Gambling Business

The following structure/framework provides an overview of the case:

Information that should be shared with the interviewee: 

• There are currently no casinos in Kingsville. There are competing casinos in Royal City, but they are not relevant as the market is saturated and mature.
• Royal city has 25% taxes on revenues while Kingsville has 50%.

This is a rather simple question, which should lead the interview to the conclusion that he/she has to evaluate the impact of an own casino on the company’s revenues compared to a competitor’s one.

Main conclusion

Do nothing. Open an own casino in Kingsville.

Information that should be shared with the interviewee:

• Poker Inc. revenues are $1 B.
• Revenues are generated mainly by customers from 4 cities:
  • Royal City
  • Kingsville
  • Banktown
  • Westpark
• There are no casinos in Banktown and Westpark due to government regulations.
• Banktown and Westpark are about 5hrs driving time away from Kingsville and 3hr away from Royal City.
• Kingsville is about 1hr away from Royal City.
• The customer base is 1.5 million per year.

After some analysis by the candidate share this information: 

• Gamblers: only want to gamble and care mostly about convenience. They will prefer the new and closer casino in Kingsville - 100% conversion
• Vacationers: want to get away from their everyday life and stay for a weekend or a week. Therefore they would not choose the Kingsville casino - 0% conversion
• Experiencers: want to live the casino experience (shows, lights, etc.) and show interest in the casino itself. Experiencers may want to go somewhere else - 50% conversion
• As customers from Banktown and Westpark have to drive very far to Kingsville, they will still prefer Royal City.

Main conclusion

A competitor’s casino will reduce the overall revenues by $112.5 m. If Poker Inc. builds own casino, it will reduce its own revenues by $28.13 m due to higher taxes.

Main conclusions

Poker Inc. should build a new casino in Kingsville. The opening will only affect customers in Kingsville and the different segments will react differently. This should be assessed in more detail. There are although some risks associated with it. For instance could a competitor be first to open a casino and therefore get the 1st mover advantage or there could be high costs of construction/operation of the new casino.