Analysis of MGM Resort and Casino - Essay Example

Analysis of MGM Resort and Casino Introduction The primary business in the MGM is the ownership and operationof the casino resorts that entails hotel, gaming, dining, convention, retail entertainment, and other resort facilities. There is a belief by the top management of the MGM that it owns and invests in various segments of the casino resorts internationally and has continually reinvested in the resorts in bid to sustain competitive advantage within the international market. Most of the revenue comes from cash through the customers operating with cash or even paying for the non-gaming services with credit cards or in terms of hard cash (Vogel, 2001). There is a significant dependence on the ability of the standard resorts to generate the operating cash flow to repay the fund capital expenditures, financial debts and the provision for the excess cash flow for future economic growth and development. In the MGM resorts, there have been significant investments in standard procedures for adding entertainment, new restaurants, nightlife promotions, as well as other new characteristics and facilities. Moreover, there has been a regular capital investment to maintain the standard qualities of the hotel rooms and the civic spaces. The generation of cash flows by the standard domestic resorts of MGM in the year 2012 advanced than the previous year and the year 2010 and there is an expectation that the efficient and effective trend will continue into the coming years despite the constant economic declines. The visitation to the Las Vegas rose significantly up to 2 percent in the year 2012, and the room inventory has been optimum with inadequate new rooms supply planned in the recent years. The MGM branch in Macau, the money streams from operations improved extensively in the year 2012 facilitated by tough betting volumes (Vogel, 2001) . Despite the constant concerns, concerning the economic instability in the state of China, and the accomplishment of the latest smoking limitations in Macau there is an expectation that the Macau market platform should continue to expand or rather grow. In the year 2012, the speed of growth declined a little bit but the casino revenue for the Macau market still raised over 14 percent in the year 2011. It shows that over the years of the development of the MGM resort it has been consistently making profits no matter the challenging conditions of the current market. It is due to the competence of the top management that strives to maintain a competitive advantage. The competitive advantage is constant at the MGM resort due to the facts that it actually considers the welfare of its customers (Vogel, 2001). Most of the customers at the MGM resort prefer value to the price quotations, thus this will make the customers spend a lot of money at the MGM resort because they will get the value of products, and services they need to satisfy their needs. The monetary or rather the financial position of the MGM resort has been perfect as shown below by the income statements and the balance sheet (Barrett, 2013). The analysis income statement of the MGM resort The following financial details reflects a selected historical business that should be adequately analyzed by the management sector through a consolidation of financial statements. The income statement below will give the management an idea on how the business operations of the MGM resort have been flowing, and the appropriate amendments that will take the organizations greater steps ahead in order to achieve the main agenda of profit maximization in an enterprise. Income statement 2011 2010 2009 change % change Casino revenues $4,002,985 $2,479,695 $2,650,059 $1,523,290 61% Gross Profit $7,849,312 $6,056,001 $6,010,588 %1,793,311 30% Expenses: Gain on MGM China transaction ($3,496,005) ($3,496,005) Net income $3,114,637 ($1,437,397) ($1,291,682) $4,552,034 317% Casino Revenues depicted an increase in the household disposal income resulting to the increased gambling. Gain on the MGM China was due to the acquisition and consolidation The following transactions impact the idea of one fiscal year to the next contrast of the chosen monetary information as illustrated above The concept of gaining and disposing In the year 2009, there was a transaction due to the sale of the Treasure Island Casino in Las Vegas, Nevada, and the gain was recorded to be 187 million dollars (Vogel, 2001). The results of the Treasure Island were not recorded as discontinued activities as there was a belief in a significant customer migration would take place between the Treasure Island and the Las Vegas strip resorts (Barrett, 2013). It is illustrated a rise in the returns was making the enterprise make abnormal profits thus maintaining a perfect competitive advantage. In the year 2011there was an acquisition of an additional 1 percent of the overall capital stock in the MGM, China plus the controlling interest and therefore becoming the indirect owner of approximately 50 percent of the MGM in China (Charming, 2007). In this transaction, there was a recording of 3.5 million dollars gain. It took the enterprise to higher investment platforms. The MGM involved in various lucrative monetary deals that made it be financially stable after every fiscal year. The MGM is always lucky to enjoy such deals because the management or rather the board of directors has a broader knowledge in terms of management and marketing of the casino products and services. It facilitates customer loyalty making the enterprise maintain a stock rate that is perfect (Dogariu, Horning & Maurer, 2013). The analysis of the Balance Sheet of the MGM resort Balance sheet-Assets 2011 2010 Change % Change Cash and cash equivalents $1,865,913 $498,964 $1,366,940 274% Goodwill $2,896,609 $77,156 3654% Other intangible asset, net $5,048,117 $342,804 $4,705,313 1373% Goodwill emanated from the massive increase due to the MNG China consolidation. Other intangible assets emanate from Macau gaming, sub-concession, Macau land concession, Macau customer lists coupled with the gaming promoter associations. Balance sheet –Liabilities 7 Stockholders Equity 2011 2010 Change %change Other accrued liabilities $1,362,737 $867,233 $495,514 57% Long term debts $13,470,167 $12,047,698 12% Accumulated other comprehensive income( loss) $5,978 ($301) $6,279 2086% Other Accrued liabilities occur due to the big escalation in the outstanding chips and the casino front money deposits. Accumulated other comprehensive income occur due to the increase in the currency translation. LIABILITIES AND THE EQUITY FOR STOCKHOLDERS Current liabilities 2010 2011 Accounts payable $ 199,620 $ 170,994 Income taxes payable 1,350 7,611 Accrued interest on long-term debt 206,736 203,422 Other accrued liabilities 1,517,965 1,362,737 Total current liabilities 1,925,671 1,744,764 Deferred income taxes 2,473,889 2,502,096 Long-term debt 13,589,283 13,470,167 Other long-term obligations 179,879 167,027 Commitments and contingencies Stockholders’ equity Common stock, $.01 par value: authorized 1,000,000,000 shares; issued and outstanding 489,234,401 and 488,834,773 shares Capital in excess of par value 4,132,655 4,094,323 Retained earnings 213,698 1,981,389 Accumulated other comprehensive income 14,303 5,978 Total MGM Resorts International stockholders’ equity 4,365,548 6,086,578 Non-controlling interests 3,750,468 3,795,644 Total stockholders’ equity 8,116,016 9,882,222 $26,284,738 $27,766,276 Discussion From the above illustration by the balance sheet, it is clear that the MGM Resort has stable assets. The assets alone can cater for any kind of debt that the business may get involved in at various transactions. Assets are always a fundamental entity in a business premise that shows the stability of both the capital and liabilities (Vogel, 2001). The MGM has a capital level that is great and reserved to some economic concept that prevent running into extreme losses. The MGM resort does not significantly rely on various enterprises for its smooth operation because it has adequate assets and capital that would make the business to operate successfully without getting involved in situations of inadequate finance (Stephen, 2009). The stock performance of the MGM resort The stock performance is strongly related to the income statement and the balance sheet. It is because these two concepts will clearly define the position of the enterprise in the form of inventory (Charming, 2007). According to the information from the interpretation of the income statement and the balance sheet, the MGM resort is on the safer side according to the transactions no matter the state of crisis in the market (Dogariu, Horning & Maurer, 2013). The primary business in the MGM is the ownership and operation of the casino resorts that entails hotel, gaming, dining, convention, retail entertainment, and other resort facilities. There is a belief by the top management of the MGM that it owns and invests in various segments of the casino resorts internationally and has continually reinvested in the resorts in bid to sustain competitive advantage within the international market. The market position It is majorly represented by the position of the markets in terms of segments and dominance. The MGM resort is extremely active at the Las Vegas because that is the region of establishment and great loyalty by the customers (Vogel, 2001). There is a belief by the top management of the MGM that it owns and invests in various segments of the casino resorts internationally and has continually reinvested in the resorts in bid to sustain  competitive advantage within the international market. The major operational ratios The primary operational ratios are important in a firm because they indicate the proportions in which an enterprise should apply focus in order to boost performance. The operational rates of the MGM resort are based on factors such as markup prices and the net profit from the net sales of the organization. The SWOT analysis for the MGM resort The Strengths and Weakness are internal factors affecting the MGM resort while the Opportunities and Threats are the external factors that affect the MGM resort (Stephen, 2009). These factors are always attached to one main factor of competitive advantage in an enterprise. Strength The company possesses robust brand equity, which has posed to be the fundamental advantage of MGM Resorts. Moreover, this in turn enables MGM resorts to duty higher prices for their products since consumers place additional value for the brand The MGM resort has a perfect management that is well conversant with the knowledge of hospitality and entertainment sector. The employees in the enterprise are always of high standards that are appropriately specialized their assigned duties in the business (Dogariu, Horning & Maurer, 2013). The combination of these factors will automatically lead to greater returns to the MGM resort. Opportunities The MGM resort is lucky enough to host high profile personalities who can attract significant investors to have shares in the enterprise. It should be an opportunity, and the provision of quality services and products will create customer loyalty. It will create an easy way of expanding the multi-billion enterprises. Retired population at the firm has posed as a significant opportunity due to the growing number of retirees as well as older age activities and products.in addition this increases the demand for retirement services, which comprise of money management and health care Better technology has helped MGM Resorts to meet their customers’ needs with new and improved products and services . Furthermore, technology facilitates growing competitive obstacle against the company’s rivals since it is in a better position to use improved and new technological methods as compared to their rivals. Emerging profits from China is also an opportunity since this economy has a large market as the economy grows hence they will need more equipment and supplies from all over the world which will cater for its enormous population (Dogariu, Horning & Maurer, 2013). This qualitative factor in turn leads to the immense decrease in costs, which facilitates profit generation of any large industrial company. Emerging markets facilitates growth and margins. It creates new opportunities to expand products from the developed world. Computer services, paper products, and other industries collectively gain while developing countries increase demand for agricultural and industrial products Domestic tourism creates the circulation of local income. Tourists may resist going abroad due expensive vacations especially during depression of the economy Weaknesses It may result due to the level of corruption within the management. It may lead to embezzlement of development and expansion finance. It hinders the achievement of the MGM resort goals and objectives. Threats The main threat is always the stiff competition from enterprises that operate entertainment services, gaming in the casino industry and many more. It is also done in order to outdo other enterprises from the market. The best way to beat this problem is by strictly providing the needs of the customers accordingly. Investment in the MGM resort The opportunity for investing in the MGM Resort should be utilized with no hesitation. In the above analysis of the firm, the MGM resort is strongly motivating because they have improved in terms of business growth and development due to the appropriate decision making from the board of directors who practice a strategic management criterion with efficient and effective planning. The MGM resort is among the few enterprises that operate on great returns no matter the economic situation (Stephen, 2009). The primary business in the MGM is the ownership and operation of the casino resorts that entails hotel, gaming, dining, convention, retail entertainment, and other resort facilities. There is a belief by the top management of the MGM that it owns and invests in various segments of the casino resorts internationally and has continuously reinvested in the resorts in order to maintain the competitive advantage in the international market (Charming, 2007). References Vogel, H. (2001). Entertainment industry economics: a guide for financial analysis. Cambridge [u.a.] : Cambridge Univ. Press Dogariu,L., Horning,M & Maurer, N.( 2013). MGM Resorts International : Linking Strategy and Organizational Learning for Long-Term Growth.California: California State University San Marcos, Charming, C. (2007). The everything family guide to the Walt Disney World Resort, Universal Studios, and greater Orlando. Avon, Mass.: Adams Media. Foreword by Stephen Heise, V. (2009). Career Opportunities in Casinos and Casino Hotels, Second Edition. Facts On File. Barrett, S. (2013). Hidden Mickeys. Branford, Conn: Intrepid Traveler. Read More