MGM Mirage Case Review

Introduction

This review will be conducted in order to determine the ways in which MGM Mirage group has evolved and its involvement in the modern gaming industry. The review is basically to determine the methodology and circumstances that surround this industry and the growth of MGM Mirage. This review has the following purposes:

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  1. To identify the internal and external factors affecting MGM Mirage and how the company has overcome them.
  2. Formulate a SWOT analysis of the company’s affairs with emphasis on the strategic management efforts of the company.
  3. Establishing the status of the company in terms of vision, missions and objectives and the factors threatening their achievability.
  4. To identify ways in which MGM Mirage has used economic analysis in the decision making phase.
  5. Identify the reasons behind the success of the company.
  6. To learn on strategic choices made by the company and how to utilize them efficiently for the success of the business.
  7. Establish the background for future decision making in the company.

This review will basically discuss the status of events in the company and the growing trends in the past history of the company and also it’s designed to access the factors affecting this business and the best ways to overcome them.

The story of MGM mirage began in the year 200 after MGM grand acquired Mirage resorts. Their history can be dated back in the 1970s when the owner Mr. Kerkorian in 1973 opened the first MGM grand and with his investment and knowledge of the market through his investment company Tracinda corp. which currently owns a commanding 50% of the shares in the investment. After this acquisition their revenues grew (David, 2009, p 258, Para 5). The trend grew by acquiring Mandalay resort group in 2005; it opened MGM grand Detroit and MGM grand Macan and is hoping to open others in Atlantic City and Abu Dhabi.

EFE Matrix

The external factor evaluation (EFT) matrix is designed to identify and evaluate the economic factors, social factors, demographic factors, environmental factors, governmental factors, legal factors, technological factors and competitive factors of the organisation evaluated (David, 2009, p 125, Para 4).

The EFE matrix of MGM Mirage will have the following valuables:

  1. The weight value will be between 0 and 1 or 1% to 100%, zero means the factor is unimportant and 1 means that the factor is more critical.
  2. The rating will be from 1 to 4; this will basically identify how the MGM Mirage current strategy responds to the factor.
  3. The weighted score will be got by multiplying the weight factor and the rating factor in the respective factor column.
  4. The total weighted score will be translated as follows;
Rate factor Indication
1 poor
2 Below average
3 Above average
4 superior

The MGM Mirage Company is faced by many external factors which can be analysed as follows:

Key External Factors Weight Rating Weighted Score
Opportunities
1 Increase in demand 20% 4 0.80
2 Growth of the gaming industry 10% 3 0.30
3 Industry consolidation 4% 4 0.16
4 Emergence of foreign markets 7% 3 0.21
5 Acquisition and opening of new hotels and casinos 8% 2 0.16
6 Legalization of gaming in various states 9% 2 0.18
7 Increased disposable income in the US 5% 2 0.10
8 Emergence of internet gambling 1% 4 0.04
Threats
1 Legal hurdles and government oversight 15% 4 0.60
2 Economic downturn 5% 4 0.20
3 Declining profit margins 3% 1 0.03
4 Increase in competition 10% 2 0.40
5 Increased costs of operation 5% 1 0.05
6 Increased taxes 7% 2 0.14
100%
TOTAL 3.37

The result of the EFE matrix shows that MGM Mirage is slightly above average ability to respond to external factors facing it. Even though the EFE is subjective in nature the figure in the analysis give an empirical nature in which the decision can be based on. The EFE matrix analyses the external environment showing the overall rating of 3.37 for MGM Mirage thus giving the management a background on the company’s status.

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IFE Matrix

The internal factor evaluation (IFT) matrix is designed to identify and evaluate the major strengths and weaknesses of the functional and operation areas of business and also the relationships between them (David, 2009, p 167, Para 1).

The IFE matrix of MGM Mirage will have the following valuables;

  1. The weight value will be between 0 and 1 or 1% to 100%, zero means the factor is unimportant and 1 means that the factor is more critical. The strengths come first then the weaknesses.
  2. The rating will be from 1 to 4; this will basically identify how the MGM Mirage current strategy responds to the factor.
  3. The weighted score will be got by multiplying the weight factor and the rating factor in the respective factor column.
  4. The total weighted score will be translated as follows;
Rate factor Indication
1 poor
2 Below average
3 Above average
4 superior

The IFE matrix provides important information necessary for policy formulation and when a key factor in both strength and a weakness it can be included in both sections.

The MGM Mirage Company is faced by many internal factors which can be analysed as follows:

Key internal Factors Weight Rating Weighted Score
Strengths
1 New acquisition has large impact on balance sheet 10% 3 0.30
2 Table games has shown a marked percentage increase in revenues 8% 2 0.16
3 The financial management is efficient 6% 4 0.16
4 Employee morale is excellent and unique skills 7% 3 0.21
5 Revenue of rooms is growing as a percentage of total revenue 8% 2 0.16
6 Good reputation, culture and corporate image
7 Revenue in all sectors of the group are increasing 20% 2 0.40
8 History of minimum complaints and operational efficiency 5% 3 0.15
Weaknesses
1 Saturated market, poor marketing and sales strategies 5% 4 0.20
2 Absence of strategic partner and access to resources 5% 4 0.20
3 Demand exceeds supply 3% 1 0.03
4 Lack of quality and customer service 1% 2 0.02
5 Security 5% 3 0.15
6 Location of hotels and casinos impacted by high competition 7% 2 0.14
100%
TOTAL 2.28

IFE matrix is basically similar to EFE matrix but the main difference is the weights and ratings. The IFE matrix for MGM mirage is 2.28 which are slightly below average.

SWOT Matrix

This matrix helps the manager make four important strategies in management of enterprises; they include (David, 2009, p 224, Para 1)

  • SO strategies (strengths-opportunities).

“The manager should use the firm’s internal strengths advantageously to take advantage of the external opportunities.” (David, 2009, p 224, Para 2)

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  • WO strategies (weaknesses-opportunities).

“These strategies aim at improving the internal weaknesses by taking advantage of the external opportunities that come its way. By doing this it will gain a competitive advantage over the other companies in the market.” (David, 2009, p 224, Para 3)

  • ST strategies (strengths-threats).

Here the company aims at increasing its strengths and reducing the impact of the external threats it faces.

  • WT strategies (weaknesses-threats).

“They are designed as defensive tactics directed towards reducing the internal weaknesses and also avoiding them. If an organisation is faced with these factors it acts precariously to prevent its collapse by merging with other companies, declaring bankruptcy, retrenching or liquidating.” (David, 2009, p 224, Para 5)

A SWOT Matrix of MGM Mirage
Strengths Weaknesses
1.New acquisition has large impact on balance sheet 1.Saturated market, poor marketing and sales strategies
2.Table games has shown a marked percentage increase in revenues 2.Absence of strategic partner and access to resources
3.The financial management is efficient 3.Demand exceeds supply
4.Good reputation, culture and corporate image 4.Security
5.History of minimum complaints and operational efficiency 5.Location of hotels and casinos impacted by high competition
6.Employee morale is excellent and unique skills 6.Lack of quality and customer service
7.Revenue in all sectors of the group are increasing
8.Revenue of rooms is growing as a percentage of total revenue
Opportunities
SO Strategies WO Strategies
1. Increase in demand 1.Add new hotels and casinos (S1,O4) (S2,O5) (S8, O6) (S7,O3) 1.Acquire new hotels and casinos (W2,O1)
2.Growth of the gaming industry 2. Venture in other sectors i.e. diversify (S4, O7) 2.Increase advertising both locally and globally (W1,O2)
3.Industry consolidation 3.increase utility in the hotels and casinos (S5, O2) 3. Establish online gaming (W1,O8)
4.Emergence of foreign markets
5.Acquisition and opening of new hotels and casinos
6.Legalization of gaming in various states
7.Increased disposable income in the US
8.Emergence of internet gambling
Threats
ST Strategies WT Strategies
1.Legal hurdles and government oversight 1. increase marketing and advertising strategies (S4, T4) 1.Hire and train existing employees (W6,T3,T4)
2.Economic downturn 2.Purchase new or acquire new premises (S8,T5,T4) 2.Install online software capabilities for online gaming (W1,T2,T3,T5)
3.Declining profit margins 3.Formulate efficient policies for the management of resources (S3, T6,T4,T3,T2) 3.Increase the supply of gaming needs (W3,T4)
4.Increase in competition
5.Increased costs of operation
6.Increased taxes

The matching of both the external and internal factors and also opportunities and threats is a very efficient way of analysing both the micro and the macro environment of the company.

Porter’s Five Competitive Forces

This is a widely used approach in the development of strategies. According to porter the nature of a competitive strategy in a given industry is composed of the following forces (David, 2009, p 119, Para 1);

Rivalry among competing firms

The rivalry among the firms is one of the most powerful forces in MGM mirage for example there are a number of competitor who includes Harrah’s which is the largest company in the industry, Las Vegas sands Corp, Wynn Resorts, Columbia Sussex and Trump entertainment resorts. All these competitors have a market share and the greatest challenge to MGM Mirage is to maintain and increase the market share and thus it has to formulate competitive strategies to achieve this9 David, 2009, p 268, Para 3).

Potential entry of new competitors

This industry has a lot of potential for new entrants in the market and this has increased the competitiveness of the existing firms. Although there are a lot of challenges associated with entry this sector has not achieved full loyalty segmentation and thus is prone to changes in the market share in the event that a new player enters this market.

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Potential development of substitute products

New developments are inevitable since the environment is ever changing at all times. This has force the MGM Mirage to rethink their expansion strategy and are currently undertaking various projects and trying to diversify by incorporation both hotels and casinos. They have also established outlets for the locals to participate thus increasing their corporate image and social responsibility (David, 2009, p 267, Para 5).

Bargaining powers of suppliers

The intensity of the competition in the industry is affected by the bargaining powers of the suppliers. In the case of MGM Mirage the supplier’s impact on the operations is greats since most of its hotel and casinos used supplied commodities.

Bargaining powers of consumers

In MGM Mirage where the consumers account for a large and concentrated amount of revenue they can be very influential on the intensity of the competition in the industry. In MGM Mirage they are the most valuable components in their operations and thus all the services are designed to suite them. This can be a program designed to increase the loyalty of their consumers and thus increasing the services offered and also lowering the prices (David, 2009, p 121, Para 7).

Conclusion

Gambling has been an old game but with new environment and recent developments it is becoming one of the fastest growing businesses in the US. MGM Mirage is the second largest company in the US and as evident in its strategies and development projects it’s striving to be the largest. It has seen most development in both the local and the global scale with billions worth of assets. MGM Mirage review above is evident that the company is well positioned to face any challenges in the future and with implementation of those strategies it will surely become the largest gaming company not only in the US but in the world.

References

David, Fred R. Strategic Management: Concepts and Cases. 12 ed. USA: Pearson Education Inc. 2009.

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