Las Vegas Sands Corporation is an American casino and Resort Company based in Paradise, Nevada, United States. Casino mogul Sheldon Adelson founded the company in 1988. The company was founded when Sheldon, with its partners, bought in Sands Hotel at Las Vegas Strip in 1989. Its resorts feature accommodations, gambling and entertainment, convention and exhibition facilities, restaurants and clubs, and an art and science museum in Singapore (Forbes, 2021).
Its principal properties include The Venetian Las Vegas, Marina Bay Sands, The Londoner Macau, The Palazzo and Parisian Macau. The company owns properties in Las Vegas, Macau and Singapore. Porter’s five forces model is a valuable tool to identify threats and opportunities faced by Las Vegas Sands in Casino and Gambling industry in the world.
Competitive Rivalry in The Market
The gambling and casino industry worldwide is dominated by few companies. The growth trend in the casino doesn’t appear to be slowing down. Governments continue to view gaming as an easy way to earn a significant amount of taxes. The industry is expanding to new jurisdictions into the emerging markets. Las Vegas Sands is the world leader in the gambling industry based on revenue (Statista, 2021).
Las Vegas Sands compete with the US-based MGM Resorts and Caesar’s Entertainment. MGM Resort and Caesar’s Entertainment posted annual income of $12.9 B and $8.74 B in 2019 (Statista). Las Vegas Sands yearly revenue for 2020 was $3.612B, a 73.71% decline from 2019 due to pandemic in 2020 (Macrotrends, 2021). The competition within the industry is increasing.
Threat of Substitutes
The products which differ from the existing product available but do the same function are substitute products. According to Luenendonk (2019), Substitute products offer customers different choices and allow them options within the industry and beyond it to products that may fulfil a similar need. The threat of substitution is low; it is because of the two main reasons.
The majority of the products are identical and creating differentiation in the products is difficult. The second is brand loyalty and experience. People tend to enjoy the experience created by the specific brand, and customer loyalty, in this case, is much stronger. Las Vegas Sands is the brand name, and its theme styled casinos is known for their experience worldwide. The overall threat of substitutes is low.
The Threat of New Entrants
The threat of new entrants in the gambling industry is low. The significant factors are a higher initial capital requirement, competing with the existing brands, government policies and product differentiations. The more increased capital investment is required to set up and to keep up casinos. Casinos typically comprise multiple revenue centers, including gaming, rooms, and food and beverage departments. They have large teams of managers and skilled employees.
Heavy marketing and promotion are commonplace in casino operations because of the competition for players. Finally, casinos have to update their gaming devices and properties to stay competitive, thus requiring a large amount of new capital investment (Cullen, 1997). The government has strict regulation over the gambling industry, and it is over scrutinized to protect the people and keep away black money. The threat of the latest entrant against it is relatively low.
Bargaining Power of Buyers
According to Slater & Olson (2002), The Bargaining Power of Buyers is high if the buyers are large; they can switch easily to another supplier who may be in numbers. The buyers of the industry are individual and corporate companies. The majority of the casinos are located in the gambling hubs of the world, such as Macau, Las Vegas and Atlanta.
This provides the buyer with multiple options, and the switching cost is low. The products offered are different. Especially for the High Net Worth Individual (HNWI) and VIP customers in casinos, they pay a large amount of money to gamble. Therefore, the bargaining power of VIP is relatively high. You can get a better deal. All the factors mentioned above are the reason for medium to high, and it depends on buyers.
Bargaining Power of Suppliers
According to Porter (1979), Suppliers can exert bargaining power on participants in an industry by raising prices or reducing the quality of purchased goods and services. Powerful suppliers can squeeze profitability out of an industry unable to recover cost increases in its own prices. The supplier in the industry is the one who provides the raw material, production equipment for the industry and human resources. The raw material providers are the primary deciding factor; the end products depend on their material.
The main reason they have any power is that casinos cannot operate without the suppliers’ equipment. However, there are getting to be an increased number of suppliers of gaming supplies to go to another. Except for certain novelty games like Deal or No Deal, games do not vary from one another too much. The supplier, in that case, holds moderate power in negotiating the deal.
References
Cullen. P. (1997). Economics for hospitality management. Available at: Oxford, International Thomson Business Press.
Forbes. (2021). Las Vegas Sands. Available at: https://www.forbes.com/companies/las-vegas-sands/?sh=4c3586ca46c5
Luenendonk. M. (2019). Threat Of Substitutes – Porter’s Five Forces Model. Available at: https://www.cleverism.com/threat-of-substitutes-porters-five-forces-model/
Macrotrends. (2021) Las Vegas Sands Revenue 2006-2021 | LVS Available at: https://www.macrotrends.net/stocks/charts/LVS/las-vegas-sands/revenue
Porter., E. M (1979). How Competitive Forces Shape Strategy. Available at: https://hbr.org/1979/03/how-competitive-forces-shape-strategy
Slater, Stanley & Olson, Eric. (2002). A fresh look at industry and market analysis. Business Horizons. 45. 15-22. 10.1016/S0007-6813(02)80005-2.
Statista. (2021) Leading selected casino companies worldwide in 2019, by revenue. Available at: https://www.statista.com/statistics/257531/leading-casino-companies-worldwide-by-revenue/