MGM International Resorts Case Analysis Memo Essay Example for Free

MGM International Resorts Case Analysis memoranda EssayTo James J. Murren From Date November 18, 2013 Subject Issues of MGM International Resorts I am writing this letter in order to address the slow reco really of your community. It has come to my attention that your company, MGM International Resorts, is facing some major issues as the gaming and hospitality attention struggles to recover. In this letter I plan to address the industries problems, and the particularised issues that your company is facing.One of the major issues facing MGM International Resorts is that it is that the industry has a circumstances of overcapacity as gather up has dropped from pre- breakary evels when many big visits nurse been planned. This is evidenced by your companys ambitious pre-recession project metropolisCenter, the largest private development project in United States history. CityCenter ended up opening to little fanf be. The biggest sources of revenue in the industry were conventi ons. payable to the economic downturn in 2008, revenues from Conventions have decreased dramatically and have not fully recovered. duty extracts, associations and corporations traditionally paid a premium to meet in Las Vegas. Now with fewer organizations meet in Las Vegas, they can now negotiate visit prices. There argon now increased leisure travelers passing game to Las Vegas to fill discounted rooms but does not help you increase revenue much as they do not like to spend silver on your high end shopping and dining venues. Americans are also deciding more carefully spend their money preferring staycations in order to save money on increasing airfares and travel costs. This is mainly due to the decrease in discretionary spending of 43 percent from December 2007 to January 2011.The road to recovery from the start of the economic recession for the industry is slower than predicted. Your company also aces strong competition from competitors much(prenominal) as Wynn Resorts and Las Vegas Sands who have managed to fare in the recession substantially better. MGM Resorts Internationals financial statements are not very good relative to your competitors. Your company had a humiliation of financials compared to your competitors whom of which fared the recession much better. Your company is highly leveraged with net debt to EBITDA of 1 1. 5 times. Boyd, Las Vegas Sands have lower debt leveraging at 8. x, 3. 3x, 3. 4x, and 1 . 9x respectively. You are also not as widely diversified in regional American marketplaces such as in the Northeast. Your company has recently lost money carte du jour a net loss of 1,437. 4 million in 2010. I will first analyse the health of the gaming and hospitality industry in Las Vegas in which you compete using Porters Five Forces of competitor Model. The industry faces a lot of substitutes which your customers flock to. There is online gambling. This may keep people from flocking to casinos to gamble as they can conveniently do i t at home.There are also closer example of this would be Empire City Casino in Yonkers, NY. It is only half an hour way from New York City and very convenient for those in the area who would Just like to gamble for a night and make pass home. You do not face a very large threat from new entrants as the corking requirements to enter the gaming and hospitality industry are very high. Customers are able to easily renewal from staying on your properties to another companys property. Your company also possesses a wide variety of products that are differentiated. That being said, effort Rivalry between you and your competitors are very high.All companies in the industry are on clean qual ground ever since the recession. The costs to exit this industry are also very high. Customers again have very low switching costs and may switch between different properties as they realize fit and the large excess in capacity in the industry means that you and all your competitors are cutting pric es on rooms and go in order to attract business. The industrys suppliers of hospitality related supplies, such as food bed sheet and soap, and casino/gaming specific supplies, such as time slot machines and thousands of decks of cards, have very weak bargain power.The ew large companies within the gaming and hospitality industry have the bargaining power with when it comes to its two supplier lines as there are many of these suppliers to grease ones palms from while only a few large companies that are willing to buy. The ability to use a companys size of it to negotiate price and length of contracts for expensive high luxury furnishings and exclusive rights to a show or celebrity chef also gives the gaming and hospitality industry strength. While bargaining power of the suppliers is weak, the bargaining power of buyers is very strong.Customers have ery low switching costs and again the large excess in capacity in the industry means that you and all your competitors are cutting p rices on rooms and wait ons in order to attract business. Conventions, which are a large part of revenue have been on the downturn compared to capacity, again forcing prices downward. Buyers in the industry are also very price sensitive with many opting to take staycations where vacationers enjoy their time off closer to home. All of these forces add up to an industry that is comparatively weak and recovering very slowly.Using the growth-share nalysis, your company is positioned as a cash cow which is very good. Your company has high market share in a slow growing industry. The company should perplex though as it is close to being a dog of the industry as it has a lot of debt from ill-timed large projects such as CityCenter and must worry about other companies stealing market share as they are recovering faster. The industry is very capital intensive which means a lot of revenue is being reinvested back into the business. I will now analyze your company through SWOT Analysis. You r company has quite a few strengths that ill help your company into the future.Your companys large size gives it the upper hand in negotiating the best prices from its suppliers. It is very advantageous that your company caters to a wide revolve of customers from the high-end consumers with resorts such as the Bellagio offering exclusive products to the value-minded consumers with Circus Circus. Your ability to provide superior customer service by recruiting, training and retaining the best most motivated individuals is very valuable in your company. Your marketing and gross sales activities are another strong suit which compliments your services.