Industry and Organization Issues - Research Paper Example

Case study of industry and Organization Name Course title Date Table of Contents Table of Contents 2 1.0. Service 3 1.1 Description 3 1.2 Service features 6 1.3 service adoption 7 2.0 Strategic Analysis 9 2.1. Product and market analysis 9 2.1.1. Demand determinants 9 2.1. 2 Major markets 10 2.1.3 International Trade 11 2.1.4 Business Locations 12 2.2 Competitive analysis 13 2.2.1 Market Share Concentration 13 2.2.2 Investing in Key Success Factors 13 2.2.3 Suppliers 15 2.2.4 Customers 15 2.2.5 Competitors 16 2.3 Environment analysis 17 2.3.1. Regulatory Influences 17 2.3.2. Economic Influences 18 2.3.3. Environmental Influences 18 2.3.4. Societal Influences 18 2.3.5. Technological Influences 19 2.4 Swot analysis 19 2.4.1. Strengths & weakness 19 2.4.2. Opportunities and Threats 24 Reference List 26 1.0. Service 1.1 Description Lottery commission was established in Western Australia in 1933 and operated the traditional draws until 1979 when the industry introduced the Saturday lotto. From 1982- 1988, the industry managed to introduce game Super66, state-wide access via central gaming, Oz Lotto, power ball game and game Cash3. This increased the number of players and in 2003; the company renamed the corporate identity to Lotterywest after launching its new brand. To enhance its expansion, the company partnered with SA lotteries and NSW lotteries to form the Monday and Wednesday Lotto in 2006. Recently in 2011, the industry invested in technology games through innovations by launching an updated website which provides online grant applications and online lotto games (Larsson 2011, p 188). The move to launch the website was intended to reach more customers, and also, to reduce the expenses incurred in logistics and human labour. The website has guided rules that the player follows to play the online games. Fig 1.1 Different products and services offered The lottery industry comprises of businesses which sell lottery tickets. The businesses organize draws whereby winners are drawn randomly. The participants’ revenue depends on sales made through the draws and the number and size of the winnings or winners. If there are many winners with large prize winnings, then the participants may experience losses. The major products and services offered in this industry include lotto, traditional lottery draws, and instant / scratch tickets, soccer pools and minor gaming like bingo and keno. In the western part of Australia, lottery industry has grown significantly as a result of technological innovations. Young transition adults present the greatest opportunity for the market growth due to their explorative nature, influence and minimal opposition to new products in the market. Notably, this group has a strong qualitative and quantitative association with the gaming, and winning their confidence creates a huge market base due to their power of influence (Larsson 2011, p 190). The prime objective of the company is installation, acquisition, exploitation and maintenance of integrated management systems for lotteries. Their objectives are enhanced by gaming terminals that include issuing of lottery tickets, transmitting data and performing the win account through draws. The lotteries Commission of Western Australia commonly referred as Lotterywest is one of the major players in the gaming industry. It is controlled by the government of Western Australia. Besides offering lottery services, it also provides grants to support non-profit community groups’ and local government authorities. Lotterywest employs approximately 200 staff and is headquartered in Osborne Park, Western Australia. In recent years, the company has recorded an enormous performance, and has been ranked position 983 out of the available 2000 companies within Western Australia. From the sales of lottery, the Lotterywest recorded $304,065,000 as revenue in 2012(Gardner 2007, p.60). Lotto prizes range from $90.0 million helping the industry to attract a big number of game players. This contributes to detriment of weekly lottery draws run by lottery operators who have invested greatly in lotto draws to increase their interests, as well as their expenditures. A survey, which was conducted by IBIS World, expected the lottery industry to generate $7.0 billion during 2013-2014 as revenue, which is a 4.3% increase when compared to previous years (Arvey 2004, 404). The real household disposable income determines the expenditure incurred by the lottery industries, and is influenced by interest rates, economic activities, unemployment and the fuel prices. The industry experienced crisis in 2009-10 after its revenue was affected by stiff competition from other gaming markets, high interest rates and global economic crisis. Despite the crisis, the industry has projected on increasing its revenue to $8.0 billion by 2018-19. The expenditure projection is also expected to rise for the company to attain its estimated revenue and for the industry to meet the expected growth of 2.5% annually (Larsson 2011, p 195). To enhance its maximum growth, the company settled on innovation as the main strategy to compete with potential competitors who cuts the revenue returns of the industry from the esteemed customers. Increasing the revenue at reduced expense is estimated as a good strategy, and is made possible by innovation and creativities. Slow pace by large firms to adopt the technology and process change has made the per capita consumption of goods unsuitable. In addition, it has caused a decline of clear segmented brands and products. Fig. 1.2 Estimated and projected Revenue over different financial periods 1.2 Service features The IBISWorld Company is responsible for ranking Australian companies based on their total revenue within a certain financial year. The lottery company is among the companies that operate under IBISWorld. The lottery industry in Western Australia provides gaming services that do not compete with any gaming machine that operate outside the state’s casinos. This makes the lotteries commission of Western Australia have a competitive advantage over its rivals. The new brand name; ‘Lotterywest’ launched by the company in the year 2006, helps in creating positive customer relationship and behavior. The increased interest of the players to play lotteries on Monday, and Wednesday has seen a significant jump in sales. The Powerball and jackpot products, Oz Lotto allowed the players to increase their revenue by winning draws. The industry used to operate lotteries only on Saturday, but after launching the Monday and Wednesday lotteries, the company has recorded a revenue increase of 4.0% for the last five years. 1.3 service adoption According to IBISWorld, Lotterywest consolidation has contributed greatly in ensuring stability in the level of economic maturity. In the past few years, Lotterywest has realized challenges and risks existing in the market. To successfully operate, the company has learned to be at the vanguard of innovation. Every passing day confirms the imperative of continuously innovating and thinking up new ideas, implementing them and seeing how customers receive them. Successful ideas are incorporated into the company’s business operations while those, which do not work, are modified or discarded altogether. By a process of continually generating new ideas, and testing them in the laboratory of the market, Lotterywest learn what works and what does not meet the business’ purpose. For instance, the introduction of online games and lotto gives the players an opportunity to access services fast and with little technicalities. The rate of first adoption can be seen with the increased number of lottery games provided by these industries. The social clubs, casinos and convenience stores are major playground adopted by lottery industries to invest in lottery games, and this has made adoption be much easier to the demographic population. There are set accreditations and regulations of the lottery industry which pose several disadvantages to Lotterlywest. Without the necessary knowledge or background, it becomes harder for potential players enter the industry and this leads to unfavourable influences within this industry. That notwithstanding, the rate of service adoption is considered fast, simple and friendlier to the players. Lottery products are easy to experiment with as the customer requires only a small amount to buy lottery tickets for winning. However, one has to have a high disposable income to try as the money used may not earn anything as the probability of winning is low. Fig 1.3 Different factors that influence service adoption in a lottery industry. 2.0 Strategic Analysis 2.1. Product and market analysis 2.1.1. Demand determinants Revenue volatility in lotteries industry is influenced by interest rates, gambling taxes and unemployment. Increase in interest rates and taxes as well as increased unemployment cause reduction in the disposable income of consumers thus affecting demand negatively. Changes in tax rates to government affect the operators’ returns. Volatility is also a result of prize distributions that keep fluctuating from year to year based on lottery win rates which are random in nature (Larsson 2011, p 193). There is also emergence of online lotteries, which offer consumers entertaining and superior experience as well as convenience since they do not have to move from their homes. These reduce demand for lotteries in existing organisations (Larsson 2011, p 193). Major influences to profitability of the market are the winning first jackpot sizes leading to increased sales and profits. The use of multiple and digitised distribution channels such as internet and use of loyalty cards help in the efficient distribution of services leading to improved profit margins. It also leads to expansion of the market to new segments. This has a great impact on company’s profit levels (Kaplan 1987, P 3). Participants in this industry are due to benefit from privatisation of lotteries which is now the trend according IBISWorld report. This will expand the market further thus allowing flow of more revenue to this industry. 2.1. 2 Major markets The probability of winning lottery drawl is always very minimal and also the payout ratio is low, and this makes consumers run away from it. In spite of these circumstances, many consumers purchase the lottery ticket with an expectation of winning the expected payout that is always large. The expenditure incurred in purchasing these lottery tickets is small and any loss incurred after purchasing these products does not make a significant difference to discourage the consumers from purchasing these products. Lotteries are used in determining results by non monetary setting, and this works against the product perception as a type of gambling (Shelley 1999, p.109). Looking at the demography demand to lottery products, they are highly attractive to the older age groups and women in Australia. The population shows a great preference in lottery products. Fig. 1.4 The size of lottery market in different age groups 2.1.3 International Trade The lottery industries mainly operate within the western part of Australia. They are mainly intended for the state and not international markets. Lotterywest is run by the state lottery commission only in Western Australia. The geographic segmentation of the market is based on the population spread and per capita gross revenue on lottery products. Tatts group operates in many states and territories Art Unions operate in Queensland as it is profitable than other states while keno operates in hotels and clubs, in their own state. The target market in the industry is where revenues are comparable to the popularity of the product. For example, per capita total lotteries revenue is the highest in Queensland due to the general popularity of a wider range of lottery products 2.1.4 Business Locations Following the license agreement, Tatts group limited operates lottery operations in different territories and states. These locations mainly include New South Wales, Queensland and South Australia. In Queensland, the art unions operate due to legislation that acts as a step up to increase profit compared to other territories and states. Keno is very common in big clubs and hotels and has specific state where they operate from. Jupiter’s operates keno in both Queensland and New South Wales (Gardner 2007, p.57). The lottery companies are geographically spread depending on population distribution and the gross per capita revenue of lottery products. In New South Wales, keno and lotteries are the most common products while Lotto is very popular in Australian Capital Territory, Victoria and Queensland. Lotto, instant lotteries and keno, are also very popular in South Australia, Tasmania and Western Australia. The popularity of lottery products in Queensland plays a crucial role of enhancing the per capita revenue in this state. Fig. 1.5 Distribution of revenue and the population in different locations 2.2 Competitive analysis 2.2.1 Market Share Concentration According to Garcia (2005, p.34), concentration of lotteries industry is highly evident throughout Western Australia. The Australia State Lotteries Commission has the role of issuing lotteries licence in Western Australia. The licence is intended to provide tickets, instant scratches and many other products. However, it has failed to secure a good Garcia market share. The industry is mainly structured among giant gamblers such as Tatts and TABCORP. A good significance of market consolidation was recorded in 2010 after NSW lotteries were acquired by Tatts Group and overseas; the largest turnover of lottery per state. In 2012, the Tatts group acquired SA Lotteries thus increasing the market concentration. Notably, few lotteries industries have formed franchise operations. 2.2.2 Investing in Key Success Factors Development of new products: Investing in new product by lotteries industries helped in expanding the market and expenditure. Lotterywest offers differentiated products and services to various consumers. This is achieved through innovation of numerous products and services to suit the different consumer segments and to market them through the most effective approaches. Initially, the company focused on inexpensive lottery products and services with desirable qualities. This was attractive to Australian, who formed the first bunch of clients. With time, premium products and services have been included in order to suit clients seeking for quality. Research and understanding of Market: Researching consumer needs is the first step towards achieving success. The tremendous growth of lottery companies can be attributed towards creating market-responsive products. Innovation plays a crucial role of enabling the business to provide customer’s immediate needs. Adding to this, and perhaps more importantly, customer research discovers the latent consumer needs and sets motion the process of producing appropriate products. Lottery companies have been in tune with the customer by producing only those items that meet his needs. This has brought about success, and also expanded business’ share of the market. Establish a collective network: Marketing of industry product requires partnerships and links serving as networkers. Lotteries industries have been enjoying a well trained, professional and a comprehensive sales agent which makes networking very effective. Adopting effective production promotion: Employed Marketers in lotteries industry conduct aggressive promotion campaigns in order to raise product awareness for the purposes of increasing sales. Access to the most recent and efficient technology: Although the specifics of innovation vary from one lottery organization to another, the overall model is a generic. It is based on a strategy for achieving flexibility to stay ahead of the competition. Technology advancement contributes to industry growth through online purchase provided by lotteries industry website. Innovation is the only way to create new markets and develop old ones. Lotteries companies, which expect to sustain their competitive position, have continuously are always at the vanguard of the innovation wave. These companies have created online games, which are common with young people in order to enhance the market share, and also complete the loop i economic cycle (Garcia 2005, p. 38). 2.2.3 Suppliers Lotteries industry work close with their suppliers to find the most effective and creative ways of ensuring the lotteries product are of standards and their quality is sustainable in the market. Their relationship with suppliers is mainly built on open communications, shared goals, mutual trust and an assurance of support and guidance throughout the purchasing and supply of lotteries product. The major suppliers in lotteries Australia are as follows: Major Supplier Supplied Service C1611 Printing and publishing of lotteries. J5621 Free-to-Air television broadcasting of lottery draws. J5911 Internet provision for online lotteries. J5922 Information technology through data centres. M700 Computer system design services for information Technology. 2.2.4 Customers Lottery companies across are now coming face to face with new market realities, namely: the acceptance that the customer is not a burden to the business. He is the reason the business exists. Days when suppliers dumped their offerings in the buyer’s lap expecting him to gracefully accept the proffered goods are past. It is now the Age of the Client. Strauss (2012, p.58) states that a company must gear all its efforts towards delighting customers. Thus, the lottery industry has been striving to offer entertaining and innovative products to its players while upholding standards of consumer protection and integrity. This gives the customers trust and confidence in the integrity of the lottery by supporting their winners, preventing underage play and raising the awareness of problem gaming. In addition, it helps the customers to understand their responsibilities and their roles in lotteries. 2.2.5 Competitors In the recent past, lottery market has been volatile making it necessary for players to identify and focus on the most lucrative markets. The process of identification of the most suitable markets requires understanding and consideration of various factors such as the ability of the organization to penetrate and compete in the increasingly volatile market, the current needs of consumers in targeted markets and the driving factors of the future consumer trends. The Australia State Lotteries Commission faces stiff competition from assorted lottery companies including the lottery agents and minor lottery operators. With this regard, the company aim at offering the powerful combination of affordable prices and high quality lottery products in order to capture the hearts and wallets of lottery enthusiasts. Increased competition in the marketplace has called for companies to anticipate rival's moves. A greater competition is evidenced between some individual products such as gaming machines and instant scratch-win cards. The availability of gaming machines offer similar attributes of products that affect the instant lottery sales with their high degree of instant gratification (Arvey, 2004, 406)). The minor lottery operators are intralot, keno and non-profit organisations that invest on lotteries promotion trade. These industries mainly do not draw revenues from these competitions giving the lotteries industry a competitive advantage. 2.3 Environment analysis Fig 1.6 Market attractiveness of the lottery industry 2.3.1. Regulatory Influences In the lottery gaming, the industry observes honesty and integrity as per the set standards by regulatory bodies. According to IBISWorld, the regulatory influences have moderate influence in the market attractiveness (Gardner 2007, p.54). These regulations are also steady and medium. The main demands by the regulatory agencies are for the industry to pay the registration fee, comply with all the statutory requirements, and obtain an insurance cover and satisfaction in managing the audit accounts. The effects of these demands have been considered cost effective by the lottery industry thus having a minimal influence in the operation of its gaming. 2.3.2. Economic Influences Unstable economy has a greater influence in the revenue returns by the lottery industry. Instances of high interest rates and inflations have a greater impact on the industry. They have the effect of increasing price of product and services offered by the lottery firms. Price increase disheartens the potential clients, and this may lead to lower profits. On the other hand, an increase in the disposable income from the ageing population has a positive impact on life insurance, and this increases the demand of lottery products. 2.3.3. Environmental Influences Environment influences the market attractiveness moderately and plays a great role in enhancing organizational stability. Some of the environmental aspects related to lottery industry are incidences such as climate change and natural disasters. 2.3.4. Societal Influences The aim of the industry is to enhance cohesiveness among the community. Society has a different perception to lottery games. In Western Australia, lotteries are attractive to women and old people. However, they are less attractive to the young people (Bellhouse 1991, p 143). Unequal distribution of the population in the society poses a challenge to lotteries industry as far as equal distribution of resources is concerned. 2.3.5. Technological Influences Technological innovation plays a crucial role with regards to production levels and barriers to entry. Technological factors that influence business performance include new discoveries, speed of technology adaptation, rate of obsolescence, R&D activities among others. Innovation has become an important and competitive resource for business organizations. Research shows that great organizations have overwhelmingly institutionalized the culture of innovation. Failing organizations, on the other hand, take a lazy, disinterested approach to innovative programs. They do not suspect that their lack of innovation contributes to their shrinking market share and continue to expect the customer to reward them by buying whatever they produce. The online website established in 2012 help in selling lottery tickets online and also increasing participations in online lotto games. 2.4 Swot analysis 2.4.1. Strengths & weakness Lottery industry has been enjoying a competition free market. In Western Australia State, Lotterywest is the only lotteries organization and does not compete with gaming machines that operate outside the state’s casino. This provides the lottery commission with a competitive edge compared to its counterparts in other states. One of the major strength that makes the commission highly competitive is its brand name, that is, the Lotterywest. Over the last five years, the company has been withstanding a volatile performance in its finances. In 2008-09, a significant jump was experienced as a result of increased occurrences of jackpots and interest of Monday and Wednesday lotteries. Although the commission saw drops in 2009-10 and 2010-11, the financial performance is still high. The drop was contributed by unusual high win from Oz Lotto and Powerball players who received higher than what were expected from the revenue returns. The expectation of IBISWorld was to increase sales by 4.0% over the five years period till now. Lottery commission Australia has significant strengths and competitive advantage in the following area: Management Store Expansion Reputation Quality Employee Satisfaction Customer Satisfaction Joint Ventures Acquisitions Financial Growth. Fig 1.7 Marketing capability Fig 1.8 Marketing capability The major industry weakness is the high level of labour intensity. It is estimated by comparing the ratio of labour to that of capital. The single dollar that the industry spends in paying wages accounts for 28 cent. The use of computer terminals to provide online services to the customers has also increased the capital outlay. Other costs are incurred in maintaining and refitting lottery sales in the agency network. In addition, the company has a narrow product mix, and this may hinder the company from meeting its marketing objectives. . 2.4.2. Opportunities and Threats According to Griffin (2011) opportunities are the chances that enable a firm to perform exceedingly well and attain its objectives. Opportunities play a prominent role as far as a firm’s growth and profitability are concerned. The following is the main opportunities of Casella Wines Ltd; An increase in the population provides a ready market for lottery products. The number of wealthy people in Western Australia is growing every day. It is believed that the old and wealthy people are the greatest consumers of lottery products. With the growing number of old people, the lottery market share is bound to increase. The old are believed to have a high disposable income. According to Griffin (2011) threats refer to the external factors that hinder a firm form achieving its objectives. The threat has the effect of hindering the firm’s growth as well as profitability. With regards to the lotteries Commission of Western Australia, the following are the main threats that can prevent it from achieving its set goals; Massive adverting campaigns by the competitors and hence expanding their market share. Such rival firms spend huge amounts of money to advertise their products. Lottery is not a necessity implying that people can do without it. It is thus an inferior commodity, and therefore, individual demand for the product goes down once the income increases as people tend to consume other products, which they consider being more superior. With this regard, the consumers enjoy high bargaining power, and this is a threat to the company. Fig 1.9 Marketing capability Fig 2.0 Operations capability Reference List Arvey, R. D. & Harpaz, I. 2004, "Work centrality and post-award work behaviour of lottery winners", The Journal of Psychology pp.138, doi:10.3200/JRLP.138.5.404-420. Bellhouse, D.R., 1991 “The Genoese Lottery”, Statistical Science, vol. 6: Pearson Education Inc., pp. 141 -148. Garcia, M. 2005."Fortune Cookie Has Got Their Numbers", The Washington Post, pp. 32-43. Gardner, J. & Oswald, A. J. 2007, "Money and mental wellbeing: A longitudinal study of medium-sized lottery wins", Journal of Health Economics 26 (1): pp 49–60. Griffin, R. 2011. Fundamentals of Management. Ed: 6. London: Cengage Learning. Kaplan, H. R. 1987, "Lottery winners: The myth and reality", Journal of Gambling Studies pp.3 (3), doi: 10.1007/BF01367438. Larsson, B. 2011, "Becoming a Winner But Staying the Same: Identities and Consumption of Lottery Winners", American Journal of Economics and Sociology 70 (1):pp. 187– 209, doi:10.1111/j.1536-7150.2010.00768. Shelley, R. 1989. The Lottery Encyclopedia. Austin, TX: Byron Publishers Services. pp. 109. Strauss, G. 2012. Lottery jackpots may get bigger. USA Today: Harvard Business School Press Pp. 58. Read More