A CORPORATE STRATEGY ANALYSIS FOR MANDALAY RESORT GROUP INC.
Presented by: JASPER B. MIRAL
In Partial Fulfilment of the Requirements of COMPREHENSIVE EXAMINATION
Southern Christian College Graduate School Midsayap, Cotabato March 2012
I THE PROBLEM
BACKGROUND OF THE STUDY
At year-end 2003, Las Vegas, the kingdom of glitz and glamour, seems to have recovered completely from the terrorist attacks of September 11, 2011 and the falling economy. Where two years before only crickets could be heard on the strip, there are now the sounds of laughter and the clink of coins falling from slot machine. Flights to Las Vegas (although fewer) are full, the colossal hotels/casinos are back in action, the bright lights are on and the large crowd are back. This study will present Mandalay Resort Group Inc. a business of entertainment, and it has been one of the innovators of resort and casino gambling industry. Its areas of operation are the extravagant vacation and convention centers of Las Vegas and other location in the United States.
STATEMENT OF THE PROBLEM
The corporate study was conducted to create a strategic plan for Mandalay Resort Group. Further research would provide solutions to the following problems: 1. What are the strategic courses of actions that Mandalay should undertake to stay at the top of competition?
2. How Mandalay increase their credit standing? 3. What promotional strategy they may use to increase their sales?
SIGNIFICANCE OF THE STUDY
This study will be a significant endeavor in promoting a strategic plan in the business. Moreover, this study will be helpful to the gambling industryand business practitioners in training them in the area of strategic management, financial management and business policy. It will also serve as a future reference for researchers on the subject of business policy.
SCOPE AND LIMITATION
This study uses the information provided by the case of Mandalay Resort Group Inc. (2004) written by John K. Ross, Mike Keeffe, and Bill Middlebrook of Southwest Texas State University.Some information is taken from the worldwide web.The study is limited only in the area of Las Vegas and other location in the United States.
OPERATIONAL DEFINITION OF TERMS
For the purpose and use in this study, the following terms are defined as follows:
Mandalay shall refer to Mandalay Resort Group.
Casino shall refer to popular gambling game in Las Vegas.
Las Vegas shall refer to gambling capital in United States.
II. METHODOLOGY
The data used in this study are taken from the ofMandalay Resort Group Inc. (2004) written by John K. Ross, Mike Keeffe, and Bill Middlebrook of Southwest Texas State University and from the information available from the worldwide web. This study applies the Revised Porter’s Model to gauge the industry where Mandalay belongs. The
BCG (Boston Consulting Group) Matrix is employed to assess Mandalay’s product portfolio. This work uses various financial ratios to evaluate the financial position and performance of Mandalay. To know the performance of Mandalay Resort Group profitability ratios are used.
SWOT analysis is also being use in the attempt of evaluating Strengths, Weaknesses, Opportunities, and Threats of Mandalay Resort Group. This will help in formulating a strategic plan.
III PRESENTATION AND ANALYSIS OF DATA
A. ANALYSIS OF INDUSTRY WHERE THE FIRM BELONGS
The gaming industry has captured a large portion of the vacation/leisure time dollars spent in the United Sates.Casino gambling accounts for 40.6 percent of all legal gambling expenditures, still ahead of spending on second place lotteries at 32.2 percent and third-place Indian reservation at 15.4 percent. The popularity of casino gambling may be credited to more frequent and somewhat higher pay-outs as compared to lotteries and racetracks; however , as winning are recycled, the multiplier effect restores a high return to casino operators. Over the past several years, there have been numerous changes as mergers and acquisitions have reshaped the gaming industry. As of year-end 2003, the industry was a combination of corporations ranging from those engage solely in gaming to multinational conglomerates. The largest competitors, in terms of revenues, combined multiple industries to generate both large revenues and substantial profits. However, those engage primarily in gaming could also be profitable. Although once viewed as a substantial vice to be avoided at all costs, in reality gambling has been around in various forms for centuries. The allure of easy money coupled with the excitement of “leaving it up to chance” has been difficult for man to
resist. The gambling industry in the United States however, was relatively slow to evolve
in the commercial sense. Until modern times, back-room card games amongst friends and acquaintances had been the norm. It wasn’t until a place called Las Vegas was born
that gambling in its current form began to prosper.
B. THE BUSINESS ENTERPRISE OF THE BUSINESS FIRM
BRIEF HISTORY
Mandalay Resort Group is one of the leading hotel-casino companies in the United States, and is the largest such company in the Las Vegas market in terms of square footage of casino space and number of hotel rooms. Mandalay Resort operates ten hotel-casinos in Nevada, including four elaborate properties on the Las Vegas Strip: Mandalay Bay, Luxor, Excalibur, and Circus Circus. Outside of Nevada, the company owns a dockside casino in Tunica County, Mississippi, a riverboat casino located in Elgin, Illinois, and is developing casinos in Detroit, Michigan. With the exception of the upscale Mandalay Bay, the company's properties are mainly aimed at middle-class vacationers.
To appeal to this market segment, the company offers reasonably priced
rooms and food, and has pioneered the concept of the casino as an entertainment theme park for the entire family. In the midst of a Las Vegas Strip building boom that promised to add thousands of new hotel rooms to the gambling mecca, Circus Circus was betting its future on its biggest resort yet, Mandalay Bay. Construction of the hotel-casino began in 1997 on the site of the Hacienda, which was imploded on New Year's Eve 1996. Opened in March
1999, Mandalay Bay marked Circus Circus's move upscale. Costing $950 million to build, the South Seas-themed megaresort included 3,700 hotel rooms and 100,000 square feet of casino space; 15 restaurants, a 12,000-seat sports and entertainment complex, a Broadway-style theater, and a House of Blues nightclub; and an 11-acre pool 'environment' featuring a beach, a shark tank, and a wave machine through which worldclass surfing competitions were able to be held. Adjacent to the new casino, Circus Circus also built a high-class, 424-room Four Seasons Hilton, which did not offer gambling but became the first hotel in Las Vegas to receive the coveted five-diamond rating from the American Automobile Association. The initial results at Mandalay Bay were positive, and the increased traffic within Circus Circus's 'Masterplan Mile' helped to improve results at the struggling Luxor. Circus Circus moved its headquarters to Mandalay Bay following its opening and further signaled its future direction by changing the company name to Mandalay Resort Group in June 1999. As it looked toward the early 21st century, Mandalay Resort had no immediate plans to develop another megaresort on the Strip, although it had land set aside for that purpose. It did have in the works smaller additions to the Mandalay Bay area, including a time-share condominium development. Also in the development stages were a casino in Detroit, Michigan, being developed through a joint venture 45 percent owned by the company; and a hotel-casino resort on the Mississippi Gulf Coast, the third largest U.S. gambling market after Las Vegas and Atlantic City.
CORPORATE PHILOSOPHY AND POLICIES
Mandalay currently does not seem to have a formally stated mission. No publicly stated vision statement is available.
C. THE ANALYSIS OF THE CORPORATE BUSINESS PORTFOLIO
casino Entertainment
Food & Beverage
Room
The Boston Matrix shows that the casino is in high market share and high market growth. That is why they are one of the top in the gaming industry in Las Vegas. Entertainment is in medium market share and high market growth. Big events like Boxing and Concerts are being held at Las Vegas to attract more tourists. Food and Beverage is in medium market share and medium market growth. Room is in medium
market share and low market growth.Room, Food and Beverage are dependent in the market of Casino and Entertainment. D. FUNCTIONAL AREA ANALYSIS
OPERATION ANALYSIS
Mandalay Resort Group is a hotel-casino operator. The Company's Mandalay Mile is a large-scale hotel-casino resort development in Las Vegas, the world's largest gaming market. Mandalay Mile consists of three interconnected mega-resorts on 230 acres, including its flagship property, Mandalay Bay. The Company and the joint ventures in which it participates operate a total of 16 properties with more than 27,000 guest rooms and more than one million square feet of casino space in Nevada, Mississippi, Illinois and Michigan. Of these properties, 12 are wholly owned and have more than 22,400 guestrooms and more than 800,000 square feet of casino space. In addition, the Company owns a 50% interest in each of three joint venture casino properties that have approximately 4,700 guest rooms and more than 200,000 square feet of casino space, and a 53.5% interest in a fourth joint venture casino with approximately 75,000 square feet of casino space.The primary source of the Company's revenues is casinos, although its hotels, restaurants, bars, shops, midway games and other entertainment attractions and other services are an important adjunct to the casinos.
MARKETING ANALYSIS
Mandalay have historically followed a marketing and operating philosophy which emphasize high-volume business by providing moderately priced hotel rooms, food and beverage and alternative entertainment in combination with their gaming operations. While they continue to follow this philosophy at many of their properties such as Circus Circus, with the opening of Mandalay Bay (and to a lesser extent Luxor), our marketing focus has shifted to providing a high-quality, destination-resort experience designed toappeal to higher-wealth customers. Mandalay seeks to provide the best overall experience for our customers in each of the market segments they serve.
Las Vegas is their core market and their properties in Las Vegas appeal to a broad range of customers. For example, Mandalay Bay — with its fine rooms, internationally renowned restaurants, and entertainment attractions — appeals to the upper middle-income to high-income segment of the market. Meanwhile, Luxor and Monte Carlo are marketed more to the middle-income to upper middle-income segment of the market. With their playful themes and more limited amenities, Circus Circus and Excalibur appeal more to the value-oriented, middle-income segment of the market. Mandalay utilize a variety of methods to market their properties including advertising on radio, television and billboards, as well as in magazines. They market their Las Vegas Strip properties primarily through national cable television and magazines. For their other Nevada properties, advertising is concentrated primarily in Nevada, California and Arizona, while their properties outside Nevada advertise in the regional markets in which they compete. Mandalay also utilize direct marketing to a large extent, by making specific offers directly to their extensive database of customers, both via mail and the Internet. They also maintain Internet websites for all of their properties, which provide customers with
information about their resorts, along with the ability to make hotel and show reservations. In addition, Mandalay offered complimentary hotel accommodations, meals and drinks to selected customers.
Mandalay also looked for cross-marketing opportunities. For example, in November 2001 we introduced One Club, our player affinity program that allows cash and complimentary awards to be accumulated and redeemed in real time across multiple properties. Mandalay wholly owned properties in Las Vegas, Laughlin, and Reno, Nevada and Tunica County, Mississippi, as well as Monte Carlo are currently linked through the One Club system. Mandalay believed the One Club system has helped them maintain and expand their customer database, enabling them to better target their marketing efforts. They also believe One Club encourages repeat visitation to their properties and further encourages customers to visit their other properties through the seamless use of their One Club card.
HUMAN RESOURCE ANALYSIS
Although Mandalay does not publish its organizational chart, It appears that Mandalay provides overall direction and strategic leadership as well as functional coordination in the areas of finance, accounting, human resources, legal issues and marketing. Each resort, in turn, has its own functional structure that enables it to handle the specific activities required to successfully operate a large, combined hotel, casino and entertainment resort.
Mandalay Resort Group
Finance
Accounting
Human Resources
Legal Issues
Marketing
FINANCIAL ANALYSIS
Financial Ratio
2003
2002
2001
Current Ratio
.9810
.8486
.9659
Quick Ratio
.6830
.5750
.6211
Return on Sales
.2555
.1509
.2774
Return on Asset
.0757
.0699
.0822
Mandalay’s quick ratios of .6830, .5750, and .6211 show that they are not liquid
for the years 2003, 2002, and 2001, respectively.Mandalay current ratios of .9810, .8486, and .9659 show that Mandalay is not solvent for the year 2003, 2002 and 2001, respectively.This indicate that in every $1 debt of Mandalay, they can only afford to pay less than $1 dollar.Return on sales of 0.2555, 0.1509 and 0.2774 for the years 2003, 2002 and 2001, respectively; indicates that Mandalay can provide $0.2555, 0.1509 and $0.2774 income after tax and interest for every $1 sale in the year 2003, 2002 and 2001, respectively. Return on assets of 0.0757, 0.0699 and 0.0822 in the year 2003, 2001, and 2001, respectively means that for every $1 asset, Mandalay has yielded $0.0757, 0.0699, and 0.0822, respectively income after tax and interest.
SWOT ANALYSIS DIAGRAM
STRENGHTS
WEAKNESSES
Innovation
Brand Name Recognition
renovations and expansions
Large market share
to compete.
Revenue Growth
Requires constant
No mission or vision statement
OPPORTUNITIES
Expansion still available
Las Vegas is a very popular Tourist area
Large amount of debt
THREATS
Economy suffering
Extensive regulations on gaming industry
Highly competitive Market
Online gaming
Competitors
Strengths
Mandalay has a large share in the market due to their innovation in the hotel and casino industry. They are one of the top players in Las Vegas and they have revenue growth.
Weaknesses
Because of stiff competition in the market, Mandalay needs to constantly renovate and expand their existing properties. Due to this, they have obtain a large amount of debt. Mandalay has no stated mission-vision.
Opportunity
Las Vegas is the capital of gaming, and entertainment in the United States. Many tourists visit this place every year. It is an opportunity for Mandalay to expand for they have properties still available. Online gaming became more po pular in many places.
Threats
The coming of new competitors in a high competitive market is a threat of Mandalay. Economic crisis affects the gaming industry. Geographical expansion has slowed considerably since no additional states have approved casino-type gambling since 1993.
IV CONCLUSION
Mandalay Resort Group is the market leader in the business of entertainment, and it has been the innovator in the theme resort concept that is popular in casino gambling. The low liquidity ratio of Mandalay is the result of various renovations of its existing properties in order to compete in the market. Due to the highly concentrated field, expansion has taken on many forms.The company also enter in various mergers. Growth potential in the industry is based upon customer satisfaction, and entertainment. Although internet gambling became more popular in many places, Casino gambling at Las Vegas still at the top which it accounts for 40.6 percent of all legal gambling expenditure. SWOT Analysis shows that Mandalay is very strong in their innovation and possessed a large market share. It has the opportunity to expand in the market of online gaming. The coming of new competitors is a major threat of Mandalay especially in the time of economic crisis. Another is the government policies towards gambling and the stiff competition in the market. Because of that, Mandalay needs to have constant renovation and expansion to stay competitive. As a result, Mandalay obtain a large amount of debt.
IV RECOMMENDATIONS
1. Acquire software for online gambling, and upgrade existing machine for security purposes. This strategy will expand the market of Mandalay and it will accommodate customer outside the United States. It will also gain the trust of their existing customers.
2. Align promotion with the promotion of Airline companies and offer more menus, and innovate room offerings. This strategy will increase the sales of resort industry; rooms, food and beverage, and entertainment.
3. Sell more stock shares. This strategy will increase the liquidity of Mandalay Resort Group.
BIBLIOGRAPHY
A. Books
Agamata,
Franklin
T.
(2009) Managmenet
Advisory
Services.
ENTERPRISES & Co. Inc.
B. Electronic Homepages/Websites
http://www.getfilings.com/o0001047469-03-021057.html: March 12, 2012 http://www.sec.gov/Archieves/edgar,data. : March 11, 2012 http://american gaming.org/casino_entertainment/aga_facts/.: March 11, 2012
GIC
