Mgm Mirage Case Study

MGM Mirage Introduction of the Company MGM Mirage is one of the largest gaming industries in the united States and specifically Lass Vegas, Nevada. The two people responsible for the start of this empire are Kirk Gregorian and Steven Wynn. Kirk Gregorian opened up the first MGM Grand in Lass Vegas, Nevada in 1973.

Steven Wynn moved to Lass Vegas in 1967 and after Investing in land on the strip he later opened up the Mirage, followed by Treasure Island and the Bellagio.

The MGM Mirage was created during the merger In 2000, and Steven Wynn Is no longer affiliated with this company. Since this merger, MGM Mirage has grown and acquired numerous other properties. Currently MGM Mirage acts as a holding company and conducts operation through its wholly owned subsidiaries. The MGM Mirage owns many of the large hotels and casinos on the Lass Vegas strip, all which provide restaurants and some the largest entertainment in the world.

In 2006 MGM Mirage had $7 Billion In revenues and $600 Million net profits. Mission Statement MGM Mirage’s mission statement that is posted on their website is “Our mission is to deliver our winning combination of quality entertainment, luxurious facilities and exceptional customer service to every corner of the world in order to enhance shareholder value and to sustain employee, customer and community relationships. The mission statement that is stated in the text book is “The resorts and casinos of MGM Mirage are some of the most famous In the world, widely credited for establishing a new generation of excitement In Lass Vegas’ Our 24 destinations are renowned for their winning combination of quality entertainment, luxurious facilities and exceptional customer service. Our dedicated staff of over 70,000 employees are omitted to providing an unsurpassed experience for every one of our guests. We are actively expanding our presence globally, with potential developments in a number of domestic and International markets.

Leveraging Brand Name and Skills Some companies are very large and have powerful brand names that allow them to control their name and talents to other businesses for a fee. In some case the brand allows a company to avoid all the capital expenditure issues involved in building a brand property or product. Therefore, the brand earns a pure profit from the enterprise. 2. Domestic Tourism A lot of international travel my be cut back to due recessions and economic hardships, but tourists may be willing to travel domestically, some of the hot spots ill include Lass Vegas and Hawaii 3.

Retired Population As the number of retirees increases, so will the demand for older aged activities and products. Mobile vehicles, which are popular amongst retirees, should see a gradual increase over time. Casino stocks and leisure activities, such as boating will also see an increase. It also increases the demand for retirement services from health care to money management. 4. Emerging Profits China is one of the largest producers for good throughout the world, and with the economy constantly growing; they will need more equipment and supplies from around the world.

Almost all large industrial companies should benefit from China and other countries growth. 5. Emerging Markets Demand from emerging markets is helping growth and margins. Emerging markets create new opportunities to expand products from the developed world. Paper products, computer services and other industries will all benefit as emerging countries increase demand for industrial and agricultural products.

6. Airline Cuts Airlines might cut down on services to Lass Vegas and other vacation destinations if the economy doesn’t recover quickly. This would hurt tourism and revenues on the Lass Vegas Strip.

With less people traveling it becomes more expensive for airlines to fly back an forth to destinations. 7. Government Intervention Government intervention could put downside pressure on the stock.

Possible government intervention increases risk, because the government is a big customer and has a history of making adverse changes to the operating ability of companies in every industry. A government regulated industry increases political risk, because government actions may not be in the best interest of citizen of that particular country. Governments are usually inefficient with spending money.

Regulations are meant to protect the environmental and consumers. They take the form of permits, package, etc Summary – The weighted average of the opportunities and threats in the chart above is a 14. Since this amount is much larger than 2.

5, I would consider this to be a favorable situation. Internal Analysis Strengths I Weights Rating I Weighted Average I Brand Name 10. 3 13 1 0. 9 | Continuing Growth | 0. 1 | 2 | 0.

2 | 110 1 Weaknesses 1 1 10 1 Geographically Concentrated Assets | 0. 2 | 3 Competition Within | 0. 1 | 1 Government Regulation | 0. 25 | 3 | 0. 75 Total II 1.

Brand Name 0. | Strong brand name helps to increase margins by charging premium prices for goods, because customers perceive a higher standard of quality from companies with strong brands. A strong brand name may also help to support the stock price, because people will associate a strong brand with a strong stock. 2. Geographically Concentrated Assets When assets are geographically concentrated, they are subjected to additional risk that those locations may be under political duress or natural disasters. Many companies rely on the United States for the majority of their revenue.

3. Continuing

Growth MGM Mirage is currently planning a six billion dollar, sixty-six acre construction project with E;K Architects. The project is called ‘city center’ and it is located right on the Lass Vegas strip. This project will consist of building new hotels, resident buildings, as well as retail, dining and entertainment. MGM plans to complete this project by 2010.

4. Competition Within MGM Mirage faces competition within its own brands of hotels and casinos. Since they own so many of the hotels on the Lass Vegas strip they are constantly competing with itself for the same customers.

MGM Grand Lass Vegas, the Bellagio, and The Mirage all compete for the same high-end customers. 5. Low Bankruptcy Rate There is a low chance of bankruptcy because MGM Mirage has no short-term debt, they also own about half of the hotels and casinos on the Lass Vegas strip.

6. Government Regulation The gaming industry is heavily regulated by the states and other governments. In the United States, individuals must first pass laws legalizing gambling, and then they can set up some form of regulatory commissions to oversee gambling activities.

The weighted average of the strengths and weaknesses in the chart above is a 2. .

Since this amount is greater than 2. 5, I would consider this situation to be favorable. Potential development of substitute products Porter’s Five Forces Model Bargaining power of consumers Potential entry of new competitors Rivalry among competing firms 1. Rivalry among competing firms The industry of entertainment, including hotels, restaurants, gaming and casinos, is definitely involved heavy competition.

It is an industry that is growing at a constant rate in different cities, states and even around the world.

Some of MGM Mirage top competitors include Hurrah’s Entertainment Inc. Caesar Entertainment Inc. , Mandalay Resorts Group and the Lass Vegas Sands Corp…

Mandalay Resort Group is one of the smaller corporations and competitors in the industry; MGM Mirage has proposed an offer to buyout Mandalay Resort Group which could increase annual revenues. The Lass Vegas Sands Corp… Owns the Venetian, which is a direct competitor of the Bellagio, Just one of the resort casinos owned MGM Mirage.

The switching costs for this industry are both high and low.

When there are high switching costs it is based on how well a guest views the customer service, such as comps to upgraded moms, free meals, and other included amenities. These comps distract the guests from going to other resort casinos hopefully resulting in returning customers. There are low switching costs involved due to the fact that the resort casinos are located mainly on the Lass Vegas strip. This makes it easier for the customers to migrate from one resort casino to another.

The resort casino industry has high exit barriers due to the difficultly and high cost when getting out of the business.

2. Threat of New Entrants The threat of new competition for this industry is very low. In order for new intention in this market, especially in Lass Vegas, a tremendous amount of capital is necessary. MGM Mirage’s success and profitability is directly related to the rockiness and constraints of entering into the industry. With an economy as large as the gaming and casino industry, new entrants must enter with a large capacity, facing the possibilities of the space not being utilized.

Existing relationships between the firms and suppliers creates a barrier to new firms wanting to enter the industry.

Some of the legal barriers include state regulation and liquor licensing, zoning and Nevada gaming commission. . Threat of Substitute Products The threat of substitute products is low in this industry because the different resort casinos are not affected by the substitutions. For someone who does not have the time or money necessary when traveling to Lass Vegas or overseas, there are a number of entertainment areas and services where the exciting pleasure of gambling remains available.

Some of the most popular substitutes consist of playing the lottery, going to horse races and online casinos. The lottery is probably the easiest and most convenient way for a person to participate in gambling.

Since the gambling world is constrained to those 21 and older, the lottery is a way to pull in a younger crowd. Those that enjoy the thrilling environment of casinos would most likely find pleasure in going to the horse races. Online casinos are a readily available source for people that appreciate a wide variety of games.

The two main determinants of the bargaining power of buyers are price sensitivity and relative bargaining power. Both price sensitivity and relative bargaining power are low for this industry.

Price sensitivity is going to be based solely on the prices of he hotels, not the casino, since the actual casino is not competing on price. The sensitivity of price to the buyer will be determined by the wealth and personal taste of the customer. A wealthy customer will often choose an expensive hotel when luxury and customer service are of high importance.

On the contrary, if a customer is there solely to enjoy the casinos, a cheaper hotel would be suitable. When it comes to the relative bargaining power of the buyer, negotiating a certain price with the actual hotel will be difficult to achieve.

However, there are online discount websites, such as Hotels. Com, who can help lower the cost for the buyer. 5. Bargaining Power of Suppliers In this industry, the suppliers to the hotels and casinos have a substantial amount of power. This is because the resort casinos can only choose from a small selection of suppliers.

As many people use the internet and MGM Mirage has many clients that live worldwide it could be safe to say that this is a good way that MGM Mirage could use technology to their advantage and increase their promotional tools. The more resources that they use the better chances they have in eliminating their competition. MGM Mirage could strengthen their brand by creating more advertisements; this will help attract new customers as well as bring back the old ones. Since MGM Mirage has strong financial and great profit I believe that a new promotional package is affordable and that it will be profitable to their company. The best way for MGM Mirage to implement this project would be to use as many resources as they have available to them, the internet is one of the best and most useful sources because it is the least expensive and it is relied.

MGM Mirage can advertise through the internet, this will allow for them to reach out to the greatest amount of potential and existing customers.

The advertisements could include new attractions, restaurants, entertainment, or renovations. They might also consider updating some of the themes to their existing hotels as some of them have become old. It is important for MGM Mirage to not only look at competitors in Lass Vegas, but also internationally. Especially in new regions, they need to make sure that they gain a profitable market share in the new up and miming regions before other hotels beat them to this. I believe that there can be achievement within the new promotional package plan for MGM Mirage.

They can expect new gain a rise in new customers of an estimated 15%.

The use of promotion through the internet could easily bring in customers from all over the world. Advertisement through sponsors and commercials can also project to bring in new customers. The second strategy that I believe MGM Mirage could implement is introducing a new annual objective and policy that allows for MGM Mirage to compete and rise above Hurrah’s Inc and other competitors’. Overcoming Hurrah’s should be MGM Mirage’s biggest concern, since they are their largest competitor.

They are off to a good start with their new project ‘city center’, MGM Mirage will need to do something different to stand out from their competitors’ and creating a project like city center is Just the thing that they might need.

For MGM Mirage to be successful doing this they will need to start by securing their financial as well as promotional advertising. Each of these strategies need to be carefully planned out and made sure that they can sustain the long term goals and objectives of the company. MGM Mirage will have to look at and constantly manager their external around if found necessary. Not only will MGM Mirage need to constantly review their external and internal factors but they will also need to constantly monitor the external and internal factors of their competition, making sure that their strategies also have not changed and is so why.

It is crucial for MGM Mirage to keep up with this information on a continually basis and not Just a periodic basis.

Managers and employees of MGM Mirage should also stay aware of their own continually progress in achieving their objective as well. Epilogue There have been many things that have taken place at MGM Mirage since this case study was written in 2007. MGM Mirage had revenues of in 2009, which was a -17. 1% change from 2008. The company also did not ever surpass its main competition Hurrah’s, who ranks higher on the Fortune 500 list then MGM Mirage.

As we know, MGM Mirage recently acquired Mandalay Resorts, this was one of their larger acquisitions; in 2008 they decided to sell their Treasure Island resort and casino for $775 million in cash and notes to real estate investor Phil Ruffian.

But in 2006 the proposed a plan to build a complex called ‘city center’, the construction or this project started in 2007 and was completed by late 2009. City center consists of Aria resort and casino, along with other small hotels and residences. It also includes a 500,000 square foot mall, $40 million worth of modern sculptures, a parking garage, fire station and on-site power plant. It was the single most expensive privately funded project in the western hemisphere. This project has so far been successful for MGM Mirage and is believed to create great revenues for the company.