Introduction
Genting Singapore is an international hospitality company that deals with integrated resort development and gaming (Genting 2017). Specifically, the company builds integrated resorts and runs casinos as its core business. It also consults for the hospitality industry businesses and investments in the area of sales and marketing support. Besides, it offers information technology services such as software development, systems integration and maintenance among others. Its markets of operation include Singapore, Malaysia, Philippines, the Bahamas, Australia and the UK. The company that began as Genting International was first listed on the Singapore Securities exchange in 2005. It acquired the Stanley Leisure in 2006 and won the bid to construct the Resorts World Sentosa in the same year. The company has floated several convertible bonds that have been concerted to stocks. It entered the Korean market in 2014 but sold off its interest in the Jeju project in 2016 to concentrate in the local market.
Political Factors
Singapore enjoys a democratic government in which the people elect the representativesevery six years although bureaucrats mostly govern the country. The People’s Action Party has ruled the small nation since its independence from Malaysia in 1965 and it given it a high political stability that was 1.23 in 2014 (Global Economy 2014). Successive governments embrace the values of meritocracy, skills development, performance and loyalty. The small indigenous population means that the government is very tolerant of immigrants and it is estimated that they will make up 50% of the population by 2030 (BBC 202016). It is also very tolerant of religion and Buddhism, Islam, Christianity and atheism coexist peacefully. State-owned companies dominate the economy although they are run very efficiently and corruption is minimal. Singapore is very attractive to business and maintains the eleventh position worldwide and fourth position in Asia.
Economic Factors
Singapore has a very vibrant economy based on trade as its mainstay. It scored third in world competitiveness in 2015 according to IMD, the Swiss business school (Weizhen 2015). The cost of living, labor shortages declines in productivity and income inequality are the major economic problems facing the country. Labor shortage is triggering a lot of immigration of workers, which might itself become a problem in future. In 2016, there was a drop in the hospitality industry with reports indicating that hotel occupancy dropped by 2% in December, a situation that has been prevalent in recent years due to a glut in supply of hotels, a weak corporate demand and a reduction in tourism (Today Online 2017). The fall in tourism is attributed to lack of events to attract visitors (Hotel News 2017). The poor performance of the commodities and finance sector led to the poor corporate demand. The government launched a Transformation Plan for the hotel industry in November 2016 to reverse the trend (Tan 2016)
Social Factors
The native Singaporean population has very strong family ties found in all oriental countries. The younger generation however, has a growing taste for Western life that is unpopular with the older generation. These values are likely to suffer with increased immigration of foreigners. With encouragement from the government that operates with meritocracy and punishes corruption harshly, all embrace the value of hard work. The small area of the country and lack of agricultural land forces the population to involve itself in business and entrepreneurship form a young age. Primary education is compulsory in the country and most citizens speak English or Mandarin. These two languages are the commonest in South East Asia and are a major driver of trade. An educated population offers Genting an assurance of workforce currently and in future. Changing consumer tastes will also force the company to redesign its products to accommodate Western tastes. Gambling, one of the key business areas of Genting, enjoys a cultural following in the country, making the integrated resort business sustainable in the foreseeable future (Tulshyan 2010).
Technological Factors
Singapore is a highly developed economy in technology. There is high internet connectivity that eases communication and social networking. The road infrastructure is well-established and electricity connection is almost 100%. Housing is developed to the extent of surplus in the commercial sector as most citizens have their own homes. For the hotel industry, housing, electricity, transport and communication is very vital. The government owned Changri Airport is a gateway to the port city-state by air. Government services are increasingly available on the electronic platform, making the establishment of business in the country very easy. This will encourage more investors and tourists to establish in Singapore and provide custom to Genting. The advent of online gambling finds Genting Singapore in a competitive position due to the highly developed internet infrastructure.
Environmental Factors
Singapore is a city-state with most of its population living in urban areas. The urbanized nation has a major problem of air pollution due to its developed industrial sector and had one of the highest levels of carbon dioxide (Venkat and Watts 2016). Water is a problem and the little available is highly polluted. The country has to import water supplied by Malaysia and purified by local companies. Industrial air and water pollution led to the loss of 30% of Singapore’s mangrove ecology, endangering many rare species of flora and fauna. This is very important as the country has a natural rainforest with many species that attract tourists. The Ministry of Environment and Anti-Pollution has spelt a raft of measures to minimize and reverse the menace. Pollution is a problem to foreign companies that wish to invest in the country if their home countries have laws that require them to engage in green business only.
Legal Factors
Singapore is a member of the United Nations and a signatory of the international treaties and statutes that govern international trade. These international laws are therefore localized. The constitution protects the ownership of property and intellectual rights, a major factor that will attract foreigners and the locals to invest in Genting’s public listings and bonds. The national culture that shuns corruption gives room to the judiciary to offer justice to litigants and opens space for more investment. Proposed legal regulations on gambling will affect Genting’s revenue (Mesina 2012).
Porter’s Five Forces
Porter’s Five Forces is a theory and tool that gauges a business’ competitiveness in a market. The tool utilizes competitive rivalry, supplier power, buyer power, threat of substitutes and threat of new entrants to assess the competitiveness of a firm.
Competitive Rivalry: Medium
The number and capability of competitors in the market is a major factor in determining a firm’s competitive edge. First, as a market, Singapore faces stiff competitive rivalry from Indonesia, the traditional tourist destination for Asian travelers, especially China. The Singapore Toruist Board must continue making agreements with its largest trading partner of China to continue attracting its people to Singapore. So far, the many agreements signed with China led to a surge in tourist arrivals in the first half of 2016. However, a surge in hotel space from new openings in the same period led to a fall in average room rates in the country. New luxury hotels that opened in 2016 include the Styles Singapore, Oasia Downtown and the Holiday Inn Express Katong (Smalani 2016). The number is expected to rise in 2017. Fortunately, the situation affects the whole industry and the luxury secxtor of Genting is least hit.
Supplier Power: High
Suppliers have a high power when they are few and when they supply critical raw materials. The chief supplier of the Genting Singapore is the government. The government makes the rules and regulations for operating hotels, theme parks and gambling. Through the Singapore Tourist Board, the government enters agreements with the tourist sources of China and other Asian countries (Vasagar 2016). It is these agreements and other regulations that determine whether tourists will go to Singapore or not. The government also determines the tax regime for the businesses of Genting. The decision on visas for various nationalities lies with the government. There is no alternative to government regulation therefore making the government the sole supplier for Genting. Genting has no option but to abide by all the government policies to stay in business.
Customer Power: Medium
Genting’s customers range from individuals to corporates using its facilities for conferences. The individual customer has little to no power to change the way Genting runs its business. However, the power of social media and the large following it has in Singapore and the world in general can make this seemingly powerless individual very significant. Hence, despite the relatively little income individuals bring to Genting, it would be prudent for it to treat them well in their transactions. Corporations bring a lot of business and they have some power over Genting. Government corporations in particular have a high bargaining chip given that mistreating one can lead to loss of business from the government as a whole (Lim 2016).
Threat of New Entrants: Medium
The political stability and overall attractiveness of Singapore as a business destination makes it appealing to many potential competitors (Weizhen 2015). The free market economy of the country makes it easier for competitors to enter the market. However, the extreme luxury segment of Genting requires a huge capital outlay for any player to enter the market. The recent forecasts of a decline in earnings for the hotel industry due to high competition also discourage other competitors with less capital. These small investors desire to recoup their investments in a shorter time and the current market outlook does not favor them. In the short term, Genting may enjoy fewer competitors in the luxury niche. This scenario may not last for long if the government draws policies that will encourage growth in the sector, especially in encouraging foreign tourism into the country. Another approach could be to increase local productivity that could bring down the cost of living and spare the citizens more disposable income.
Threat of Substitute Products: Medium
Substitute products are products that serve the same purpose as player’s products. Genting offers luxury accommodation and gaming facilities for tourists. Substitute products can arise with the emergence of competitors in the luxury sector of the tourism industry. The threat of new entrants is directly related to the threat of new competitors and existence of competitors (Magretta 2012). The number of competitors for the luxury market is still low but the number of resorts expected to open in 2017 could pose as a threat. The decline in current earnings from room occupancy indicates presence of substitute that is taking away potential earnings from Genting. Future survival affects all the competitors equally and those who will not be able to cope will exit the market.
Recommendations
Cost leadership
A cost leadership strategy is one in which the firm minimizes its cost and sells at the market price (Enz 2010). This strategy would require that Genting Singapore identify cost centers that can make good candidates for reduction. An example could the use of cheaper but effective technology in the construction of new outlets. This would reduce its initial capital outlay for putting up new resorts. The company could also source its workforce from cheaper sources in the neighboring countries such as China and Indonesia. Automation of services within the resorts may involve high initial outlays but it can reduce costs significantly in the long term. The firm could take advantage of the technology advancements in the country and in China and Japan to source for robots that could take over the duties of many workers to reduce labor costs. This strategy is subject to existing regulations on labor.
Market Share
The company can strategize to increase its market share to survive. A larger market share can be attained by reducing the prices of its products in comparison to its competitors, aggressive marketing campaigns and a diversification of products (Ireland, Hoskinsson and Hitt 2012). A reduction in product pricing can attract customers who wish to consume exotic products but do not want to pay the exorbitant prices associated with them. Care must be taken in this approach because lower prices are usually associated with inferior quality. Genting must ensure that it communicates that the product remains of superior quality although they are charging less than the competition.
Differentiation
Differentiation is the strategy of making a firm’s products unique and different from those of the competitors (Schermerhorn 2010). It is a strategy that requires extensive research and aggressive marketing. In most cases, it also calls for additional costs that may neutralize the gains sought if not carefully executed. Genting’s products are already differentiated as luxury and to make them different from those of competitors may be very expensive. However, with innovation, it is possible to devise unique product offering for the segment.
Focus
A focus strategy is similar to the differentiation strategy except that it targets a specific market instead of making the product unique (Hill and Jones 2010). However, in targeting a segment, the product must reflect the needs of that niche. Genting could target fewer customers in the celebrity level to charge high prices for its products. This strategy requires the application of other strategies such as cost leadership and differentiation for successful implementation (Scheele 2014).
Conclusion
This is a comprehensive analysis of the Genting Singapore. The PESTLE analysis enables one to evaluate the environmental, political, social, and economic factors in relation to how they impact the business. Clearly, the company is known to be a multinational company operating in nations such as Singapore, the Unite Kingdom, and Philippines among other nations. The analyses in this case are primarily base on the factors affecting Genting operations in Singapore. The research also gives a series of recommendations on how the company can ensure its growth and expansion in Singapore.
References
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