Gambling on the edge of china WYNN Macau Gambling on the edge of china Tue Tran Soraya Feizpour Alex Huynh Chris Coloma Long Hoang Hung Nguyen

Background Created in September 2006 600 hotel rooms 205,000 sq. ft. gaming area 26,000 sq. ft. retail 22,000 sq. ft. convention space Further space expansion in December 2007 Encore at Wynn Macau created in April 2010 414 hotel rooms

____________________ Economic Environment Tourism dropped during recession Visitor Volume down 3.7% Gaming Revenue down 7.7% ____________________ Asia Gambling Market= positive growth 2009 to 2011 increased $20,000+ in GDP per capita

GAMBLING MARKET in ASIA

____________________ INTERNAL ANALYSIS Moderately Strong financial condition Growing Net Revenue 2006 to 2007 up $1,255,262 ____________________ Decreasing Return on Assets 2006 to 2007 down 9.5%

Current Price on Hong Kong Stock Exchange: $26.25 5-YEAR STOCK TREND Current Price on Hong Kong Stock Exchange: $26.25

INDUSTRY VIEW PORTER’S 5 FORCES RIVALRY AMONG COMPETITORS - HIGH Many competitors already established Rivals offer similar product High exit cost THREAT OF ENTRY- LOW High capital & resources required License required PORTER’S 5 FORCES

INDUSTRY VIEW PORTER’S 5 FORCES THREAT OF SUBTITUTES- HIGH Many other casinos Lottery Other non-gaming entertainment BARGAINING POWER OF BUYER- MODERATE Hotel rooms, food, other entertainment services BARGAINING POWER OF SUPPLIER- VARIES Gaming equipment Services & Employment PORTER’S 5 FORCES

INSTITUTION View THEY HELP… Institutional forces heavily influence Macau casinos Beijing gave birth to Macau’s rapid rise Macau monopoly- gambling illegal in the rest of China Chinese economy grows fastest in the world  wealthy people w/ money to spare Informal institution: high demand for gambling

INSTITUTION View BUT HURT… China limits cash takeout per person, per trip Big gamblers need to borrow money in Macau Gambling debts not enforceable in mainland China  intermediaries known as junkets

INSTITUTION View JUNKET PROBLEMS Expensive  take up to 75% gambling revenue Linked to Organized Crimes  occasional battles for territory Not Transparent  investigated by government for money laundering Build Relationships w/ Gamblers that Casinos Can’t  may compete w/ casinos later Casinos Still Need Them for VIP Guests!

INSTITUTION View BAD STREAK FOR MACAU Chinese economy slows down Beijing cracks down on corruption Long-term reduction in gambling revenue Macau placed cap on # of gambling tables allowed Aimed at reducing gambling-based revenue

INSTITUTION View WYNN MANEUVERS Closely watched by US Authorities under Foreign Corrupt Practices Act Young entrant in the gambling market More regulatory layers Hesitant to employ junkets Now reliant on junkets to pull VIP customers

INSTITUTION View CORRUPTION OR “GREASE” Wynn granted land rights to $4 billion project in Cotai, 2012 Included payment of $50 million to local company co-owned by: Edmund Ho, close associate of former Macau top official Prominent family in Beijing No accusations of wrongdoing from US authorities Still under investigation by Macau anti- corruption

RESOURCE View

RESOURCE View VRIO FRAMEWORK Value Imitability Organization Key Competitive VRIO Advantages Value Luxury products & services that come second to none Imitability Retention of high-end customers w/ world class service Organization Well-established reputable company backed by Steve Wynn

INTERNATIONALIZING Asian culture’s favorable view & Chinese government’s harsh restriction on gambling  huge obstacle for expansion High demand for sport event outcomes  public attention & government restrains sport gambling market entrance Expand traditional casino gambling  avoid shortage of labor & competition

INTERNATIONALIZING

Recommendations Concentrate on developing non-gaming services Drop in gambling revenue China track down corruption, decrease in VIP Customers Establishment of Encore Macau Marketing Towards Middle-Class Chinese Chinese has fastest growing middle class

Recommendations 3. Training Program for Employees Macau staff is relatively new & inexperienced Need proper training Maintain brand image & top quality 4. Special Training Program for Board Members Complete reliance on Steve Wynn

SUMMARY Background, Economic Environment, & Internal Analysis Industry-Based View Institution-Based View Resource-Based View Internationalizing Recommendations