Circumstances Facing By The Gambling Industry Management Essay

Currently, the global financial turmoil started from United States has involved all other countries, and slow their pace on economic development. With companies closed down, sharp decline in import and export trade, as well as high lay-off rates, gaming industry witnesses no exception. In October 2008, Sheldon Adelson who owns the gambling empire of Las Vegas Sands Corp had to spend 476 million dollars from his own deposit to save his company through this crisis.

Based on this background, this paper aims to discuss the specific circumstances facing by gambling industry, and analysis would be made on attractiveness of this industry to new investors. Following this, some suggestions would be given on how to survive the financial crisis. At last a comparison with dining industry would be given.

2.0 Discussion

2.1 The task environment facing by organizations in gambling industry.

The task environment of an organization or industry refers to things and elements relevant to them and they are uncontrollable (Kefalas,1992). Generally, task environment can be concluded into five elements, that is, competitors, customers, suppliers, regulators as well as strategic allies.

(1) Competitor analysis

The need of understanding and responding to competitors has long been recognized as a significant aspect of business, competitor analysis has been defined as activities trough which companies can understands its industry, identifies its competitors and understands their advantages then make moves (Wright,2002). Facing the downturn of economy, the market for gambling industry is shrinking which makes it necessary to analyze competitors for organizations in this industry.

As a matter of fact, competitors in this industry can be divided into two groups, the competition between casinos and on-line gambling companies. For gambling organizations, whether in Las Vegas or Australia, many competitors on Internet are flooding into this industry. Taken Asia Pacific area for example, besides Cook Island and Vanutau, Australia has the policies for qualifications of on-line gambling licenses. Although no relevant support measures have been carried by the government, it is still can be figured that in the foreseen future, on-line gambling would be the major competitors in this industry.

Meanwhile, besides the wider radiating of on-line company, it also enjoys relatively relaxed tea laws when bookies in Northern Territory. Despite the cost of daily operation, gambling organizations also have to develop restaurant and entertainment facilities which can help make it more attractive to consumers in this severe competition.

(2) Customer analysis

The global economic crisis makes the consumer market quickly malaise, which also in turn makes service industry like gambling should transfer into customer focus. It requires putting customer’s interest first, which does not exclude those of stakeholders, managers and employees (Nwokah, 2009). As a consequence of this, analysis of customer for task environment is necessary.

All in all, the most direct influence from financial crisis is the decline of customers who can afford entertainment as they used to. Due to the unguaranteed stability, people seem to be reluctant to spend money to gambling companies and try their lucks. Atlantic City gambling company reported a year earlier that the company witnesses a nearly 20% decline in revenue compared with 2007, the biggest drop in 31 years. Also Australia’s Herald sun columnist admits that what happens in Las Vegas reflects the overall states of gaming industry, the current situation is disappointing.

(3) Strategic allies

Many gambling companies in Australia like Consolidated Media Holdings and Crown Ltd have been listed on the Stock Exchange. Thus, the economical turmoil has brought exponential decline to their stock, which directly hit the confidence of investors. The poor performance of stock market would not only damage the gambling companies themselves, but also their images and credibility in the eyes of investors and consumers. What’s more serious it the effect on their confidence for further financing and investing into this market. Without such investment, the development of gambling industry would still under the clouds of financial crisis.

(4) Suppliers & Regulars

Regulars are different in different countries, and even states in some countries hold their own attitude and policies towards gambling. Take China for example, new visa policies have limited the entrance to Macau more strictly than it was ever, which would not only influence the local gambling industry, but also Australian company who invest there. Take Crown. Ltd. for example, it has just started a four star casino in Macaw as its base to further business there. For Australia itself, regulars would be harder to deal with, since each state holds their own regulations on gambling. Meanwhile the financial crisis also put the related machine industry like porker machine manufacture into suffer which would definitely cause influences to gambling industry. Meanwhile, as related industry, they also receive regulation from the governments.

2.2 Attractiveness of this industry to new investors (analyzed by Porter’s five forces model)

Porter’s five forces model can be used in analysis of competitive strategy and the customer’s competitive environment. The five forces can be seen as follows.

Supplier Power

Competitive

Rivalry within

an industry

Barriers to Entry

Threat of Substitutes

Buyer Power

As a developing industry, and also the one who is hitting by economical crisis, the question is that whether it is still worthy to invest in gambling industry by new entrants. Using Porter’s five forces model, the question would be analyzed as follows.

First the barriers to entry would be analyzed. Although the industry can be concluded as service-providing one, who always have nearly no barriers to entry, one of gambling industry’s key strength is generating huge profit to the government (Berstain&. Stevens, 2004). Thus, many new investors would be attracted by this industry. However, cost should be the first element under consideration. Despite the numerous licenses have to get from different states in Australia, the basic facilities are also on the must-provided list in order to attract clients. All in all, the entry into this industry is based on a huge capital, and with the mature competitors like Crown who has already owns its casinos abroad, the entry barriers of gambling industry is relatively high.

Second is the threat of substitutes. Internationally, gambling is a growth industry. The basic reason contributes for this is the role of generator for revenue and employment it has played. The legalized gambling is treated like an immensely profitable enterprise (Campbell&. Smith, 1998). Though facing the downtime, gambling industry is still treated as the least-effected industry in financial crisis. This unique role it has played in economy is not substitutable.

The third element which should be checked is the supplier power. Here would be an innovation on the concept of supplier in this special industry. They are not only the manufactures who provide lottery machines or surrounding services, but also governments who provide licenses to operate. For the first part of suppliers, their power is relatively less. However, for the other group of government, their power is relatively stronger. Taken Australia for example, the gambling industry is viewed as providing working opportunities and chances for financial recovery. Thus, all provincial government would like to provide facilities to it. However, as a government at the same time, it face the responsibility to control the social impact of gambling which draw great attention from social groups. Thus, the roles of provincial governments are kind stranded. But facing the downturn of economy, the attitude of the government to gambling industry can be assumed as positive, at least for current time.

Buyer power can be recognized as the strongest element which can influence the entry of new investors, especially in current economical situations. Just as figured out in the case, the “stay-at-home mentality” among consumers has strong effect for the conditions of gambling industry. Judging from this angle, new entry nowadays may face strong frustration from the consumers. Since the security of job is doubtful, how many of them would like to try their lucks.

Last but not least, the competitive rivalry in gambling industry must be evaluated. As a special industry providing service, the loyalty of its clients is relatively higher and easily maintain. With the competitors discussed above, the situation of gambling market is nearly dominated by large consortia and leading companies in earlier times. Facing the declining consumers, the competitiveness among existing companies could be more severe than ever.

To sum up, the attractiveness to entry gambling industry in current time is disappointing. However, it is also a chance to seize since the industry is struggling with the economical crisis and has not so much time spending on innovation or consumer-attraction. Entry this time would be a smart preparation for the bright future of gambling industry when economy is back to its path.

3.0 How can gambling industry weather the storm in current situation?

For better or worse, governments, Australian or abroad ones, have never lost regulation on gambling industry (Hutchinson, 1999). While Australian Government put legislation to legalize gambling and earn money from it, it also mobilizes the community to vigorously carry out gambling campaign which persuades people out of this habit.

Facing this kind of dilemma, the gambling organizations should seek new markets by themselves, for instance, the on-line resources. When people are afraid of the security in their life, internet gambling can be a way to vent their emotions with relatively little cost. Meanwhile, in 2009 the Australian Government used to plan building an Internet review mechanism in order to screen out unhealthy site, including gambling sites without permission. However, luckily for gambling organizations, this plan has been abandoned due to against from majority. This against totally reflects the interest people holds towards on-line gambling, at least in the period of economical downturn.

Besides that, it is advisable to handling relationship with the government smartly. Facing the huge exponential decline in Las Vegas, it can not be denied that there is kind relationship with Obama’s persuasion on saving instead of deal in gambling. Thus, investment on gambling centers or even football teams, what gambling organization should do is rebuilding the public confidence in overall economy situation and the gambling industry.

At the same time, the downturn also provides gambling industry to restructure itself. New technologies are constantly being introduced into gambling, in order to improve convenience and enhance attractiveness of the games. Innovation can be a way for gambling organizations attract their clients and finally obtain the leading position when they weather the storm of economical crisis.

4.0 Crisis hits the dining industry (a comparison with gambling industry).

Gambling is not the only industry hits by financial turmoil. According to analysis carried by Zagat in the year 2008, the dining industry is also struggling. Facing the economical crisis and the impact of rising prices, people can no longer afford “dining out” as they used to be and they spending less in restaurants (Zagat, 2008).

In addition, the survey carried by Zagat has found out the decline is reflected not only in people who dining out but also number of new restaurants. Taken New York for instance, the number of new restaurants in 2008 witnessed the first drop since 2003. Compared with the year before, the number dropped from 163 to 119.

Meanwhile, just the same like gambling industry, it is also a chance to make some adjustment for restaurant industry. After all, with the high unemployment rate, dining industry can feels a relaxation from the huge gap in labor demand and provide.

5.0 Conclusion

With the recovery trend of global economy, one of the major difficulties facing by gambling industry is rebuilding the public confidence and interest to this industry, since the impact of turmoil would still impact people on their sense of security. Besides the measures taken by government to support recovery from global financial crisis, it is important for organizations in gambling industries finding ways to support themselves. After all, as a support force for revenue of government, especially for Australia, rising again is a predicable.