product for Las Vegas casinos. They also have the favor of being exempted from federal taxes and pay a percentage of their profit to the residing state as by previously signed agreement (Aley, 1997, p. 46). And a final consideration should be made for online gambling sites as a new threat/form of new entrants into this industry. Up to date, there are more than 2000 websites that generate total revenue of more than $15 billion in revenue (Porter, 1997, p. 78).
Interconnections between macro and industry analyses
From what is stated above it can be understood that two are the major threat for this industry: the threat of rising competition and the economic situation of society. Nowadays consumers have many more choices regarding gambling than one or two decades ago. They can decide to go in a Las Vegas casino, or a riverboat one, or even gamble online through a variety of sites. They can even decide to travel abroad to places like Macao. This rising competition has forced many casinos during the last years to keep spending to grow (Grant, 1991, p. 44).
The problem is that the debt these casinos took for their spending has been harder to manage. In some cases, it has brought casinos to business failure (Petris, 2003, p. 4).
Reference
Aley, J. 1997. “The heart of Silicon Valley”, Fortune Magazine, 7: 66-77.
Ansoff, I. 1990. “General management in turbulent times”, Practicing Manager, 11(1), 7-26.
Grant, R. 1991. “A critique of Porter’s competitive advantage”, Strategic Management Journal, 7: 535-48.
Klepper, S. 1996. “Entry, exit, growth and innovation”, The American economic Review, 86(3), 553-567.
Lawson, M. 2002. “What if?”, Boss, 11-23.
Markel, A. Hubard, G. Davenport, S. Beamish, S. 2000. Cases in Strategic Management, Sydney: Prentice Hall.
Mintzberg, H. 1994. The rise and fall of strategic planning, Chicago: Free press.
Petris, S. 2003. “Three new perspectives on strategic analyses”, Eliza Business Review, vol. 62(1), p. 75-88.
Porter, M. 1997. “The new economics of competition”, Harvard Business Review, 77-90.
Reger, R. Huff, A. 1993. “Strategic groups: a cognitive perspective”, Strategic Management Journal, 14: 103-24.