MGMT 102
Strategy

Las Vegas Sands
A Company and Industry Analysis

Submitted by:
Adhitya Christian Martin (G3525406X)
Chye Hui Lin (S8734971C)
Darren Chng Meng Hoe (S8509392D)
Jasmin Hamdani Ham (G3529740K)
Karina Ondang (G0638741T)
Liu Fang (G3529124K)
Louis Lim Wei Chun (S8416257D)

* Contents

Executive Summary | 1 | Company Overview | 2 | External Environment | 2 | Internal Environment | 4 | Acquisitions, Restructuring and Cooperative Strategies | 6 | Business-Level Strategy of Las Vegas Sands in the U.S. | 6 | Corporate- Level Strategy of Las Vegas Sands in the U.S. | 11 | International Business-Level Strategy of Las Vegas Sands | | Macau | 14 | Singapore | 17 | Bibliography | i | Appendix | iv |

* Executive Summary
Las Vegas Sands is a hotel, gaming and resort development company which operates in many countries worldwide. It has 3 significant establishments; The Venetian and The Palazzo in United States, The Venetian Macao in Macau and Marina Bay Sands in Singapore. The company places strong focus on their code of conduct and ethical behavior of their employees.
The company has both tangible and intangible resources. Their capabilities include excellent management of operations and human resources, specifically tailored offerings to the Asian market, the MICE business and Eco 360 cost savings initiative. We have identified their core competencies to be in MICE, the Eco 360 program, its Paiza Club which targets high end Asian clientele and the Venetian theme which is seen prominently in their establishments. We have also analyzed the company’s external environment based on Porter’s 5 forces. Most of the forces are identified to be moderate, with the exception of threat of substitutes being high.
For this paper, we have defined their core business to be in the casino business. Their resort hotels and MICE businesses will be analyzed on the corporate level. We have identified their main competitors to be Harrah’s, MGM and Wynn. They would seem to have strong ties with its customers, especially Asian high rollers, when analyzing based on reach, richness and affiliations. Las Vegas Sands’ business level strategy in the U.S. has been identified as focused differentiation. Their corporate level strategy has been identified as both related constrained and related linked diversification to achieve economies of scope. For both of these strategies, we have concluded that they are the best choices given the context of the internal and external environments in which the company operates. We have also recommended on how to improve on the strategies.
We have also analyzed the International business level strategies for Las Vegas Sands in Macau and Singapore. Macau is pursuing the broad differentiation while Singapore is using the focused differentiation. The difference in strategies is due to the strict political-legal environment set by the Singapore government. We have concluded that the strategies taken in each country are appropriate and also recommended on how to improve their current positions.
From our research, we found no substantial information about Las Vegas Sands acquiring, restructuring or entering cooperative agreements with other companies. As such, we have left out the analysis of strategies for these 3 components. * 1. Company Overview
Las Vegas Sands (LVS) is a hotel, gaming and resort development company and along with its subsidiaries, it owns and operates in different countries like US, India, Japan, South Korea, Hong Kong, China, Malaysia, Singapore and other countries with the headquarter in Las Vegas.
For the purpose of this project, we will only be focusing on The Venetian and The Palazzo in United States, The Venetian Macao in Macau and Marina Bay Sands in Singapore. The corporation is led by Sheldon G. Anderson in which he acts both as the Chief Executive Officer and the chairman of the board of directors. In terms of corporate governance, the company places strong focus on their code of conduct and ethical behavior of their employees whereby a comprehensive guideline and reporting mechanism has be set in placed. There is also a strong emphasis on the quality of board of directors overseeing the company in which a list of requirements in character traits has been listed out which the boards of directors are required to exhibit. * 2. Internal Environment
This part examines the internal part of the environment which comprises of analyzing the firm’s portfolio of resources and how to leverage the resources, turning them into core competencies. Core competencies should be sustainable to create competitive advantages.
2.1 Resources
Some of the tangible and intangible resources for LVS include the long list of hotels and resorts under its brand and its valuable human resources -28,500 employees. Also, LVS has established a strong presence in the market in terms of branding and their Eco 360 initiative.
Other resources include its two private jets– L-1011 airplanes which serve to chauffeur mainly Asian gamblers with larger bankrolls to the company’s two Strip resorts from Asia and allow them to play baccarat during the 14 hour flight and the winnings will not be subjected to Nevada’s 6.75% rate on all gaming revenue.
2.2 Capabilities
Through its excellent management in operations and human resources, LVS was able to integrate most operations including its retail tenants in the context of a Venetian theme to deliver a unique experience to patrons. LVS also noticed that the Asian market has huge potential for growth and decided to shift its focus to target this sector instead by putting in tremendous effort and time in understanding the Asian culture and integrating them into the operations of the Paiza Club – an Asian-themed club, and tailoring other facilities such as renovating the presidential suites and expanded the baccarat pit to meet the expectations of high-budget Asian customers.
In an attempt to attract more businesses to the casino, LVS also added MICE on to its offering with an aspiration to be the leading destination for MICE activities in the region with its well-equipped facilities such as Sands Expo Centre and Congress Center.
Also, the Eco 360 initiative is regarded of high importance for the organization as it brings about healthy balance sheets and cash flows from the cost savings. It is reported that LVS saves $4 for every dollar invested in its sustainable development program and the company is looking into aligning all future properties to comply with its Eco 360 degrees principles and standards. Lastly, the management team with an average of 30 years of experience in the hotel, gaming and convention industries act as one of the capabilities for LVS as they are the ones who have a good understanding of the market, employees and consumers’ needs.
2.3 Core Competencies and Competitive Advantages
It is reported that Las Vegas hosts an average of 22,000 meetings with 6 million business travelers flying in, generating an economic impact of $8.5 billion and these travelers usually come from Fortune 500 companies. Major conventions and trade shows are also being held usually employing more than 46,000 employees for the shows.
Tapping on this, LVS saw it as an opportunity and invested a great deal in facilities, service and amenities to ensure companies bringing meetings here have the best possible experience. This competitive advantage is deemed as a sustainable one due to its first-mover advantage in becoming the market leader for MICE industry and also the high costs involved for competitors to mimic the same infrastructure.
Next, its Eco 360 initiative is deemed as a short-term competitive advantage as it brings about continuous and sustainable cost savings which may seem to be costly for competitors to imitate in the short-run but in the long-run, competitors might see the value in it and will be willing to pump in money to invest.
Thirdly, the focus on high end Asian clientele through Paiza Club is seen as a sustainable competitive advantage if LVS continues to put in effort to sustain the club and continuously improving to meet the expectations of the target group.
Last but not least, the Venetian theme is sustainable as it traces back to the branding and how established it is to consumers and also its operating efficiencies through coordinated management of several interconnected facilities within a single complex - Venetian-Palazzo-Sands Expo Centre. * 3. External Environment
Before any organization decides to venture into a new market, it is crucial that they also conduct an analysis of the external environment to determine if it is a viable market for them to enter. For this part, we will be examining the external environment based on Porter’s Five Forces.
3.1 Bargaining Power of Buyers
This element looks into the impact that customers have on the industry and the chart (Appendix A) provides an analysis of the casino sector in the United States. Given the popularity of gambling activities in US, it shows that there is a huge market and an increasing trend for number of buyers. However, the wide variety of potential customers suggests a weaker buyer power in the sector. Moreover, such activities are considered non-essential and raised social concerns by the society where consumers are deemed as not making rational economic decisions and further weaken buyer power.
On the contrary, even though casino sector is said to be “recession-proof”, results have shown otherwise and this implies fewer buyers during the period leading to stronger buyer power.
Market players in this sector know the different types of games (black jack/poker) and distribution channels (online/outlets/casinos) along with the different payout margins. Hence, loyalty is unlikely to be high even if casinos made memberships compulsory to ensure retention.
Switching costs for consumers differ as well for the different types of gambling and generally switching costs is minimal, strengthening buyer power. Also, the increased growth of disposable income levels has also helped to increase buyer power further.
In short, looking at both sides of the coin, it seems that there is a moderate degree of buyer power within the US casinos and gaming sector.

3.2 Bargaining Power of Suppliers
Due to the hospitality nature of this sector where quality of service plays a crucial role, skilled employees are highly demanded along with the accessibility to the gaming machines. With high level of barriers of entry, the market is dominated primarily three suppliers – International Game Technology (IGT), WMS industries and Shuffle Master and they are the ones who supply equipment, machinery and services to most of the casinos in US. Due to the high reliance on the gaming industry for survival, supplier power is weaker and larger suppliers usually diversify geographically so that they will not be dependent on just one particular market. The supplier business can be volatile as well, following the trend of the economic recession. However, there is some room for expansion in some areas in terms of new forms of gambling as there are several states which lack lotteries, or do not permit slot machines or others.
Hence, we conclude that supplier power is moderate (Appendix B).
3.3 Threat of New Entrants
This focuses on the regulatory and legislative barriers of a particular state, reflecting the acceptance of gambling in a particular country. Gambling is widely accepted in US than other countries despite having different regulations in different state. Market players have to adhere to codes of practice to ensure operations are socially responsible by not glamorizing gambling.
Any new organizations attempting to enter this sector would require huge capital funds to set up, hire and acquire the gaming equipment. Moreover, the willingness of customers to switch and accessibility to suppliers are influencing factors to the entry of the new players.
Hence, probability of new entrants is assessed as moderate as well (Appendix C).
3.4 Threats of Substitutes
Since gaming and casino activities are deemed non-essential activities, any other leisure activity can act as a substitute with minimal switching costs and may even provide cheaper gaming alternatives for consumers. Also, some socially responsible consumers prefer the non-gambling activities. Coupling all these together, the threat of substitutes is therefore strong (Appendix D).

3.5 Intensity of Rivalry among Competitors
In the US, there are a number of organizations involved in the casino and gaming sector and for some of them, gaming is their sole activity. Hence, it is vital that they maintain their gaming revenues while other companies are diversified to weaken rivalry. As for LVS, though a big bulk of revenue is generated from gaming sector, they diversified themselves by incorporating the gaming facility into a hotel and tapping on the “5- diamond luxury” hotel as an attraction. This is also why LVS choose to differentiate its offerings by including additional services such as leading destination for meetings, conventions and tradeshows.
Overall, rivalry within this sector is assessed as moderate (Appendix E). * 4. Acquisitions, Restructuring and Cooperative Strategy
From our research into LVS company profile, we did not find any significant information which states that LVS has done any acquisitions, restructuring and cooperative initiatives. Assets are wholly-owned. As such, we will not focus on these 3 components in our analysis of strategies. * 5. Business-Level Strategy of Las Vegas Sands in the U.S.
For the purpose of this paper, the main business that we are focusing on is the casino business, as this business segment is the main source of revenue for LVS, contributed 77% of the total revenue in the year 2009. As such the analysis of business-level strategy will be focusing on the casino business in its home country USA.
5.1 Competitors
In this analysis, we will be analyzing LVS’s business level strategy mainly by comparing with its key competitors in US. Key Competitors are chosen in light of the industry and business model with core business in gaming industry and based in Las Vegas, with similar business portfolio. Thus, we define LVS’s major competitors are: * Harrah’s Entertainment Inc (Harrah’s) * MGM resorts international (MGM) * Wynn Resort Ltd (Wynn)

5.2 Customers
Customers are the foundation of successful business strategies for any venture. For its casino business, LVS targets the premium market as its three casinos in the USA are positioned lavishly toward higher-end customers. With emphasis in its VIP club such as Paiza Club, LVS is particularly targeting VIP Asians. Strong International presence in Macau has provided LVS with expertise in Asian clientele which helps its positioning in the US casino industry.
On the other hand, with 37 casinos, Harrah’s is able to target itself to a broader mass market of low to high-end consumers. MGM is targeting more at families of medium to higher budget. Wynn, with its two casinos, targets the premium market similar to LVS.
5.3 Customer relationship
LVS has limited reach domestically, through its two casino properties in Las Vegas (The Venetian and The Palazzo) and one Sands Bethlehem Casino in Pennsylvania. This is limited in relative comparison to its key competitors MGM and Harrah’s which have 16 and 37 casinos respectively in the USA, but it is still broader than Wynn which only has 2 casinos domestically. The domestic competitive reach can be summarized in the following table. Key Competitors | Casinos in the USA | Casino Space in the USA (sq meters) | Harrah’s Entertainment | 37 | 291,809 | MGM Resorts International | 16 | 140,793 | Las Vegas Sands | 3 | 33,817 | Wynn Resorts | 2 | 17,001 | (Source: Las Vegas Sands website)
LVS has high richness of customer relationship, possibly affected by it serving only the premium market of the hotel industry, and thus its personnel are trained with the firm’s culture of service excellence. Online reviews from travel websites as well as independent travel journalists and anonymous guests rated LVS resorts and casinos high, showing richness in customer relationship. With the addition of mobile gaming through its ‘pocketcasino’ device, LVS added another dimension of richness in its interaction with customer. In an attempt to increase its reach and richness of customer relationship, LVS entered into an agreement with Cantor Gaming L.P. to create an online casino and poker site in 2006. Back then the Unlawful Internet Gambling Enforcement Act prevented LVS to pursue this, but recent reports mentioned the possibility of the US government legalizing some aspects of online gambling.
In line with the richness, LVS also has high affiliations with customers, primarily through its ‘Grazie Loyalty Program’, a three-level membership program with reward points that entitles members for perks and benefits. This is considered an industry standard with Harrah’s and MGM also offering the same affiliations as expected (Harrah’s Total Rewards membership and MGM’s M life Players Club). Nevertheless LVS stands out with its Paiza Club Membership, a unique type of affiliations aimed towards high roller Asians clientele in which no competitors has done previously.
Simply put, LVS has a strong tie with its customers, especially Asian high rollers.
5.4 Competitive Advantage: Cost vs. Uniqueness
LVS is particular about its cost efficiency. Through its Eco 360 green sustainable technology program, the company claims to be able to save 4 dollars for every 1 dollar invested. However due to recent expansion in building Sands Bethlehem and Marina Bay Sands Singapore, as well as investments in Sands Macao, costs have gone up. Competitors have also geared up on green efficiency trend that is similar to LVS’ Eco 360 program, such as MGM’s Energy and Environmental Services Division and Harrah’s Code Green.
Being a cost leader does not seem to be a target for LVS. Comparing to its key competitor Harrah’s, most of its 37 casinos which are outside Las Vegas, are targeting at lower tier of middle income gamers. With each construction project of LVS’s easily cost millions of dollars. It makes more sense for it to differentiate itself in other aspects.
Furthermore, as the suppliers of casinos in US are mostly dominant, the likelihood of casinos competing on machines or equipments is moderate to low. Thus, casinos are competing with each other mainly in terms of their services and casino furnishing.
Design and furnishing have played key roles in differentiating LVS from the rest. For instance, the Venetian is the only casino resort built in Venetian style with replicas of the Italian city’s major landmarks and gondola-filled waterways in Las Vegas. The five diamond resort is extremely appealing to tourists who fancy Italian style, as suggested by CEO Sheldon.
LVS is also the pioneer in introducing mobile gaming through its ‘Pocket Casino’ device, enabling customer to play casino games within designated areas of the casino property, away from the casino floor (e.g. restaurants). The device, available only in LVS’s Venetian and The Palazzo, aims to induce LVS’s gaming customer experience from non gaming area of the property into revenue generating area, resulting in incremental income for the company. In addition, LVS leverages on SAS analytics, a revenue management system, to maximize the revenue by digging the data of each individual gambler. The new program even helps them to figure out which gambling machine to buy and how to organize them on the floor.
In Las Vegas, LVS has a strong Asian clientele due to its expansion into Macau. To differentiate from other casino in Las Vegas, LVS continuously put in effort to attract Asians. The Venetian’s Paiza Club, a service amenity uniquely targeting at VIP Asians, is known to be the most exclusive casino club in Las Vegas catering to Asian high rollers. LVS is also the first casino provides private jets in Vegas, with two L-1011 airplanes to chauffeur high rollers to the company's two resorts from Asia. It provides baccarat games to customers in the long haul flight. It is worth noting that revenues generated by LVS on the plane are not subject to any gaming tax.
5.5 Competitive Scope: Narrow vs. Broad Target
As indicated from previous analysis of customers, LVS has narrower target than MGM and Harrah’s, but a slightly broader target than Wynn because of its construction-in-progress casino in Pennsylvania. Although LVS’ casinos have bets ranging from low to high limit, this is limited only through its three casinos, and each casino serves from low stakes to high rollers. On the other hand MGM and Harrah’s have different casinos catering to different target markets. For instance, MGM’s Bellagio and Mandalay Bay as well as Harrah’s Caesars target the premium market; MGM’s Luxor and Harrah’s Flamingo target at the middle class market; MGM’s Railroad Pass and Harrah’s Laughlin Nevada target at the lower class market. Harrah’s even has one casino, Harrah’s Phoenix Ak-Chin Casino in Arizona, which is jointly managed with Ak-Chin Indian Community and is serving the Native American market in Arizona.

5.6 Conclusion & Recommendations
From the analysis above, we can conclude that LVS is deploying Focused Differentiation Strategy in US Casino Industry. The following will analyze the soundness of the chosen business level strategy in the given industry environment:
Bargaining Power of Buyers: The bargaining power of LVS’s buyers’ remains moderate. LVS is targeting at premium market. There is a risk of losing customers if their high price charged is not substantiated by its ability to provide equivalent customer satisfaction.
Bargaining Power of Supplier: The bargaining power of LVS’s supplier is lower than its competitors. Due to a shift of its focus to Asians, it makes more sense for LVS to diversify games toward Asian’s taste. Thus, it reduces its dependence on the local dominant suppliers.
Threat of New Entrants: Deploying focused differentiation strategy enables LVS to withstand threat new entrants better than its competitors. LVS has its expertise in serving Asian high rollers. Although new entrants are expected from other states which subsequently allows commercial casinos, LVS is able to achieve sustainable competitive advantage by leverage on one of its core competency—strong loyalty from its Asian clientele.
Threat of Substitutes: As LVS provides entertainments other than gambling (i.e. shows and shopping), threat of substitutes is maintained to be moderate. When LVS differentiates itself further by launching an online gambling service, the current threat of substitute to other online gambling portals will be eliminated.
Intensity of Rivalry among Competitors: There are a large number of players in this industry with high exit barriers which makes competition more intense. LVS is reasonably insulated from intense rivalry as long as it continues to perceive the differentiated needs of its customer group, especially its Asian clientele.
In conclusion, we feel Focused Differentiation Strategy is a logical and feasible choice for LVS by sustaining its competitive edge in the US casino industry. Additionally, it is advisable for LVS to differentiate further and meanwhile increase its reach to customer (broaden the target market) by developing the online gambling venture with Cantor Gaming L.P. * 6. Corporate-Level Strategy of Las Vegas Sands in U.S.
LVS owns and operates a portfolio of integrated resort businesses in 3 different industries: casinos (gambling), luxury resort hotels, and MICE (Meetings, Incentives, Conferences and Events). Other businesses like F&B, retail, clubs, and theater/entertainment businesses are considered as parts of resort hotels business. Gambling and resort hotels activities take place at The Venetian, The Palazzo, and Sands Bethlehem. MICE facilities are executed at Sands Expo Center and The Venetian/Palazzo Congress Center. LVS has sold its two retail malls, The Grand Canal Shoppes and The Shoppes at Palazzo, to GGP (a U.S. mall operator). LVS will collect leasing fees from the operation of the malls inside its properties. The Venetian and The Palazzo show some exclusive entertainments, such as the Paiza Club, Blue Man Group, Phantom (The Las Vegas Spectacular), and Jersey Boys.
6.1 Casinos (Gambling) Business
Based on the figures from Las Vegas Convention and Visitors Authority regarding the purpose of visit to Las Vegas in 2009 (Appendix F), there was only a small percentage of domestic and overseas visitors who visited Las Vegas for gambling only. There were higher percentages for other purposes of visit, such as for vacation/pleasure and convention. Diversification into MICE and other entertainments businesses like clubs or theaters creates value for LVS because it serves to satisfy different purposes of visit, thus attracting broader customer base. It also reduces uncertainty or risks in LVS’s profitability from casinos alone, thereby protecting its market power in highly competitive business landscape in the U.S. integrated resort industries.
6.2 Resort Hotels Business
Resort hotels play a big role in attracting and keeping high-rollers into the casinos. Free rooms or suites with extensive perks are typically offered to high-rollers, for the purpose of enticing them to gamble in-house. Forbes predicted that Las Vegas casinos give away $10 billion annually in free rooms, and the trend is expected to continue. Indeed, to support its casinos business, The Venetian and The Palazzo offer special suite rates for poker players who play at least six hours of poker per night stayed at the hotels. Casinos and resort hotels operations could be unfavorably affected during economic crisis. In 2008 and 2009, resort hotels suffered the recession’s impact due to the drop of gambling activities. But, slowing demand for hotel accommodation was handled by lowering room rates and by leveraging on MICE activities to bring in corporate guests. In fact, 30% of room occupancy is related to conventions, showing how hotels depend on business customers for mid-week occupancy (Appendix F). Moreover, LVS uses SAS and IDeaS systems to keep occupancy and revenue high regardless of economic situation. The systems work to create a forecast of what a customer would spend on the next visit by analyzing the customer’s past stays, activity on the casino floor, and purchases in other parts of the hotels.
6.3 MICE Business
According to Tradeshow Week, Las Vegas hosted 45 of the largest 200 trade shows in the U.S. in 2009. Las Vegas has three of the largest ten convention spaces and well-developed hotel and transportation infrastructures. However, some federal agencies blacklisted several cities including Las Vegas as a venue choice for meetings in 2008 and 2009. As a result, number of conventions and convention attendance in Las Vegas fell by 14% and 24%, respectively. MICE business has had a more positive growth outlook since mid-year 2010 as the public’s attention has also turned around. Sheldon G. Adelson, Chairman and CEO of LVS, acknowledged that the MICE revenue segment is only 9.1% of total LVS revenue in 2009, yet he believed that MICE drives weekdays (not only weekends) visitation to Las Vegas, and in turns, MICE participants might visit casinos. Euromonitor reported that 31% of convention attendees in Las Vegas brought someone with them who may not attend the convention but would look for other entertainments such as gambling or shopping. Thus, the MICE business plays an important role in bringing tourists or domestic visitors into LVS casino properties.
6.4 Analyzing Diversification Strategy
There are moderate to high levels of diversification in LVS integrated resort business. LVS uses both related constrained and related linked diversification strategies to create economies of scope by simultaneously achieving:

* High level of operational relatedness. Primary activities (i.e marketing of Grazie Resort Customers Loyalty Program, use of SAS Analytics for marketing, operations and valuation of potential customers purpose, as well as use of IDeaS for enterprise profit optimization and customer relationship management to increase market share), supporting activities (i.e. use of Hewlett Packard ProCurve technology to control surveillance system, hotels’ Agilysis reservation system can be used for MICE guests, and HR training program) and resources (i.e. limo pick-up service for VIP guests) are shared among casinos, resort hotels, and MICE businesses. * High level of corporate relatedness. Intangible resources (i.e LVS brand name and reputation with customers, the casinos and resort hotels’ customers database, knowledge about market demand for green technologies and processes) and core competencies (i.e. senior management expertise, continuous cost saving efforts through Sands Eco 360 Global Sustainable Development program, as well as smart revenue management and predictive modeling using SAS and IDeaS systems) are successfully transferred into casinos, resort hotels, and MICE businesses through corporate headquarters. 6.5 Conclusion & Recommendations LVS’s existing diversification strategy in the U.S. has been successful in creating sustainable competitive advantages. Current trend shows that the increase in casino visitors is largely resulted from the increase in hotels and MICE guests who are enticed to play in the casinos. We believe that LVS can generate above-average return by capitalizing on its MICE operation, which has a high profitability potential. LVS should spend more marketing efforts to promote its MICE facilities or sponsor big-scale events that will attract large number of visitors and increase MICE space utilization (e.g. Marina Bay Sands held Avalon clubbing event with renowned DJs which took place in its convention hall) or partner with more travel agents to create special holiday or business package especially during lower demand period. However, the bottom line is that LVS must continue to strengthen its competitive advantage in the U.S. by maintaining its current portfolio of businesses as they are suitable for now. It should now focus more on its fast growing and lucrative expansion in Asian countries. * 7. International Business-Level Strategy of Las Vegas Sands

* 7.1 Macau
7.1.1 Background Overview
In 2004, LVS entered the Macau gaming market with the opening of its first Macau property the Sand Macau situated in the central area of Macau. The mode of entry into the Macau market is through its subsidiary Sands China Ltd in which it became a sub concessionaire (sub licensee) from one of the main concession recipients (Galaxy Consortium) awarded by the Chinese government for gaming operations in Macau. Following the success of Sands Macau in which its construction costs of 265 million dollars were paid off within a year, LVS began construction on Venetian Macau along the Cotai Strip and started operations in 2007. This analysis will anchor upon the casino business found in Venetian Macao based on the argument that the bulk of operations and development are situated within the Cotai Strip.
7.1.2 External and Competitive Environment of Macau
In order to analyze LVS casino operations in Macau, it is critical to establish the understanding of the external environment of Macau in which LVS can respond to. A key consideration is the demographic segment in which the large population of China suggests the vast market LVS will have access to once they have gained establishment. In terms of economic segment, the booming economy of China in the recent decade has created immense wealth for many Chinese leading to a larger pool of potential high quality patrons for its casinos. In the socio cultural segment, the Chinese generally embrace gambling as part of their culture thus the gambling business brought by LVS may appear to be a fit in this cultural setting. In terms of the political-legal segment governing the gaming business, the turning point came when China ended the 40 year monopoly held by billionaire Stanley Ho through the issuance of new gaming licenses to other operators including foreign operators. The implication behind this development presents a vital opportunity for LVS to enter the China/Asian market considering the fact that Macau is the only region that legalize gaming in China. Lastly, LVS faces a diversified competitive landscape in which competition comes from both local and foreign casino operators. Foreign competitors originate from Las Vegas in which LVS already has a strong understanding of from their domestic market. However, LVS has to face local competitors who have been in the Macau market for decades. The unfamiliarity towards local competitors as well as the better understanding of local conditions by competitors might result in a competitive disadvantage.
7.1.3 Opportunities
There are 3 main reasons behind the establishment of casinos in Macau. The first reason is to increase market size for LVS by establishing a presence in Asia through its Macau sites. From LVS experience in casino operations in Las Vegas, a significant amount of high rollers originate from Asia especially from China. Location advantages in Macau can be considered as the most important factors in supporting LVS’s decision to set up operations there. In China, gambling is an important integral of the Chinese culture which is aligned with the gaming business thus allowing LVS to quickly assimilate and capitalize upon the cultural settings. In addition, Macau has been experiencing an increase in the number of visitors in recent years and is easily accessible by more than 3 billion people within a 5 hours flight which serve as a strong proposition in LVS’s goal of increasing market size. In terms of infrastructure and costs, the readily available reclaimed land called the Cotai with an area of 5.2 km2 allows LVS to respond quickly and initiate new development projects ahead of its competitors through its Cotai Strip project which attempts to replicate the Las Vegas Strip in Nevada. The developments of these projects were made more cost effective due to the cheap labor and raw materials provided by mainland China. Lastly, the establishment of operations in Macau has enabled learning for LVS in terms of catering towards the needs and expectations of Asian clientele. In which, the openings of the Asian themed Paiza club and presidential suites in the Las Vegas operations is a result of knowledge transfer from the expertise gained in Macau.
7.1.4 International Business Level Strategy
The gaming business strategy adopted by the Venetian Macao casino can be considered a broad differentiated strategy due to the following factors. In terms of target audience, the casino targets a broad spectrum of gamblers within the Asia pacific region. Its main casino floor cater towards a broad mix of main stream customers which includes convention goers as well as tourists who will stay and shop in Macau for several. On the other hand, its VIP club dubbed the Paiza club caters towards premium high end customers and exclusive membership of the club is by invitation only.
The casino attempts to differentiate itself from its competitors in several ways. The Renaissance-Venice theme has been extended into its Macau’s casino floor offering casino guests a unique luxurious gaming experience distinctly different from what it is offer by its competitors. The casino is also the largest in the world with an area of 550,000 sq ft comprising of 800 gaming tables and 3400 slot machines offering gamblers an unparalleled choice of games as well as capacity. However, the most important differentiating factor is through its brand. Based on their operations in Las Vegas, LVS has built a strong brand for Venetian Macao allowing them to gain a unique reputation amongst the Chinese gamblers as “Asia’s Las Vegas”. The value proposition of this branding implies that LVS is able to deliver a promise of high product quality one can find in Las Vegas towards the Chinese gamblers.
With regards to other possible strategies, there is little evidence to support an integrated cost leadership business level strategy similar to the explanation given in the Las Vegas business strategy previously. The broad market segment pursued by Venetian Macao also does not suggest that they are following a focused strategy.
7.1.5 Comparison with Venetian Las Vegas Sands
In comparison with Venetian Las Vegas Sands, some similarities and differences are identified in reference to Venetian Macao in their value creating activities. Similarities in terms of human resource management includes the culture of regarding their employees as team members, benefits such as a wellness centre and subsidized dining facilities for employees have been adopted from the parent company. Apart from the wage differences in both countries, the high similarities for their human resources management implementation suggest the robustness and relevance the HR system has despite the cultural and demographic differences. Technologies which require generic implementation have also been successfully transferred from Las Vegas to Macau such as their IP Surveillance technology which allows them to monitor casino operations anywhere with an internet connection.
In contrast to the similarities, Venetian Macao has also made distinctive adaption to the local landscape in terms of their operating and marketing activities. The casino operation encompasses F&B outlets in order to provide more convenience to Asian gamblers who tend to spend more time in the casino as compared to their Las Vegas counter parts. Lastly, the Chinese government has imposed a ban on casino advertisements in China. In view of this, the marketing activities for Venetian Macao has to focus more on attracting visitors through its amenities as well as events and performances to increase traffic flow towards their casinos. LVS also adopts direct marketing towards their VIP customers with their Direct-VIP program where they establish relationships with high rollers as opposed to using middlemen known as junkets.
7.1.6 Recommendations
The removal of junkets from their marketing operations should theoretically result in costs savings since LVS no longer needs to pay for middleman fees. However there are some concerns to be considered here. Junkets operating in Macau usually extend a line of credit on behalf of LVS towards these VIP clients thus lowering LVS risks into running a bad debt as there are no jurisdictions in China that facilitate the collection of casino debts. Chinese gamblers also prefer anonymity but the application of a credit line through LVS itself would defeat this intention as credit application has to be transparent. Lastly, the Chinese values “Guanxi” and many Chinese high rollers would already have close informal relationships with these junkets. LVS will risk losing high roller clients to competitors if they omit the service of these junkets.
Through the analysis of the above, we recommend LVS to adopt a longer horizon in their Direct VIP strategy implementation rather than jumping the gun. LVS cannot risk suffering from any bad debts in their casino operations as the company needs the revenues to pay off their current staggering amount of debts due to their massive development projects. Relationship building with the Chinese requires deep understanding of each other and takes time. In view of these, LVS should continue to employee these junkets while pursuing their Direct-VIP strategy on a smaller scale to allow them to gain more experience in building up “Guanxi” and establish more relationship with the Chinese. Implementation of the Direct-VIP strategy can be made on a full scale once the company is in a better position to take financial risks and have gained experience in managing these Chinese high rollers. * 7.2 Singapore
7.2.1 Background Overview
LVS originally entered into a strategic alliance with City Developments Limited (CDL), which had a proposed 15 per cent equity stake in the project. However, CDL pulled out of the partnership in the second phase of the tender.
As such, LVS’s mode of entry was to enter Singapore with a new wholly-owned subsidiary, the Marina Bay Sands. The total cost of the development was estimated to be at S$8.0 billion as of July 2009 and it was declared as one of the world’s most challenging construction projects and most expensive stand-alone integrated resort property ever built.
7.2.2 External and Competitive Environment of Singapore
Singapore has a stable political-legal structure. It is also one of the least corrupt countries in the world. As such, the crime rate is one of the lowest in the world. The government encourages foreign investments for creation of jobs and stimulation of the economy. The gaming tax rate is 17.3%, as compared to 39% in Macau. The casino industry is also heavily regulated in Singapore as the casino cannot release stories about casino winnings nor promote any activities to locals. For the economic segment, the GDP at current market prices increased to 16.7% from 15.4% in the second quarter of 2010. The CPI increased by 3.3% from 3.1% in August 2010. As of June 2010, the unemployment rate stands at 2.2% of the total labor force in Singapore. There was a drop in tourists from 2008 to 2009. However, beginning February 2010, tourists’ numbers have been increasing steadily. In terms of the socio cultural context, there are issues of public dismay, mainly over fears that the casino would increase the country’s famously low crime rate and worsen gambling addiction. In view of this, the government set up various authorities, councils and public education program. However, it would also seem that gambling is a culture among most Singaporeans. 54% of Singaporeans gambled in the year 2008 and about 1 million visited the casino in Genting in the same year. Singapore’s technological environment has everything in place in terms of hardware and infrastructure for the IR to develop and design initiatives to bring in more businesses to Singapore. Resorts World Sentosa, a wholly-owned subsidiary of Genting Singapore Pte Ltd, is the only competitor. It opened first in early 2010 and to date, operates 4 hotels, the Resorts World Casino, Universal Studios theme park and MICE facilities.
7.2.3 Opportunities
Increased market size is a reason why LVS decided to bid and build the Marina Bay Sands (MBS). Singapore selected LVS due to its industry-leading experience in the MICE business. To date, MBS has more than 160 events booked in its Sands Expo and Convention Center.
Location advantage is another reason. Singapore is a unique urban location and a reputation of being a world-class international tourist destination. With MBS’s meeting and convention business and a multitude of leisure amenities, the entire week is their peak period.
It is important to understand that Singapore officials have downplayed the role of the casino, euphemistically referring to it as an "integrated resort, to address the high level of public dismay. However, the casino business would appear to be the core of MBS. Sheldon Adelson, Chairman & CEO of LVS said they needed the casino to subsidize the returns for building the other amenities.
7.2.4 International Business Strategy
MBS was originally pursuing the broad differentiation business level strategy, but changed to focused differentiation due to the strict government regulations.
In terms of differentiation, MBS, together with SATS, launched the first city check-in and baggage acceptance service in Singapore for its customers. There was also technological innovation initiated. MBS introduced the QuickJack2 kiosk which will enhance the customer experience by accelerating cash handling functions. The friendly and courteous staff members are always present to assist all player needs, offering signature service, while helping to ensure best gaming experience possible. Also, more than 200 games are available in the high limit, Ruby and Paiza areas located in exclusive salons on the upper floors of the casino.
There is some evidence that MBS is also trying to pursue cost savings. The Eco 360 initiative is also practiced in Singapore. MBS’ goal is to achieve the platinum level of Green Mark, which is the equivalent of U.S. Green Building Council’s LEED certification. The company also awarded HP a major contract to provide the technology platform to run the business more efficiently to quickly recover remote servers and also to reduce energy costs. However, their only competitor in Singapore, Resorts World Sentosa, was awarded the GoldPlus rating which is the second highest Green Mark. As such, they would not have achieved cost leadership.
The competitive scope of MBS have changed to narrow in the sense that the Singapore government has explicated mentioned that the target market would be tourists and not Singaporeans. In addition to the $100 levy on locals, the government also banned the shuttle service which ferried locals to the casino. It would also seem that the company is targeting the Chinese due to the many Chinese-related restaurants located inside the casino premises.
7.2.5 Comparison with Venetian Las Vegas Sands
The major difference between operating in Las Vegas Sands and Singapore is due to the strict political and legal regulations. As mentioned, they do not want the casinos to target the locals. This will affect the promotional efforts of MBS to only target the tourists. The Venetian theme used in Las Vegas and Macau is also not prominent in MBS. This could be due to MICE being the main objective for the Singapore government to open MBS. We infer that the games offered in the casinos are similar as in Las Vegas. MBS also share the Eco 360 initiative. As for amenities which support the casino, the MICE knowledge and experience is gained and brought over from Las Vegas. Elements of the Grand Canal Shoppes and Four Seasons at Macau will also be brought together in MBS.
As MBS is still young and that construction has not been fully completed yet, we are bounded rationality in the information to compare with the parent company.
7.2.6 Recommendations
Using the focused differentiation strategy would seem to be appropriate for MBS in the context of Singapore. The strict regulation would only allow the casino to target mainly tourists which was seen when the government banned the shuttle service and the company subsequently worked with SATS to launch the baggage check-in service to differentiate them. The Eco 360 initiative, which is one of their core competencies, is also apparent and practiced in Singapore. This initiative is important in their fight to be cost leader in Singapore. On top of that, the technological environment of Singapore remains very attractive for MBS to further initiate cost savings measures. Incorporating both the Eco 360 initiative and Singapore’s technological environment will further elevate their status to be a cost leader.
Overall, there are great economic prospects for MBS based on the rising GDP and tourists’ numbers. However, they must actively address and avoid the risks identified previously. The government is a huge stakeholder. MBS needs to actively monitor on the government plans and assess how they might affect them. Abiding by the rules set by the government is also mandatory because of the license issue. The general public is also another major stakeholder. MBS must ensure that the public sees them as a place for business activities and leisure, and not as a venue which encourages compulsive gambling and broken families. Curbing such impressions will ensure continued success for MBS.

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* Appendix
Appendix A

Appendix B

Appendix C

Appendix D

Appendix E

Appendix F Domestic Visitors | Overseas Visitors | | |