As discussed, Wynn Resorts expansion is based on attracting high-end players. With the Chinese government relaxing restrictions, the Chinese citizens have freedom to become those high-end players that Wynn Resorts seeks to attract. Based on the financial statements provided within the case, as of the end of 2007 there was definite support to make a significant capital investment. For example, the resort’s operating income ended at $429,403 (thousands), almost six times greater than the prior year ending at $70,899 (thousands).
Total assets at the end of 2007 were significantly higher than the prior year and net cash provided by operating activities was also significantly higher. These numbers provide evidence that currently Wynn Resorts Ltd. can make a significant capital investment. Apply Porter’s Five Forces to assist you in advising Wynn Resorts on whether or not to pursue this expansion at this time. Will building this additional property offer a sustainable competitive advantage for the Wynn Resorts? What is your recommendation?
Companies choosing to expand into new territory must evaluate the industrial competition that may exist within that industry. Wynn Resorts is seriously considering expansion into a new region. In order to advise Wynn Resorts on the expansion, Porter’s Five Forces analysis was conducted to evaluate the competition. Following are the details of the analysis. 1) Threat of new entrants to an industry – Currently there is a very low threat of new entrants into this industry. The reason for this is that the Chinese government has to grant concessions to companies in order to build casinos.
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Currently Wynn Resorts is one of three companies with a license to build casinos on the strip. In addition, the Chinese government has given permission but only until the year 2017. At this time they may redeem the concession. This policy may deter companies from attempting to gain access to this area. 2) bargaining power of suppliers – The suppliers for Wynn Resorts would mainly consists of those providing the slot machines and the gambling tools. Since Wynn Resorts is already established within Las Vegas, they would already have connections to their suppliers.
Therefore there is little bargaining power for the suppliers. 3) Bargaining power of customers – Gamblers of the industry (buyers) currently have very little influence within the industry. This is due to the Chinese government still having some restrictions on currency movements which limits the number of buyers. However this may change in the future with estimations of residents moving into higher income brackets. 4) Threat of substitute products – Along with a low threat of new entrants there is a low threat of substitute products.
Since the casino industry will be new to the area, buyers will not find substitute entertainment. 5) Degree of competitive rivalry – There is a very low degree of competitive rivalry with this expansion. This is primarily due to the “clout in the Wynn name” (Pearce & Robinson, p. 30-9, 2011).
This name symbolizes luxury and the best quality of service available everywhere. To continue to ensure this high ranking status, Wynn Resorts has implemented a new policy where pit bosses are rewarded for making customers happy.
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Executive Summary 1.) Purpose To know if what is the overall strategy of Steve Wynn to make Wynn Resorts, Ltd. on the right track and quite a remarkable company. 2.) Statement of the Problem There are three problems which I found out in the case, and these are the three challenges that Wynn will have to face, and the future may throw some curveballs along the way. First is need to secure a way to ...
All of this provides for little opportunity for rivalry from other casinos. Based on the analysis conducted through Porter’s Five Forces, Wynn Resorts will gain a sustainable competitive advantage by building an additional property. My recommendation would be to move forward with expansion paying close attention to ensuring client’s expectations are met while maintaining profits. References Pearce, J. , & Robinson, R. (2011).
Strategic management. (13th ed. ).
New York: McGraw-Hill Companies.
