Aristocrat has the reputation as a highly successful global organization in international gaming industry.
The company has maintained its growth momentum for over a decade. It also had a great overall performance in year 2014 with a profit $118.1 million after tax, which represents a 10.2% increase in the reported terms The firm is in a good shape from finance perspective.
Chief Executive Office and Managing Director Mr. James Odell expects a significant growth in total recurring revenues in the near future.
After studied several years’ annual reports of the organization, the author believes the management team of the organization did every possible good business practice, recommended by the text book, from business operational perspective. However the author also believe there are many external challenges which are threatening the prospect of this organization.
The Global games market will reach $102.9Bn in 2017, driven by 10 innovative movements in gaming industry (Newzeroo gaming market research, 2015).
The global gaming market has never been so full of competition. Mobile, social, online and virtual reality gaming technology have been growing tremendously over the past several years and has dramatically shape the global gaming market. Thanks to the internet these days company can be based any corner of the planet but have its customer virtually anywhere of the planet. The gaming industry will change forever.
Superior service providers consciously strive to create a memorable customer experience by nurturing a culture for 'serving' . They go beyond efficient and effective service design to bring spirituality in service .Superior service delivery requires managing customer expectations and incorporating self service technologies .Customers' expectations play a crucial role in this .
This case study is an example of designing and managing services .
Superior service providers consciously strive to create a memorable customer experience by nurturing a culture for 'serving' . They go beyond efficient and effective service design to bring spirituality in service .Superior service delivery requires managing customer expectations and incorporating self service technologies .Customers' expectations play a crucial role in this .
This case study is an example of designing and managing services .
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Howard schultz : building starbucks communitySaurabh Arora
Reason for success
Having well developed values, culture and charter
Willingness to move out of comfort zone – Introduces flavours of milk
Ensuring that the organisational culture is adhered to globally
Making changes and customising according to local culture
Providing employee benefits and making them feel a part of the family – ESOPs, Training
Conclusion
Howard Schultz’s vision has ensured that Starbucks has been a market leader
He revolutionized the coffee experience – From a regular to commodity to a third place experience
Having their own culture and innovative spirit has kept them ahead of their competitors
Recommendations
Starbucks must maintain the competitive advantage by keeping to its own distinctive culture
Listening and adapting to its customers and their needs
Adapting to localised cultures and developing a culture in each location that is apt
New products should be developed – Look beyond coffee to attract the Asian market
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Brief of article" internationalisation of the Spanish fashion brand Zara ", Lopez, C., & Fan ,Y., (2009),Internationalisation of the Spanish fashion brand Zara. Journal of Fashion Marketing and Management ,13(2),279-296
This presentation gives you an insight into the world of The Ritz -Carlton and helps you understand via marketing fundamentals why designing and managing services are of utmost importance.
Howard schultz : building starbucks communitySaurabh Arora
Reason for success
Having well developed values, culture and charter
Willingness to move out of comfort zone – Introduces flavours of milk
Ensuring that the organisational culture is adhered to globally
Making changes and customising according to local culture
Providing employee benefits and making them feel a part of the family – ESOPs, Training
Conclusion
Howard Schultz’s vision has ensured that Starbucks has been a market leader
He revolutionized the coffee experience – From a regular to commodity to a third place experience
Having their own culture and innovative spirit has kept them ahead of their competitors
Recommendations
Starbucks must maintain the competitive advantage by keeping to its own distinctive culture
Listening and adapting to its customers and their needs
Adapting to localised cultures and developing a culture in each location that is apt
New products should be developed – Look beyond coffee to attract the Asian market
The Upcoming Hotels Which will may Soon Launch & Operation soon under Private Sector Investment. Formar Sheration Dhaka/ Ruposhi Bangla will Revamp as Intercontinental Dhaka with New Reforms. IHG Hotel Group Massive Businesses Hub.
Marketing Position Of "GILLETTE" and Its Supply Chain Integration Sunny Kumar
The report was assigned to evaluate marketing practices of Gillette and their effectiveness in Pakistan's safety razors and personal care product sector.
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Aristocrat business strategy analysis
1. Aristocrat Leisure Limited
Charlie Chen; SID: 00004301
Business School, University of Technology,
Sydney
Subject: 21873 Global Business Strategies
Lecturer: Antoine Hermens
Challenges of its Business Strategy
2. 1 | P a g e
1Aristocrat Global Business Strategy
Executive Summary
Aristocrat has the reputation as a highly successful global organization in international
gaming industry.
The company has maintained its growth momentum for over a decade. It also had a great
overall performance in year 2014 with a profit $118.1 million after tax, which represents
a 10.2% increase in the reported terms (Hemens, A., 2015). The firm is in a good shape
from finance perspective.
Chief Executive Office and Managing Director Mr. James Odell expects a significant
growth in total recurring revenues in the near future (Hemens, A., 2015).
After studied several years’ annual reports of the organization, the author believes the
management team of the organization did every possible good business practice,
recommended by the text book, from business operational perspective. However the
author also believe there are many external challenges which are threatening the prospect
of this organization.
The Global games market will reach $102.9Bn in 2017, driven by 10 innovative
movements in gaming industry (Newzeroo gaming market research, 2015).
http://www.newzoo.com/wp-content/uploads/2014/05/small_Newzoo_Global_Moments_Towards_2017.jpg
The global gaming market has never been so full of competition. Mobile, social, online
and virtual reality gaming technology have been growing tremendously over the past
several years and has dramatically shape the global gaming market. Thanks to the internet
these days company can be based any corner of the planet but have its customer virtually
anywhere of the planet. The gaming industry will change forever.
3. 2 | P a g e
2Aristocrat Global Business Strategy
Contents
Executive Summary.................................................1
Sustainable Competitive Advantage........................3
Competitive Rivalry.................................................3
Supplier Power.........................................................4
Buyer Power.............................................................4
Threat of New Entry ................................................4
Threat of Substitution ..............................................4
Challenges that Aristocrat is facing .........................4
Situation Analysis of Aristocrat...............................5
Recommended Strategy for Aristocrat.....................7
Innovated is the Key of Transformation ..................7
References................................................................8
4. 3 | P a g e
3Aristocrat Global Business Strategy
Sustainable Competitive Advantage
In this section, I use Porter’s five force analysis as a tool to analyze the competitive
advantage of Aristocrat Leisure Limited in the market place.
Competitive Rivalry
Good quality slot machine and reliable maintenance service are vital to the success of
casino business. Casino operators usually take conservative approach when they select
slot machine provider. This means existing operators will continue to use established
supplier and new operators will also select established supplier rather than try a new one.
Aristocrat’s profile and its products are popular in gaming market of Australia and New
Zealand for over 20 years and recently the company and products gained popularity in the
emerged Asia Pacific gaming machine market. In order to improve its market position,
the company has a dedicated program to ensure the business has long term
environmental/social sustainability and sustainable competitive advantage.
Here are some of the highlights of the program:
Extensive background check on staff, customers, vendors, agents, distributors, major
shareholders and other associates every three years
Competitive
Rivalry
Threat of
New Entry
Buyer Power
Threat of
Substitution
Supplier
Power
-the company has long term relationship
with supply and
-the components market are static
-Similar products can be sourced from
others
-Able to change and substitute
-Expensive to enter the industry
-requires specialist knowledge
-requires long term and trust
relationship with customers
-Aristocrat hold some of the patents of
slot machine
- Aristocrat’s products is dominating
slot machine market in Australia and
Asia Pacific region
-High switching product cost
-High customer loyalty
-Large size order (usually)
-Similar products from others
-Able to change and substitute
-the product has been in market for
long time
-Requires specialist knowledge to
provide maintenance service
-The new product need pass many
restricted local regulations
5. 4 | P a g e
4Aristocrat Global Business Strategy
Anti-bribery and anti-corruption policy has been added to code of conduct
Recycle, repair and remanufacture components of gaming machines
Strategic human resource management in order to retain and , develop the best talent
internally and attracting possible talents around the world
Support local communities around the globe with encouraging employees to get
involved in charitable events.
Integrating health and safety into all process of operations. (PWC, 2012).
Supplier Power
Components suppliers very much rely on system integrators’ sales/marketing power to
survive. There are few large scale gaming machine system integrators in this region.
Aristocrat is one of them. Besides most of components of the slot machine are common
electronic devices. Due to above situation the components suppliers in this region do not
have much power over Aristocrat. This force is considered weak.
Buyer Power
Aristocrat very much relies on large orders from USA, ANZ and Asia Pacific region. The
company not only has strong sales and marketing force in above regions, but also have
very skillful maintenance teams in above region. In Australia, there are only two major
players of slot gaming machine manufacture/assembler. Casio operators do not have too
much choice from selecting supplier perspective. This force is considered weak too.
Threat of New Entry
The barriers to entry in this market are relatively high. In the gaming machine segment,
due to high quality requirement, safety standard, design patents, licensing, regulations in
each region and the high upfront capital investment there are few suppliers able to have
sustainable business in this market.
Threat of Substitution
The gaming machine segment is inevitably changed by innovation in information
technology and telecommunication (i.e. Internet). Online virtual slot machines, have
captured generation Y market. There are less and less people willing to travel to venue
just for playing slot machine. Instead young and middle age people play them online or in
bed room with personal computers. Slot machine appeared to be the gambling equipment
for old/retired generation only. The threat appears to be very high in this aspect.
Challenges that Aristocrat is facing
Based on author’s research the company as well as the entire gaming industry is facing
enormous challenges. We see similar disruption pattern that happened with IT industry in
60s. New technology started as disruption force and eventually replaces the old
technology became mainstream.
6. 5 | P a g e
5Aristocrat Global Business Strategy
Gaming industry slowly but firmly transfers from slot machines, card tables to computer
based interactive games. Nintendo started virtual reality gaming revolution followed by
Sony PlayStation and Microsoft Xbox. These days’ people even can play games on their
smart phone or tablets which giving player great flexibility of how to play and where to
play. Industry analysts believe the global mobile gaming revenue has excessed 21 Billion
in 2014 (Newzeroo.com, 2014).
With several IT giant companies on the list of top ten gaming companies, it is not hard
for us to see the new direction that the gaming industry is heading to.
In 2006, a small group engineers and developers bring Wii’s motion sensitive based
gaming device to the market. It has fundamentally shaken the gaming industry. Followed
by Sony PlayStation and Microsoft Xbox, smart domestic gaming device has created a
new segment in gaming industry.
In Australia the demand of old (slot) gaming machine is expected to continue to decline
in next five years due to pressure by anti-gambling lobby groups and the possibility to
impose mandatory limit of personal loss (Flores, N., 2015).
Generation Y has complete different expectations of gaming industry. The new
generation of gaming player much more sophisticate and highly demand. These days
game need to be interactive, evolve, flexible, social and even high tech (such as leverage
recent development in motion sensitive, 3D display and virtual reality technology).
China will overtake US as world biggest game market next year which will be worth over
25Billion. Since slot machine is banned and gambling is illegal in China (mainland), this
figure represent gaming revenue mainly come from on line gaming. Ranked as world
number one by gaming revenues Tencent communications reported 40% year-on-year
growth. It has took 10% of world gaming market respectively (Newzeroo.com, 2015).
There are some industry disruptors which have the potential to change the landscape of
gaming industry.
We all remember that the invention of PC has completely changed IT industry landscape
and nearly push the IT giant IBM out of market. The digital photography has pushed
Kodak out of market and 3D printing will soon change many industry landscapes.
Situation Analysis of Aristocrat
In the article of “U.S. Regional Gaming Weakness to Persist” published by Fitch
Reading, US regional gaming revenues “will decline to roughly 75% of total revenue by
2030” The shift largely reflects the generation Y gambling preference. (Paladino et al.
2014). Aristocrat has 53.5% of total revenue come from US region. The trend of this
shifting is not a good sign.
7. 6 | P a g e
6Aristocrat Global Business Strategy
In Australia, the gaming machine industry average growth ratios is -2.05% (in 2014). In
the same year, Aristocrat managed to growth its total revenue 6.1% in Australia but
EBITDA was -38.5% and NPAT -115.3 % (IBISWORLD.COM.AU, 2015)Leisure
Limited). Australia market is the second largest revenue source of Aristocrat. Above
alarming figures should ring the bell.
In 2012 the company increased its revenue in Japan by 370% (Aristocrat Leisure Limited
Business Review 2012). However in 2014, it has net loss of $7.8 million which caused by
Japan introduced new regulatory of the environment. The headache not just stop there,
the regulator has signaled further changes on its way which will be introduced in 2016
(Aristocrat Leisure Limited Annual Report 2014).
Overall Japan is a conservative society so do its government. Gambling never has a good
image in the society and often related with organized crime by general public opinion.
Highly unlikely this situation will be changed in the near future.
The temporary casino business booming in Macau and Hong Kong last decade did
brought increasing orders of slot machine in South East Asia region. However the
massive increase gamblers population and flood of cash from mainland China were
highly related with corruptions in each level of its public servant force. However, the
camping of China massive corruption crackdown initiated by its President-Xi Jinping
(Miller, 2015) will definitely bring this temporary booming to its end.
Macau gaming revenues dropped 23 % worth on its record in Oct 2014 (Master, 2015).
There is a pattern that gaming revenues has positive relationship with disposable income
of the region. With army of middle class in China and their disposable income increase
year by year (refer following diagram). More than 75% of China’s urban consumers will
earn $9,000 to $34,000 a year by 2022, according to a research by McKinsey (Farrell, D.,
et al. 2006). The higher percentage of the middle class in the population at large will
translate into higher disposable income. It will be a strategic mistake if the gaming
company not able to find its way to tap in to this huge potential market. However, this is
the market for innovative players not for old slot gaming machine manufacture.
Gambling is illegal in China and it will not be changed regardless which government they
will have.
8. 7 | P a g e
7Aristocrat Global Business Strategy
Recommended Strategy for Aristocrat
Based on my extensive research in this subject, I believe that Aristocrat Leisured Limited
need to consider a strategic transformation from its current business model (importing
spare parts from Asia and assembling in Australia then ship them to the rest of the world)
to a complete new business model. The key of the success transformation is innovation.
Innovated is the Key of Transformation
The author believes that there is a very good chance for slot gaming manufacture to
transform itself to an innovative cross product manufacture. I had this idea when
exercising on a walking machine.
What if someone turns this boring console in to an interactive touch screen which
incorporates distance, speed, calories burned on the machine into an interactive screen
that simulating a virtual walking track (i.e. at blue mountain or somewhere else) that
incorporating with actual environment
(such as elevation changes) over there. The user
will feel much more engaged rather than
staring at the boring console all the time
during course of exercise. The new interactive
walking machine will have a wireless
connectivity with Internet. It can also
incorporate with actual weather conduction
over there. Furthermore it can
communicate with other user(s) of walking machine around world and have peer to peer
computation. This approach can also be implemented on a bike machine and even a
rowing machine. Imagine if we replace the boring console of bike machine with Tour de
France track information and interactive display that transfer the distance and speed of
the machine in to an equivalent of where the user (of the machine) could be as if he or
9. 8 | P a g e
8Aristocrat Global Business Strategy
she rides the bike on the track of the tour. Since it is connected via wireless network the
interactive screen also can display targeted advertisements (for sports services and
products, etc.). This will create a potential revenue stream for gyms and health clubs.
Gym business is booming in China with annualized growth of 15.6% from 2009 to 2014
(http://www.ibisworld.com/industry/china/gym-health-fitness-clubs.html).
This approach also transformed current gambling products of Aristocrat to a pure
recreation products which should have no regulation concern with ether Chinese
government and Japanese government. This breakthrough innovation will transform the
slot machine business forever.
My recommendation is Aristocrat should continue its slot machine assembling business
for next several years in order to accumulate enough wealth to fund this strategic
transition.
The company needs to establish a strategic relationship with gym equipment
manufacturer(s) in East Asia region and start R&D process. This is a fundamental change
and it will not be easy for some of the people of the organization. However it has to be
done in order for the company to have long term prospect.
References
Aristocrat Leisure Limited Annual Report 2014, pp.17
Flores, N., 2015, Gaming and Vending Machines Manufacturing in Australia, IBISworld.
pp. 4-6.
Farrell, D., Gersch, U. A., & Stephenson, E. 2006, ‘The value of China’s emerging
middle class’, McKinsey & Company.
Hemens, A., 2015, ‘21873 Global Business Strategies’,UTS Business School, pp. 10.
IBISWorld Company Report, 2014, Aristocrat Leisure Limited Premium Report, Balance
Date: 30 September 2014.
IBISWorld. 2014, Gym, Health & Fitness Clubs in China: Market Research Report.
IBISWorld.com.
Master, F., 2014, UPDATE 2-Macau Oct gaming revenues fall 23 pct, drop worst on
record. reuters.com, http://www.reuters.com/article/2014/11/04/macau-gambling-
revenue-idUSL4N0SU22120141104.
Miller, M., 2015, China's Massive Corruption Crackdown Is Even Going After State-
Owned Firms, Business Insider Australia.<http://www.businessinsider.com.au/r-
chinas-graft-busters-target-state-owned-firms-ahead-of-reform-2015-1>
10. 9 | P a g e
9Aristocrat Global Business Strategy
Newzeroo gaming market research, The Games Industry Disrupted: 10 Key Moments
Towards 2017, http://www.newzoo.com/insights/games-industry-disrupted-10-key-
moments-towards-2017/
Paladino, M., Bumazhny, A., & Geressy-Nilsen, K., 2014, U.S. Regional Gaming
Weakness to Persist, fitchratings.com.
PricewaterhouseCoopers, 2012, ‘Aristocrat Leisure Limited Business Review 2012’.
Team, T., 2014, Comcast To Build A $3.3 Billion Theme Park In Beijing, Forbes.com.
http://www.forbes.com/sites/greatspeculations/2014/10/24/comcast-to-build-a-3-3-
billion-theme-park-in-beijing/