An Analysis of the Uk Casino Industry: Using a Pest Analysis and Porters 5 Forces as a Framework

AN Analysis of the UK Casino Industry: Using a PEST Analysis and Porters 5 Forces as a Framework

Word Count- 6417

Introduction

The aim of this report is to conduct a situational analysis of Gala casino and analyse their marketing potential. I will be looking at what Gala casino is proposing to do and also assess the options they have as a business to push forward. I have chosen this industry and gala casino in particular to look at as it is an industry I am personally interested in, I also find the issues that arise from this industry and the organisation itself in terms of the remote environment, external environment and competitive arena to be very fascinating.

Industry background

The precise origin of gambling is unknown however there is evidence to say that it may have originated as far back as 2300 B.C. and has been prevalent throughout almost all societies in history. The history of casinos began at varying times throughout the world, for example the introduction of casinos to the United States, arguably the pioneers of the casino industry can be dated back to the 1930's. Having said this the official casino industry in UK did not fully get started till post world war 2 with the Betting and Gaming Act 1960, (Gambling Origins) this allowed for official casinos to be opened for members only and limited to only 10 gaming machines. Due to the difficulties of enforcing this, the Gaming Act 1968 was brought in and liberalised the law by allowing for true commercial casinos. (Gambling Commission) Since then the casino and gambling industry in the UK has rocketed and in 2009 reached a value of £18,766.7million. (EBSCOhost)This is a huge potential market for the casinos however unfortunately the casinos are only enjoying a small percentage of this at only 3.7%.

As shown in Table 1 the Casino industry does enjoy a net worth in 2009 of over £585 million. The Casino industry enjoyed a rapid growth period when first legalised, this however slowed more recently but expenditure at casinos continued to grow from 2003 to 2006. The casino industry has however seen a steady decline from 2006 onwards but predictions from industry leaders believe this will pick back up.

Table 1: Total Expenditure at UK Casino's £Million

Year Total Expenditure £Million

2003 713

2004 765

2005 780

2006 795

2007 725

2008 650

2009 585

2010 (ESTIMATED) 600

2011 (PROJECTED) 623

2012 (PROJECTED) 647

2013 (PROJECTED) 678

Source- Mintel 2009

There are a number of companies fighting for the market share of this £585 million with three main operators in the industry. These operators are Genting Casinos, Gala Casinos and Grosvenor Casinos who make up 71% of the market with some smaller companies and independent Casinos making up the rest. The number of casinos in the UK has grown from 138 in March 2007, to 145 in March 2009. The table below shows the number of Casinos each organisation holds.

Table 2: Casino Ownership by operator as at 31 March 2009

Organisation Total Casinos

Gala 27

Grosvenor 32

London Clubs International 11

A&S Leisure 6

Genting Casinos 45

Aspinals 4

Blue Chips 3

Clockfair 2

Individual operators including 2 card clubs 15

Total 145

Source- www.gamblingcommission.gov.uk

Gala Situational Analysis

Mission Statement GALA

Background INFO-

Where they want to go

PEST Analysis

Armstrong (2006) highlights the PEST analysis as, "a framework for the analysis of a range of macro environmental factors, including the Political, Economical, Social and Technological environment". PEST analysis is described as a framework of macro-environmental factors used in the environmental scanning component of strategic management; the framework allows a business to understand their position within a market and potential direction for future operations. It does not provide an exhaustive list, but it does give examples of ways in which organisations seek to handle aspects of their environment. I will use this framework to analyse the Casino industry.

Political

Gambling as a pastime has gained certain social interest, which has meant that legislation created by government is closely followed and influenced by the public and media. The Gambling Act of 2005 looked to bring in a new wave of legislation that looked to liberalise gambling which brought about some social opposition. This has created a somewhat long and turbulent entry for this act which was fully implemented on September 1st 2007. The Acts main objectives are as follows:

* Prevent gambling being a source of crime and disorder

* To ensure that gambling is conducted in a fair and open way

* To protect children and other vulnerable persons from being harmed or exploiting by gambling

I will look at the key parts of the legislation and the ones that have had the biggest affect on the casino industry and Gala in particular. The Gambling Act 2005 meant that a new regulator was brought in which all gambling including casinos were overseen by, this being the Gambling Commission. All operators offering gambling within Great Britain had to be licensed by the Gambling Commission, and comply with new Licensing Conditions and Codes of Practice, which all looked to reflect the main aims of the new Act. This meant that the operators offering gambling were under strict regulations and had a body looking over them. The gambling commission have also been very quick to

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