Australian Casino Industry and Competitive Analysis

3417 Words Apr 23rd, 2004 14 Pages
Executive Summary

The purpose of this report was to gain a better understanding of the Casino Industry. It identifies the many contextual and diverse factors that influence this particular part of the gambling industry in terms of the type of customers they attract, how it is shaped by government policies, the impact of suppliers and buyers of the market, competitive rivalry, and organisational generic strategies.

The Five Forces model revealed a highly dominated industry by two major competitors. Incumbents are forced to find new ways of improving their products and services but at the same time maintain high levels of efficiency. Rivals have been forced to accept takeovers and mergers so as to remain a player in the industry. New
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2.0 Industry Structure Analysis ("Five Forces" Model)

2.1 Entry Barriers

The level of barriers to entry is high

2.1.1 Economies of Scale

The rationalization of the casino industry has enabled major players to operate given economies of scale. This has lead to some degree of deterrence for any new entrant without gaming industry expertise, financial resources and/or access to distribution channels because they are otherwise forced to accept a cost disadvantage. The main competitors include TabCorp Ltd., who now own five casinos and are also involved in wagering. The second major competitor is PBL, who owns Melbourne's Crown Casino and have a 15% shareholding in Burswood Casino (IBIS, 2004). As such, these multiple and similar operations allow them to increase cost efficiencies while maintain a high level of service and quality product offering to meet market demands. For example, PBL has taken advantage of the digital technology used to produce the 'ninemsn' network (one of PBL's core businesses), and televises 3 digital channels on the largest sports screen in the southern hemisphere 24 hours, 7 days week (Craigie, 2003).

2.1.2 Capital Requirements

The level of capital needed for investment in order to sustain a competitive position in the casino industry, is significantly high. New entrants should budget for a number of costs once positioning themselves in
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