MGM Case Study: International Risk and Strategic Alliances

MGM CASE STUDY- international risk and strategic alliances
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The MGM Resort International case study looks into the organization’s history, strategic decisions as well as performance, before and after the financial crisis. The gaming and hospitality industry was thought to be recession proof, but MGM reported losses from 2008 to 2010, with the net losses increasing form $ 855.3 million to $ 1.47 billion (Hitt, Ireland & Hoskisson, 2013). The industry is capital intensive, while MGM is highly leveraged further putting a strain on the company’s ability to improve the financial well being. Besides the economic environment, the company undertook projects that proved costly to the company. For instance the company sold the Atlantic City Project for lower costs, while other hotel and casino development costs ballooned after the 2008/2009 economic downturn. Nonetheless, the company’s operations in the Chinese territory of Macau have improved and MGM should focus on an international strategy to remain competitive.
According to Hitt, Ireland and Hoskisson (2013) MGM needs to reevaluate its identity and take advantage of the opportunities available while integrating new strategies in the competitive Resort and Casino industry. As MGM faltered, other competitors increased their market share in gaming and hospitality. The group’s cash flow is dependent on resort revenue that increases the cash flows, but with the challenges in future development there is a challenge to expand o other areas of operations. Adapting the group’s strategies should then be considered including developing the workforce, with employees who are forward looking. The drivers of growth at MGM will be other locations outside the Las Vegas areas, including the international market.
The strategic choices of MGM dependent on the economic environment since external factors affect the hospitality industry players, but their ability to remain competitive depends on the strategies. The industry’s growth slowed down after the global recession, as there were fewer travelers and visitors to casinos and entertainment joints, where MGM has interest (Hitt, Ireland & Hoskisson, 2013). On the other hand, the gaming industry fared better as were Asian properties, and this diversification has been crucial to reducing risk and exposure to changing business patterns in the U.S. Additionally, increased demand for the properties in the Las Vegas strip will likely improve the group’ financial strength as the housing market rebounds.
Focusing on the industry environment affects the firm’s strategic actions, since MGM is better placed to influence the competitive forces to achieve strategic competitiveness in the internal areas of operations. The case for expanding internationally is that the firm primarily relied on revenue from the Las Vegas Strip, and there is greater risk of the gaming industry slowing down in the region (Hitt, Ireland & Hoskisson, 2013). Since the firm has international brands expanding into non-gaming areas would also provid...