The article focuses on Wynn Resorts Ltd, which is a company that has enjoyed remarkable success in the gambling industry in the past few years. The first part in this paper analyzes where Wynn Cotai Strip initiatives fits on its growth and expansion strategy and whether there is support to make a considerable capital investment in this resort. The second part applies Porter's Five Forces analysis to determine whether Wynn Resorts should pursue this expansion.
Wynn Resorts Ltd. is a premium destination world class Casinos and Resorts that was founded by Steve Wynn. The founder of this company is regarded by many as a visionary who has transformed the City of Las Vegas through establishing one casino at a time. In its initial years, Wynn Resorts Ltd. operated at small stakes in 1967 in the Frontier Hotel in which it was a newcomer to Vegas. Currently, the firm owns and operates various businesses including the Wynn Macau in the People's Republic of China and Wynn Las Vegas. Wynn Resorts Ltd. is also in the process of developing The Encore Diamond Suites, which is an expansion to the Wynn Las Vegas. Moreover, the firm continues to explore various opportunities to develop extra gaming and associated businesses in other domestic and international markets.
Growth and Expansion Strategy of the Firm:
As previously mentioned, Wynn Resorts Ltd. is exploring numerous opportunities for developing and expanding its businesses in other domestic and international markets. In order to facilitate the growth and expansion initiatives, the company has developed a comprehensive strategy that incorporates various aspects of the business. An example of the growth and expansion strategy and efforts is the development of The Encore Diamond Suites, which is an extension of the Las Vegas business.
The other significant aspect of the firm's expansion strategy and initiatives is Wynn on the Cotai Strip. As part of its strategy, Wynn Resorts Ltd. has been able to purchase significant portions of land in both Macau and Cotai. According to Sieroty (2012), Wynn Las Vegas and Encore Casinos in Macau signed a deal that enables the firm to obtain significant portions of land in Cotai strip for a proposed resort in the region. The initiative has widely been seen as a new development measure with the potential of favorable unit growth to investors.
The purchase of huge land portions in Cotai is in line with the firm's initiative to explore new global markets and expand it businesses. The initiative fits into the company's growth plan for breaking the casino monopoly and contributing to the development of the region as a tourist destination. As a project estimated to cost around $3 billion, the development of Wynn Cotai will feature approximately 2,000 hotel rooms and 400 gaming tables.
With regards to the existence of enough support to make a significant capital investment in this resort, Wynn Resorts Ltd. has the capacity to do so. First, the company has positioned itself effectively in the growing gaming markets with which the development of this resort is a strategic opportunity. Secondly, the firm has strong marketing strengths, which basically incorporate the development of its product. Thirdly, Wynn Resorts Ltd. has significant capital investment to support the project since it has continued to generate huge profits from its customers through direct marketing.
Porter's Five Forces in Wynn Resorts Ltd.:
Similar to other businesses, Wynn Resorts Ltd. experiences various factors in its quest to explore and expand into new markets, especially international markets. As a result, it's important to conduct an analysis of Porter's five forces in order to make appropriate decisions regarding the development of new businesses in foreign markets. Therefore, the question on whether Wynn Resorts Ltd. should continue to pursue its expansion in Cotai strip can be answered through such analysis.
Since Cotai Strip is in Macau, the Porter's five forces that are likely to impact Wynn Resorts Ltd. can be determined through an analysis of the whole region. Given that the Macau government strictly controls licensing of casinos, especially to foreign firms, the intensity of competition and rivalry is lower (Faiaze, n.d.). The low intensity of competition in the region's gaming and casino industry also act as a barrier to entry. There is a relatively moderate threat of new entrants in Macau's casino industry because this sector is currently in a state or stage of growth. The moderate threat of new entrants has also been fueled by the fact that the Macau government strictly controls licensing in the industry, which acts as an entry barrier.
Since Macau is not an attractive gambling destination because of the state of its casino industry, the bargaining power of buyers is low. This is coupled with a moderate power of suppliers since the approval for management of casino operations in the region is a preserve of the government. The threat of substitutes in Macau is low because high-end customers in the industry have no other actual substitute to gambling or casino as an entertainment source.
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