A CORPORATE STRATEGY ANALYSIS FOR

MANDALAY RESORT GROUP INC.

Presented by:

JASPER B. MIRAL

In Partial Fulfilment of the Requirements of

COMPREHENSIVE EXAMINATION

Southern Christian College

Graduate School

Midsayap, Cotabato

March 2012

I

THE PROBLEM

BACKGROUND OF THE STUDY

At year-end 2003, Las Vegas, the kingdom of glitz and glamour, seems to have

recovered completely from the terrorist attacks of September 11, 2011 and the falling

economy. Where two years before only crickets could be heard on the strip, there are now

the sounds of laughter and the clink of coins falling from slot machine. Flights to Las

Vegas (although fewer) are full, the colossal hotels/casinos are back in action, the bright

lights are on and the large crowd are back.

This study will present Mandalay Resort Group Inc. a business of entertainment,

and it has been one of the innovators of resort and casino gambling industry. Its areas of

operation are the extravagant vacation and convention centers of Las Vegas and other

location in the United States.

STATEMENT OF THE PROBLEM

The corporate study was conducted to create a strategic plan for Mandalay Resort

Group.

Further research would provide solutions to the following problems:

1. What are the strategic courses of actions that Mandalay should undertake to stay

at the top of competition?

2. How Mandalay increase their credit standing?

3. What promotional strategy they may use to increase their sales?

SIGNIFICANCE OF THE STUDY

            This study will be a significant endeavor in promoting a strategic plan in the

business. Moreover, this study will be helpful to the gambling industryand business

practitioners in training them in the area of strategic management, financial management

and business policy. It will also serve as a future reference for researchers on the subject

of business policy.

SCOPE AND LIMITATION

This study uses the information provided by the case of Mandalay Resort Group

Inc. (2004) written by John K. Ross, Mike Keeffe, and Bill Middlebrook of Southwest

Texas State University.Some information is taken from the worldwide web.The study is

limited only in the area of Las Vegas and other location in the United States.

OPERATIONAL DEFINITION OF TERMS

For the purpose and use in this study, the following terms are defined as follows:

Mandalay shall refer to Mandalay Resort Group.

Casino shall refer to popular gambling game in Las Vegas.

Las Vegas shall refer to gambling capital in United States.

II.

METHODOLOGY

The data used in this study are taken from the ofMandalay Resort Group Inc.

(2004) written by John K. Ross, Mike Keeffe, and Bill Middlebrook of Southwest Texas

State University and from the information available from the worldwide web. This study

applies the Revised Porter’s Model to gauge the industry where Mandalay belongs. The

BCG (Boston Consulting Group) Matrix is employed to assess Mandalay’s product

portfolio. This work uses various financial ratios to evaluate the financial position and

performance of Mandalay. To know the performance of Mandalay Resort Group

profitability ratios are used.

SWOT analysis is also being use in the attempt of evaluating Strengths,

Weaknesses, Opportunities, and Threats of Mandalay Resort Group. This will help in

formulating a strategic plan.

III

PRESENTATION AND ANALYSIS OF DATA

A. ANALYSIS OF INDUSTRY WHERE THE FIRM BELONGS

The gaming industry has captured a large portion of the vacation/leisure time

dollars spent in the United Sates.Casino gambling accounts for 40.6 percent of all legal

gambling expenditures, still ahead of spending on second place lotteries at 32.2 percent

and third-place Indian reservation at 15.4 percent. The popularity of casino gambling may

be credited to more frequent and somewhat higher pay-outs as compared to lotteries and

racetracks; however , as winning are recycled, the multiplier effect restores a high return

to casino operators.

Over the past several years, there have been numerous changes as mergers and

acquisitions have reshaped the gaming industry. As of year-end 2003, the industry was a

combination of corporations ranging from those engage solely in gaming to multinational

conglomerates. The largest competitors, in terms of revenues, combined multiple

industries to generate both large revenues and substantial profits. However, those engage

primarily in gaming could also be profitable.

Although once viewed as a substantial vice to be avoided at all costs, in reality

gambling has been around in various forms for centuries. The allure of easy money

coupled with the excitement of “leaving it up to chance” has been difficult for man to

resist. The gambling industry in the United States however, was relatively slow to evolve

in the commercial sense. Until modern times, back-room card games amongst friends

and acquaintances had been the norm. It wasn’t until a place called Las Vegas was born

that gambling in its current form began to prosper.

B. THE BUSINESS ENTERPRISE OF THE BUSINESS FIRM

BRIEF HISTORY

Mandalay Resort Group is one of the leading hotel-casino companies in the

United States, and is the largest such company in the Las Vegas market in terms of

square footage of casino space and number of hotel rooms. Mandalay Resort operates ten

hotel-casinos in Nevada, including four elaborate properties on the Las Vegas Strip:

Mandalay Bay, Luxor, Excalibur, and Circus Circus.  Outside of Nevada, the company

owns a dockside casino in Tunica County, Mississippi, a riverboat casino located in

Elgin, Illinois, and is developing casinos in Detroit, Michigan.   With the exception of the

upscale Mandalay Bay, the company's properties are mainly aimed at middle-class

vacationers.   To appeal to this market segment, the company offers reasonably priced

rooms and food, and has pioneered the concept of the casino as an entertainment theme

park for the entire family. 

In the midst of a Las Vegas Strip building boom that promised to add thousands

of new hotel rooms to the gambling mecca, Circus Circus was betting its future on its

biggest resort yet, Mandalay Bay. Construction of the hotel-casino began in 1997 on the

site of the Hacienda, which was imploded on New Year's Eve 1996. Opened in March

1999, Mandalay Bay marked Circus Circus's move upscale. Costing $950 million to

build, the South Seas-themed megaresort included 3,700 hotel rooms and 100,000 square

feet of casino space; 15 restaurants, a 12,000-seat sports and entertainment complex, a

Broadway-style theater, and a House of Blues nightclub; and an 11-acre pool

'environment' featuring a beach, a shark tank, and a wave machine through which world-

class surfing competitions were able to be held. Adjacent to the new casino, Circus

Circus also built a high-class, 424-room Four Seasons Hilton, which did not offer

gambling but became the first hotel in Las Vegas to receive the coveted five-diamond

rating from the American Automobile Association.

The initial results at Mandalay Bay were positive, and the increased traffic within

Circus Circus's 'Masterplan Mile' helped to improve results at the struggling Luxor.

Circus Circus moved its headquarters to Mandalay Bay following its opening and further

signaled its future direction by changing the company name to Mandalay Resort Group in

June 1999. As it looked toward the early 21st century, Mandalay Resort had no

immediate plans to develop another megaresort on the Strip, although it had land set

aside for that purpose. It did have in the works smaller additions to the Mandalay Bay

area, including a time-share condominium development. Also in the development stages

were a casino in Detroit, Michigan, being developed through a joint venture 45 percent

owned by the company; and a hotel-casino resort on the Mississippi Gulf Coast, the third

largest U.S. gambling market after Las Vegas and Atlantic City.

CORPORATE PHILOSOPHY AND POLICIES

Mandalay currently does not seem to have a formally stated mission. No publicly

stated vision statement is available.

C. THE ANALYSIS OF THE CORPORATE BUSINESS PORTFOLIO

The Boston Matrix shows that the casino is in high market share and high market

growth. That is why they are one of the top in the gaming industry in Las Vegas.

Entertainment is in medium market share and high market growth. Big events like

Boxing and Concerts are being held at Las Vegas to attract more tourists. Food and

Beverage is in medium market share and medium market growth. Room is in medium

casinoEntertainment

thers

Room

Food & Beverage

market share and low market growth.Room, Food and Beverage are dependent in the

market of Casino and Entertainment.

D. FUNCTIONAL AREA ANALYSIS

OPERATION ANALYSIS

Mandalay Resort Group is a hotel-casino operator. The Company's Mandalay

Mile is a large-scale hotel-casino resort development in Las Vegas, the world's largest

gaming market. Mandalay Mile consists of three interconnected mega-resorts on 230

acres, including its flagship property, Mandalay Bay. The Company and the joint

ventures in which it participates operate a total of 16 properties with more than 27,000

guest rooms and more than one million square feet of casino space in Nevada,

Mississippi, Illinois and Michigan. Of these properties, 12 are wholly owned and have

more than 22,400 guestrooms and more than 800,000 square feet of casino space. In

addition, the Company owns a 50% interest in each of three joint venture casino

properties that have approximately 4,700 guest rooms and more than 200,000 square feet

of casino space, and a 53.5% interest in a fourth joint venture casino with approximately

75,000 square feet of casino space.The primary source of the Company's revenues is

casinos, although its hotels, restaurants, bars, shops, midway games and other

entertainment attractions and other services are an important adjunct to the casinos.

MARKETING ANALYSIS

         Mandalay have historically followed a marketing and operating philosophy which

emphasize high-volume business by providing moderately priced hotel rooms, food and

beverage and alternative entertainment in combination with their gaming operations.

While they continue to follow this philosophy at many of their properties such as Circus

Circus, with the opening of Mandalay Bay (and to a lesser extent Luxor), our marketing

focus has shifted to providing a high-quality, destination-resort experience designed

toappeal to higher-wealth customers. Mandalay seeks to provide the best overall

experience for our customers in each of the market segments they serve.

        Las Vegas is their core market and their properties in Las Vegas appeal to a broad

range of customers. For example, Mandalay Bay—with its fine rooms, internationally

renowned restaurants, and entertainment attractions—appeals to the upper middle-income

to high-income segment of the market. Meanwhile, Luxor and Monte Carlo are marketed

more to the middle-income to upper middle-income segment of the market. With their

playful themes and more limited amenities, Circus Circus and Excalibur appeal more to

the value-oriented, middle-income segment of the market. Mandalay utilize a variety of

methods to market their properties including advertising on radio, television and

billboards, as well as in magazines. They market their Las Vegas Strip properties

primarily through national cable television and magazines. For their other Nevada

properties, advertising is concentrated primarily in Nevada, California and Arizona, while

their properties outside Nevada advertise in the regional markets in which they compete.

Mandalay also utilize direct marketing to a large extent, by making specific offers

directly to their extensive database of customers, both via mail and the Internet. They also

maintain Internet websites for all of their properties, which provide customers with

information about their resorts, along with the ability to make hotel and show

reservations. In addition, Mandalay offered complimentary hotel accommodations, meals

and drinks to selected customers.

        Mandalay also looked for cross-marketing opportunities. For example, in

November 2001 we introduced One Club, our player affinity program that allows cash

and complimentary awards to be accumulated and redeemed in real time across multiple

properties. Mandalay wholly owned properties in Las Vegas, Laughlin, and Reno,

Nevada and Tunica County, Mississippi, as well as Monte Carlo are currently linked

through the One Club system. Mandalay believed the One Club system has helped them

maintain and expand their customer database, enabling them to better target their

marketing efforts. They also believe One Club encourages repeat visitation to their

properties and further encourages customers to visit their other properties through the

seamless use of their One Club card.

HUMAN RESOURCE ANALYSIS

Although Mandalay does not publish its organizational chart, It appears that

Mandalay provides overall direction and strategic leadership as well as functional

coordination in the areas of finance, accounting, human resources, legal issues and

marketing. Each resort, in turn, has its own functional structure that enables it to handle

the specific activities required to successfully operate a large, combined hotel, casino and

entertainment resort.

FINANCIAL ANALYSIS

Financial Ratio 2003 2002 2001

Current Ratio .9810 .8486 .9659

Quick Ratio .6830 .5750 .6211

Return on Sales .2555 .1509 .2774

Return on Asset .0757 .0699 .0822

Mandalay’s quick ratios of .6830, .5750, and .6211 show that they are not liquid

for the years 2003, 2002, and 2001, respectively.Mandalay current ratios of .9810, .8486,

and .9659 show that Mandalay is not solvent for the year 2003, 2002 and 2001,

respectively.This indicate that in every $1 debt of Mandalay, they can only afford to pay

less than $1 dollar.Return on sales of 0.2555, 0.1509 and 0.2774 for the years 2003, 2002

and 2001, respectively; indicates that Mandalay can provide $0.2555, 0.1509 and $0.2774

income after tax and interest for every $1 sale in the year 2003, 2002 and 2001,

respectively. Return on assets of 0.0757, 0.0699 and 0.0822 in the year 2003, 2001, and

2001, respectively means that for every $1 asset, Mandalay has yielded $0.0757, 0.0699,

and 0.0822, respectively income after tax and interest.

SWOT ANALYSIS DIAGRAM

Mandalay Resort Group

Finance Accounting Human Resources Legal Issues Marketing

STRENGHTS WEAKNESSES Innovation

Brand Name Recognition

Large market share

Revenue Growth

Requires constant

renovations and expansions

to compete.

No mission or vision

statement

Large amount of debt 

OPPORTUNITIES THREATS

Expansion still available

Las Vegas is a very popular

Tourist area

Online gaming

Economy suffering

Extensive regulations on

gaming industry

Highly competitive

Market

Competitors 

Strengths

Mandalay has a large share in the market due to their innovation in the hotel and

casino industry. They are one of the top players in Las Vegas and they have revenue

growth.

Weaknesses

Because of stiff competition in the market, Mandalay needs to constantly renovate

and expand their existing properties. Due to this, they have obtain a large amount of debt.

Mandalay has no stated mission-vision.

Opportunity

Las Vegas is the capital of gaming, and entertainment in the United States. Many

tourists visit this place every year. It is an opportunity for Mandalay to expand for they

have properties still available. Online gaming became more popular in many places.

Threats

The coming of new competitors in a high competitive market is a threat of

Mandalay. Economic crisis affects the gaming industry. Geographical expansion has

slowed considerably since no additional states have approved casino-type gambling since

1993.

IV

CONCLUSION

Mandalay Resort Group is the market leader in the business of entertainment, and it

has been the innovator in the theme resort concept that is popular in casino gambling. The

low liquidity ratio of Mandalay is the result of various renovations of its existing

properties in order to compete in the market. Due to the highly concentrated field,

expansion has taken on many forms.The company also enter in various mergers. Growth

potential in the industry is based upon customer satisfaction, and entertainment.

Although internet gambling became more popular in many places, Casino gambling

at Las Vegas still at the top which it accounts for 40.6 percent of all legal gambling

expenditure.

SWOT Analysis shows that Mandalay is very strong in their innovation and

possessed a large market share. It has the opportunity to expand in the market of online

gaming. The coming of new competitors is a major threat of Mandalay especially in the

time of economic crisis. Another is the government policies towards gambling and the

stiff competition in the market. Because of that, Mandalay needs to have constant

renovation and expansion to stay competitive. As a result, Mandalay obtain a large

amount of debt.

IV

RECOMMENDATIONS

1. Acquire software for online gambling, and upgrade existing machine for

security purposes. This strategy will expand the market of Mandalay and it

will accommodate customer outside the United States. It will also gain the

trust of their existing customers.

2. Align promotion with the promotion of Airline companies and offer more

menus, and innovate room offerings. This strategy will increase the sales

of resort industry; rooms, food and beverage, and entertainment.

3. Sell more stock shares. This strategy will increase the liquidity of

Mandalay Resort Group.

B I B L I O G R A P H Y

A. Books

Agamata, Franklin T. (2009) Managmenet Advisory Services. GIC

ENTERPRISES & Co. Inc.

B. Electronic Homepages/Websites

http://www.getfilings.com/o0001047469-03-021057.html: March 12, 2012

http://www.sec.gov/Archieves/edgar,data. : March 11, 2012

http://american gaming.org/casino_entertainment/aga_facts/.: March 11, 2012