Strategic Management Accounting - Atlantic City Casino - Case Study Example

511157 Strategic management accounting – ‘value chain’ case analysis by using report format Name: College: Course name/number: Professor’s name: Assignment number: Date: Strategic management accounting – ‘value chain’ case analysis by using report format The casino industry, which is situated in the gaming and hospitality industry, is a service industry. Indeed, utilization of prudent cost management strategies while offering memorable experiences to revelers constitute the main focus of casino establishments as they seek to gain competitive advantage over rivals. In addition, some use high price positioning, which is justified by the experiential excellence that they provide, such that the targeted client is willing to pay. However, determining the competitive advantage of a casino establishment is best reflected by undertaking a value chain analysis of its internal processes considering that casinos operate in a service industry and thus provide intangible goods. A value chain is the process by which a firm receives inputs or raw materials, add value to them to create a finished product or service by undertaking various processes, and selling the end-product or service to customers (Porter 2008). Simply put, a value chain is the process of converting inputs into outputs that are valued by customers. Value chain analysis is a strategic management tool that is employed to analyze the internal activities in a firm and thus aim at identifying and activities that are most valuable to the firm because they result in differentiation for enhancement of customer value (Jurevicius 2013). As such, a value chain analysis can illustrates areas of competitive advantage and areas in which casino establishments can adjust to enhance their competitiveness, attractiveness and profitability (Jayaraman & Luo 2007). The ensuing report focuses on a value chain analysis undertaken for Atlantic City Casino that is owned by Hotel Corporation of America (HCA), which is considering establishing a theme part to enhance its revenues, competitive advantage over its rivals and profitability as well. 1. Value chain analysis A value chain analysis was undertaken on the processes that would be undertaken at Auckland city casino when it has or does not have a theme park. The analysis analyses six steps in the value chain, which include the obtaining of the right to operate the casino business, marketing activities, transportation covering local and regional areas, implementing casino operations, implementing hotel operations and establishing the theme park. The summary of the value chain analysis is provided in table 1. Table 1. Value chain analysis both with and without the theme park 1. Steps in the value chain 2. Activities at each step in the value chain without the theme park 3. Activities at each step in the value chain with the theme park 4. Differences between 2 & 3; and strategic issues related to construction of the theme park Step 1 Obtaining the right to operate: Includes adhering to federal, state and local laws and ordinances Application and securing of operational licenses and fees Reporting about compliance Application and securing of operational licenses and fees Reporting about compliance Complying with requirements for providing services for children such as children play areas and baby-sitting services There is little difference Main differences are in the compliance to the requirements for provision of child-related services Strategic issues Ensuring that law related to children facilities and their compliance are included during application to operate Step 2 Marketing: Included advertisements and promotions Advertising and promotions targeting local clientele who live within 150 miles from the casino Advertising and promotions targeting the middle aged and elderly clients Advertising and promotions targeting both local, regional, national and international clientele who live close to the casino, within the country and outside the country Advertising and promotions targeting clients in the younger age group and families Advertising and promotions targeting clients with families There are major differences in the nature of marketing although there are little differences in the amount of advertisements and promotions Differences in advertisements and promotions include the targeted audiences and age appropriateness of messaging Strategic issues Ensure a marketing mix that targets all targeted clientele, while ensuring that those targeting families and children are appropriate Step 3 Transportation: Included local and regional transport of clients Arrangement with travel agents to provide affordable group transportation options such as shared taxis, buses and light rail services Provision and arrangements for mass transportation for clients such as courtesy cabs and buses Provision for adequate parking spaces for personal cars Arrangement for affordable regional and national air travel for individuals, groups and families Major differences that are dependent on the preferences of clients and location of casino from transportation hubs such as airports and railway stations Strategic issues Ensuring that there is sufficient parking for vehicles, and sufficient mass transportation options such as taxis and courtesy buses to-and-from from airports and railway stations Step 4 Casino operations: Gaming processes and facilities Provision of a wide selection of gaming facilities Provision of adequate security through having sufficient ushers, security personnel and security surveillance Provision of a wide selection of gaming facilities Provision of gaming activities for children Provision of adequate security through having sufficient ushers, security personnel and security surveillance Provision for additional security for children using child minders and surveillance No major differences in the casino operations targeting adults Differences in operations targeting children included in the themed casinos and particularly those which are related to the safety of children Strategic issues Providing secure and appropriate children-friendly facilities Step 5 Hotel operations: Included food and beverages, boarding and lodging services and customer security Provision of light food and beverages Provision of adequate security through having sufficient ushers, security personnel and security surveillance Provision of light and full board menus for food and beverages Major differences in the hotel services including the facilities and services availed for adults and children Strategic issues Providing new service mixes that include appropriate services for children and their safety Step 5 Theme park Including the construction of the theme entertainment center Not applicable Provision of entertainment facilities that would attract additional visitors to the casino and the hotel Major difference between the presence and absence of a theme park Strategic issues Consideration of managerial capabilities of managing the theme park and how such expertise can be acquired if lacking Consideration of other theme park in the locality and the kind of competition they offer The major steps that Atlantic City Casino has to undertake to establish its casino operations include identifying and developing its desired real estate development on which the casino would be located. This would include the availability of space to establish the intended theme park and the processes of planning and designing for this proposed addition (Enz 2009). Thereafter, the process of filling the casino with all of the gaming and entertainment equipment as well as designing the interior of the casino to create an attractive and memorable ambience is another component of the value chain process that is critical and complex. In addition, gaming machines, dies, tables and counters have to be availed by suppliers identified by the management of the casino, which provides the suppliers low bargaining power and influence. However, this scenario changes when the management of the casinos opt for branded gaming equipment and licensed gaming machines, which increase the bargaining power and influence of the supplier (Enz 2009). 2. The competitive position of the Atlantic City Casino Atlantic City Casino has positioned itself differently from the casinos found in Nevada. Being located in a major metropolis of Atlantic City in New Jersey, which is located on the eastern coast of the United States of America, it is able to charge higher hotel prices due to the low number of hotel choices compared to Nevada wherein cheap hotel deals can be obtained. Likewise, its location in Atlantic City, which is the second casino destination in the United States, provides a gaming alternative to casino enthusiasts located at the east coast of the country, who may find Nevada too far away. As such, Atlantic City Casino can attract both short time –day gamblers and long term stay-over gamblers who want a casino experience away from Las Vegas (Baird 2012). In addition, the Atlantic City Casino is located close to a beach thus offering much fresh air and refreshing cool breeze for casino revelers who may want to take a break from gambling activities, unlike Las Vegas, which is located in an arid area with extremely high temperatures, which may be uncomfortable to many casino enthusiasts. Further, Atlantic City Casino is located in a tourism district and thus can benefit from the inflow of tourists who like gaming as well (Leong 2007). 3. Areas for potential cost reduction and/or value added for customers Atlantic City Casino has areas of potential cost reduction and value addition for its customers as illustrated by the value chain analysis. Indeed, the value chain analysis revealed various levels of differences emanating from the activities of the Atlantic City Casino with and without a theme park. Indeed, the biggest differences in value chain activities were observed in the areas of marketing, transportation and hotel and hotel operations. Consequently, these areas provide the biggest opportunities for cost reduction and value addition to Atlantic City Casino. The first potential area of cost reduction would be efficient deployment of employees who are equipped with a variety of skills. This would enable the casino to deploy fewer employees because they have capacity to operate in different areas, thus reducing the need to hire and deploy specially and singly skilled employees. Specifically, employees could be trained to operate in the hotel as well as the casino, which in turn, would avail opportunities to rationalize the human resource engaged by the Atlantic City Casino. As such, the casino would cut its employee wage bill. The second area of cost cutting is negotiating with transport providers to avail cheap travel packages that include taxi and air travel. Notably, some bus-to-rail shuttles provide free services that the casino can leverage in the packages they could provide to their clients. This would reduce the burden to the Atlantic City Casino for providing transport to its clients and thus providing the casino with valuable financial resources to upgrade the quality experiences of visitors to the establishment based of customer feedback (Baird 2012). From another perspective, much value could be added in the area of marketing through the advertisement and promotional activities undertaken. Specifically, Atlantic City Casino could add value by incorporating touristic visits to its packages, thus enabling casino revelers to relax at the nearby beaches and visit various other tourist attractions nearby. This would in turn, be reflected in the marketing activities undertaken to promote the diverse offerings at the casino and the Atlantic City as a whole. This would be particularly attractive to families because it would provide alternative venues and activities for children and families. One such destination is the Atlantic City Boardwalk and the amusement parts in the vicinity. In addition, Atlantic City Casino could communicate the richness of the its destination as one where clients can combine gaming with tourisms, which would attract new customers, particularly those wishing to travel with their families and children. Indeed, the availability of other attractions particularly for children would help counter the negative guest sentiments emanating from having children in the casino area. Furthermore, engaging a widely skilled human capital would help the casino tap into their creativity regarding areas of value addition thus acting as ambassadors and promoters for the casino as well (Kale & Spence 2009). 4. Investment in the theme park by Hotel Corporation of America (HCA) Hotel Corporation of America should invest in a theme park as a non-gaming facility for various reasons. First, the location of the casino in Atlantic City is conducive for family visits and children because of the favorable weather experienced especially during summer. In addition, Atlantic City is an attractive tourist destination, and the presence of a theme park would attract tourists to the casino and thus enrich their experiences in their visitations. Indeed, the presence of a beach near the casino would enable the theme part to attract the tourists, particularly families who are destined to the beach. Altogether, establishment of a theme park would attract clients who are interested in a one-day casino experience and the long-stay casino revelers who would stay overnight and thus use the hotel services much more while increasing customer loyalty (Prentice 2013). In addition, Atlantic City is well served by numerous transportation options that would serve the different transportation need of diverse customer at the casino. Specifically, the area is well served by taxi services, has ample parking spaces because there is not congestion of real estate, and is located close to airports such as the Atlantic City International Airport, the Philadelphia International Airport, the Newark Liberty International Airport and the Trenton-Mercer airport. The casino is also served by shuttles called jitneys that are run by the Atlantic City Jitney Association (ACJA) that connect the casinos to airports, the Atlantic City Rail Terminal and various interstate bus stations (Huba 2017). Therefore, from the value chain analysis, the theme park would positively influence the upstream operations of the casino because it would utilize the various transport modes available around the Atlantic City Casino. This would in fact, stimulate the economy of the city and the region because it would increase the influx of visitors and even increased the spending of the visitors, which in turn, would increase revenue inflow across the various businesses therein and not just the gaming industry and particularly the revenues of Atlantic City Casino (Huba 2017; Schwartz 2013). However, management of the casino should develop a specific and reasonable plan to ensure that the concerns of casino clients who would be repulsed by the presence of children close to the casino are addresses. Such plans should include having sufficient child minders and segregation of children areas from adult areas particularly in the gaming area inside the casino. 5. Analysis of data provided in the tables to show the competitive performance of ACC with its other competitors The data analysis undertaken on the data provided focused on certain indicators of competitive advantage such as the revenues accrued for every square foot of casino space, the amount of revenue made for every room in the casino hotel and the amount of sales of food and beverages for every restaurant in the casino. A summary of the analysis of the data of Atlantic City Casino and its nine competitors is illustrated in table 2. Table 2. Data analysis for comparing the competitive performance of ACC with its competitors Property Casino revenue ($ x 1000) Casino space (sq ft) Rooms revenue No of rms F&B revenue No of Rest Casino revenue ($) per sq ft Position Rm revenue per rm F&B rev per rest ACC 220,183 50,850 14,862 521 36,833 7 4.33 2 28.53 5261.86 1 254,753 59,857 17,604 727 36,457 9 4.26 4 24.21 4050.78 2 224,077 59,296 14,836 645 34,493 9 3.78 7 23.00 3832.56 3 237,700 59,439 15,787 512 35,168 9 4.00 6 30.83 3907.56 4 158,602 49,639 9,897 501 18,788 14 3.20 9 19.75 1342.00 5 210,848 52,083 13,870 750 35,265 7 4.05 5 18.49 5037.86 6 251,675 40,814 17,665 504 33,867 8 6.17 1 35.05 4233.38 7 147,037 50,516 10,191 500 35,020 5 2.91 8 20.38 7004.00 8 121,581 34,408 13,469 504 21,863 6 3.53 3 26.72 3643.83 9 123,947 60,000 12,157 612 22,643 8 2.07 10 19.86 2830.38 The analysis indicated that although there was a strong positive correlation between the income generated by the casinos and that generated by their rooms, the same was not replicated in the incomes from rooms and food and beverage revenues. However, generally, casinos that had higher revenues also had high revenues accrued from their rooms and their food and beverage sales. This indicated that casinos that had hotels attached to them enjoyed larger revenues accrued from their hotel operations. Specifically, the casino no. 6 had the most competitive performance compared to that of Atlantic City Casino and other competitors. Specifically, casino no. 6 had the highest revenue per square feet at 6.17 dollars per square feet and the highest revenue per room at 35.05 dollars. In addition, casino no. six had one of the highest revenues accrued from the sale of foods and beverages per restaurant therein. As such, the competitive advantage of casino no. 6 can be attributed to its main differentiator, which was accruing higher revenues from less space of the casino, from every room and every restaurant of its hotel. Notably, Atlantic City Casino also had a similar competitive advantage as indicated by its second position after casino no. 6. Indeed, Atlantic City Casino has one of the highest casino revenues per square foot of casino space, room revenues per room and food and beverage sales per restaurant in its establishment. These indicators suggest that many visitors who frequented the top ranking casinos also chose to stay in their hotels, and order foods and beverages from the restaurants therein. References Baird, M R 2012, ‘Casinos need the competitive advantage of real-time customer feedback’, Casino City Times, accessed from http://www.casinocitytimes.com/article/casinos-need-the-competitive-advantage-of-real-time-customer-feedback-61075. Enz, C.A., 2009. Hospitality strategic management: Concepts and cases. John Wiley and Sons. Huba, N 2017, ‘Atlantic City casino industry pumps $2.3 billion into N.J. small businesses, Press of Atlantic City, accessed from http://www.pressofatlanticcity.com/news/press/casinos_tourism/atlantic-city-casino-industry-pumps-billion-into-n-j-small/article_2a8edf24-bb1c-54b3-a60c-750eec8c6555.html. Jayaraman, V & Luo, Y 2007, ‘Creating competitive advantages through new value creation: a reverse logistics perspective’, The Academy of Management Perspectives, 21(2), pp.56-73. Jurevicius, O 2013, ‘Value chain analysis’, Strategic Management Insight, accessed from https://www.strategicmanagementinsight.com/tools/value-chain-analysis.html. Kale, S H & Spence, M T 2009, ‘Casino customers in Asian versus western gaming jurisdictions: implications for western casino operators’, Worldwide Hospitality and Tourism Themes, 1(4), pp.320-331. Leong, A M W 2007, ‘Macau MICE tourism with a closer review of the Las Vegas and Atlantic City experiences’, Journal of Macau University of Science and Technology, 1(2), pp.55-70. Porter, M.E 2008, Competitive advantage: Creating and sustaining superior performance. Simon and Schuster. Prentice, C 2013, ‘Service quality perceptions and customer loyalty in casinos’, International Journal of Contemporary Hospitality Management, 25(1), pp.49-64. Schwartz, D 2013, Suburban Xanadu: The casino resort on the Las Vegas Strip and beyond. Routledge. Read More