non market business strategy analysis for crown casino

Crown Sydney

How a company successfully managed its non-market environment in order to

achieve its corporatestrategy aims.

a BGS case on

Introduction• Crown Resorts Ltd is one of Australia’s largest entertainment groups and owner-

operators of Crown Casinos.

• In 2012, Crown launched its bid to build a 2nd casino in Barangaroo, government-owned land in the heart of Sydney, New South Wales.

• Crown had to overcome large regulatory, political and public sentiment issues in order to be successful.

James Packer,Chairman of Crown Resorts

1. Casino Industry in Australia


• 4th largest market in the world• 2012 market revenue was $4.2bn• Big 3 players

Crown: 52% of market share, 2 casinosEcho: 32% of market share, 3 casinosSkycity: 5% of market share, 2 casinos

Market Overview

38Macau

Las Vegas

Singapore

Australia

Atlantic City

0 842 6

Source: Morgan Stanley

Gambling Revenue 2010 ($ bn)


• 80% of Australians participatedin some form of gambling

• The highest spending in the world• Of which about 60% was spent on

the ‘Pokies’ (poker machines)• Estimated social cost of

between $3.5-6.3bn

Public Health issue

Australia

Singapore

Ireland

Canada

Finland

0 14001000200 1200

Source: H2 Gambling Capital

Gambling loss per resident adult 2010 ($)

800400 600

One in six Pokies players have a serious addiction in Australia


• NSW Casino Control Act(1992)- Only 1 casino license allowed

• Current license held by Echo Entertainment until 2019

Regulation of casino is

a state issue in AU

2. Crown Resorts Ltd.

Crown Melbourne


• Australia’s largest entertainment and integrated resort groups• Headed by James Packer, the fourth richest person in Australia by

Forbes• Crown’s resorts attract over 25ml visitors every year• Key differentiation factor in market strategy:

Build and operate integrated resorts, attracting Asian tourists• Already running two integrated resorts in Melbourne

and Perth

Company Overview

James Packer and Tony Abbott, Australian Prime Minister greet Abe Shinzo, Japanese Prime Minister


To achieve their vision of being Australian leading tourism and entertainment business with a global reach, they need to have another casino in Sydney.


• Initially, Crown attempted to obtain a Casino sub-license from Echo Entertainment but was unsuccessful.

• Public opinion regarding the negative impacts of a casino was strong, especially in NSW which already had a large casino.

• Crown realized that a purely market response will not work in their quest to build a second casino in Sydney.

Key Issues & Challenge

Crown decided to challenge to get a 2nd license directlywith non-market strategy.

3. Crown’s Non-market Strategy

James Packer, Chairman of Crown Resorts


Crown’s Proposal Building an integrated resort in Barangaroo Included a 6-star hotel and apartment complex, as well as a gaming

venue Casino is for VIP only (membership policy) No pokies (poker machines) Guaranteed tax revenue from Crown: AUD1 bn (by 2036)

Crown Sydney Hotel ResortUnsolicited Proposal to NSW Government

Barangaroo, Sydney, New South Wales

Crown Sydney (at completion) Opera House

Barangaroo is located on the north-western edge of the Sydney central business district and the southern end of the Sydney Harbor Bridge.

Harbor Bridge


Public Relations through charity programs

Charity programs are strategically picked and covered by the media to improve their reputation and to reduce the negative perception of the general public.


Powerful connections in political, media and finance arenas

Head of Tourism Victoria

John Howard,Ex Prime Minister

Ex Senior Minister

the Minister

of Comm.

Premier of

Western Australia

Ex Liberal Gov.

Treasurer leader

Shadow Minister

for Finance, Deregula

tion

Ex Australia

Chief Medical Officer

ExMinister

for comm. IT

& Arts

EX National Secretary of the

ALP

ALP Senator

Current Chairma

n of Tourism Australia

Chairman of

Seven West Media

Ex Editor in Chief,Sydney Morning Herald

Inside Crown Outside connection

3. Crown’s Non-market StrategySuccessfully shape the arena in which the decision would be made;Go through Unsolicited proposal rather than a competitive tender process Unsolicited proposal is designed to develop private-public partnerships to

provide new infrastructure and services Put Crown in a better position to be able to exert influence on the process Reduce competition and opposition to the plan

“Decide where to fight before start fighting”

3. Crown’s Non-market StrategyFraming: Economic benefit to Sydney through achieving tourism goals

Increase in NSW Gross State Product: AUD638 ml New job creation: between 2300-3000 jobs Increase in exports: AUD512 ml Increase in investment: AUD151 ml

Sydney Tourism+ =Six Star Hotel

VIP Casino

Money

Job

Tax

4. Outcome

4. Outcome

Echo’s reaction Echo responded by submitting a counter-proposal to the NSW government

through the unsolicited proposals process as well.

In the proposal, Echo asked for1) An extension of exclusivity to operate sole casino in NSW (up to 25 years), paying a license fee of $250 ml2) Revision to The Star’s regulatory and operating arrangement(e.g. removal of limit of # of Pokies or the bet limit) – Failed to consider public

opinion

In return, Echo proposed a series of commitments:1) Total incremental investment of $1.1 bn – Less than Crown’s offer of $1.5 bn.2) Ongoing maintenance of the integrated resort3) Ongoing delivery of responsible gambling program

No framing! Not enough investment! Less connection!

4. Outcome

In November 2013, the NSW Casino Control Act was amended to allow a “restricted gaming license” to operate specially in Barangaroo.

The government gave the green light to Crown in the same month.

Crown’s license to operate will start in 2019, once Echo’s exclusivity clause runs out.

4. Outcome

Lesson learnedImportant of consistent engagement, not ad-hoc – must be deliberate

Build connections

Build PR

Framing

Information

Change arena

Use connections

-Before issue cycle-

-On the issue cycle-

-Against the challenge-

non market business strategy analysis for crown casino

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