Introduction
Strategic management is increasingly becoming important in the modern business world with increasingly changing business landscape as businesses face globalization and growing competition. In that respect, this analysis seeks to demonstrate the process of developing suitable strategies to address such aspects like competition, market environment in consideration of a business position as well as its capabilities. To achieve that, the analysis uses the case of Trump Taj Mahal whose market and industry is analyzed for the trends as well as competition with use of Porters five forces. Further, the analysis identifies the brands’ competitors and their strategies as well as provides a value chain analysis of the business. The analysis then formulates three corporate strategies that the business can use to address the situation and finally describes the implementation of the best alternative.
Body
Trump Taj Mahal is a limited liability company in New Jersey and a subsidiary that is 100% owned by the Trump Entertainment Resorts Holdings which is a Delaware Limited partnership in turn owned by Trump entertainments Resorts Inc. It owns and operates a convention center complex and a casino as well as the Trump Taj Mahal Casino Resort. Thus its operations are basically entertainment, casino operations, and beverages as well as foods sales. (Triump, 2012)
- Market analysis/Situation analysis
A business’ operations are usually subject to the market environment that is defined by several factors and their trends including technical, economical, social-cultural, political and demographic. These factors to a greater extent define the future of a business as it determines its opportunities as well as threats. US have the most technologically advanced and powerful as well as the largest economy globally. However, there have been some trends that shape the business environment hence determining the businesses suitable target markets. For Trump Taj Mahal, the following trends define its environment and future.
- Technical trends
- There is increasing technological advance that is resulting to increased use of social media and other more effective communication platforms shaping businesses operations and promotional abilities
- Technological advance is also providing more innovative ways of doing things as well as innovative products and services. (Trump, 2013)
- Demographic trends
US is experiencing a population growth of 0.9% ranked position 124 globally by the 2012 statistics with 40% of the population being aged between 25 and 54 years. This indicates an increasing youthful generation population which marks a suitable target market. (CIA, 2013)
- Economic trends
The slowdown in the US economy growth, has had a significant effect on the hospitality and entertainment industry negatively affection the business operations. This has resulted from various factors that dampened the sectors performance. Other economic factors include inflation, exchange rate fluctuations, employment whose trend greatly determines suitability of the business’ services and products to various target segments
- Inflation
With an increasing inflation as consumer prices have been rising, the economy experiences a decline in the consumers’ purchasing power hence dampening business performance from reduced demand. This leaves the business to concentrate on the high end income segment as a suitable target market
- Unemployment and income level
The country also experiences decreasing unemployment with a n example of the decline from the 2011 unemployment rate of 95 to the 2012 rate of 8.2%. This makes an increasing income level and disposable income in the market hence a suitable segment that the business can target. (CIA, 2013)
- Exchange rate
The economy has been marked by an increasing volatility of the US dollar due to the economic condition in the country hence weakening the currency against some major currencies like the pound, euro, Canadian dollar as well as the Japanese yen. This has an implication on the international customers who patronize the business as tourists or regular customers. The weak us dollar provides the international clients a higher purchasing power hence increasing their demand for the US hospitality industry. (CIA, 2013)
- Political-legal trends
- The industry is facing increasing regulation mostly in the casino and gaming operations hence a need for the businesses to adapt to the stipulated standards and practices. Some of the regulations that are imposed by the political systems define some aspects like the age requirements for access to some services and products like casino gaming as well as the alcoholic products. Therefore this defines some demographics of the target markets that a business can serve. . (Kotler & Armstrong, 2004)
- Socio-Cultural trends
- The ethical concerns in the society define business acceptability depending on its services. Thus the increasing acceptance of Casino business in the society shapes the market view of the business hence its demand.
- Health concerns over the products that clients gets from the foods and beverages businesses calls for businesses to deliver more healthier products addressing those needs.
- Preferences and tastes as well as lifestyles changes in a trend that determines demand in the entertainment and hospitality industry hence defining the suitable market segment. The industry customers are shifting more to the businesses that have more online integrated systems and platforms
- Global trends
- The increase in common markets defines the competition landscape with businesses having more ease in accessing other markets where establishing their operations is becoming easier.
- Emerging markets also provides opportunities for businesses to focus on new markets that can provide niche markets for their products and services. (Kotler & Armstrong, 2004)
- Industry analysis: Porter five forces
An industry’s nature and its competitiveness highly determine a business’s performance and sustainability. This is due to the competitive nature that is defined by several factors which can be classified into five porter forces to understand the market. In that respect, the industry in which Trump Taj Mahal operates can be defined by the following factors. (Porter, 1980)
- Existing rivalry
- The market is marked by great rivalry between the existing competitors who have significant market share. The major competitors in Atlantic City include Ballys and Revel.
- There is an increase in both online offline competition hence making the industry very competitive
- Advertisement expense by the existing businesses has been increasing as promotion becomes one of the key competitive tools
- The businesses in the industry also compete with their flexibility through variety, customization and volume of their products and services. (Trump, 2012)
- New entrants
- The industry has higher sunk costs which makes exit in the market very expensive hence only attracting only the long-run committed businesses
- Capital requirements also serve to keep away competition from new entrants.
- Economies of differentiation is also a key aspect that keeps away competition from the new entrants since the products and services enjoys advanced differentiation that is difficult to match for new entrants.
- Existing businesses in the industry also enjoys significant brand equity that tend to keep away new entry competition
- Substitutes
- The industry has very differentiated products hence a little competition from the substitutes.
- Switching cost for customers between the business products and services are high with the industry application of customer retention strategies such as loyalty programs which makes it expensive for customers to switch to substitutes
- However, the nature of the services having elastic demand in respect to prices makes the demand more volatile hence a need to have stable and suitable pricing (Porter, 1980)
- Suppliers bargaining power
- The industry has a high supplier’s competition due to higher number of suppliers which gives the businesses more bargaining power over suppliers hence ability to access inputs at fair pricing.
- There is little in the inputs differentiation hence the businesses have a variety of choice hence a relatively higher bargaining power
- Suppliers switching costs are low for the businesses hence ability to switch to the suppliers who effectively met their needs which translates to higher bargaining power for them
- The ability of the businesses to establish strategic networks with suppliers offers them a competitive advantage over competitors. (Trump, 2013)
- Buyers bargaining power
- There is a high substitutes availability in the market hence buyers have a high bargaining power over the businesses.
- Buyers concentration relative to businesses is high hence a high demand that translalates to a significant bargaining power for the businesses
- Buyers switching costs is higher with the industry, application of loyalty programs like loyalty points and discounts.
- There is a high price sensitivity in the industry hence the businesses having a relatively lower bargaining power compared to customers. (Porter, 1980)
- Competitors analysis
Competitors’ power in the market and their ability to maintain significant market share is defined by various aspects including their strategies, mission, intent as well as capabilities. In Atlantic City, the Taj Mahal’s major competitors can be described as follows
Bally’s: Is a brand owned by Caesars and one that is focused on creating value to customers and developing loyalty through a combination of excellent products and great service, technological leadership as well as the using unsurpassed distribution operations. To achieve this the business employs strategies that seek to build loyalty with all stakeholders including employees, suppliers and other partners in a operations that are that is technology driven, geographically diversified and service oriented. (Caesars, 2013)
Revel: The brand provides a great destination in Atlantic City for uncommon recreation. With casino and restaurants operations in which they seek to deliver unique experience to their clients. The business enjoys great capabilities and resources including huge casino centers as well as spas, retail shops, night clubs and pools and guest rooms. The business main strategy is diversification where customers get a great variety of choice from their services and products. (Revel, 2013)
- Internal analysis: Value Chain analysis
The business’ value chain is analyzed by evaluating its capabilities in terms of technology, infrastructure, human resource as well as procurement against its operations, marketing and service delivery. In the analysis strengths are shown in green while weaknesses are shown in red.
(Trump, 2013)
- External analysis: SWOT analysis
A business’ operations are usually subject to both internal and external factors where it has control over the internal factors which defines its strengths and weaknesses while a business has no control over external factors which defines its opportunities as well as threats. In that respect Taj Mahal’s strengths, weaknesses, opportunities as well as threats are identified by application of the SWOT model as follows. (Porter, 1980)
- Strengths
- The business has a well known brand that enhances its competitiveness
- Trump Taj Mahal has adequate resources and capabilities to compete in the markets including skilled manpower and strategic assets
- Differentiation of the business products and services offers an competitive advantage
- Weaknesses
- The business is a subsidiary of the Trump entertainments hence having a vertical organization structure that is challenging in decision making due to the intensive consultation and authorization that have to be sought even when market changes needs prompt changes.
- Opportunities
- Changing lifestyles presents opportunities for the business to develop new products and services to serve them
- Customer concerns over the health concerns of the food products provides opportunities for providing new brands that suits their needs
- Growing income and employment levels in the economy provides an opportunity with increasing demand
- Technological advance presents opportunities for developing new products as well as developing more effective operations like promotions through online platforms.
- Threats
- Increasing inflation reduces the customers purchasing power hence posing a threat to demand for the business products and services
- Exchange rate fluctuations present a threat by the implication of making the business services expensive to the international customers.
- Increasing regulation in the industry threatens some of the business operations like the Casino gaming which is currently facing increased regulation
- Environmental concerns and regulations is increasingly calling for adoption of more environmental friendly sourcing of raw materials as well as operations which have increasing cost implications on the business (Kotler & Armstrong, 2004)
- Strategies formulation
A business’ corporate strategies define the direction of the organization as a whole by establishing the strategic coordination between all the business organs and functions towards attainment of the organization’s objectives. In respect to Taj Mahal and the identified market environment, the corporate strategies alternatives that can be applied are as described below.
- Alternative one: Diversification
Diversification strategy would entail establishment of new products and service lines in order to enhance competitiveness in face of the increasing industry competition.
Advantages
- It would promote the businesses’ resources optimization
- It would enhance growth through new markets captures
Disadvantages
- The strategy needs more resources in order to implement
Could result to less focus on key operations (Fred, 2011)
- Alternative two: Differentiation
Differentiation strategy would entail developing new features in the business’ brands that seeks to offer unique value as compared to the competitors goods and services. The strategy is appropriate in attracting niche markets that seeks specific value in the services and goods hence being a key strategy in enhancing competitiveness.
Advantages
- Isa crucial source of competitive advantage
- It provides an opportunity to charge premium prices in the market where buyers have a significant bargaining power.
Disadvantages
- It is expensive as it requires research and development of the new differentiated features
Requires expertise more and innovation for implementation. (Fred, 2011)
- Alternative three: Vertical integration
Vertical integration strategy can be suitable for the business due to the synergy it provides to the operations hence efficiency and an ability to quickly respond to market changes and needs and it would entail integrating operational departments and functions.
Advantages
- There is development of concentration of effort
- It provides functional synergy
- Promotes cooperation in pursuit of the businesses, common goal.
Disadvantages
- There is could be lack of cooperation between the departments and different functions hence negatively affecting operations.
(Fred, 2011)
- Strategiy implementation action items and plan
In consideration of the Trump Taj Hamal’s position in the market, the industry trends as well as its capabilities, the most suitable corporate strategy to adopt is diversification. This is due to the increased new markets segments like the youthful generation that is popular with the new technological systems of e-commerce and social media. The segment is also becoming significant with US having 40% of its population aged between 25 and 54 and having increasing employment level. Further, there are emerging lifestyles and needs that can be served to enhance the business sustainability and performance. (Kotler & Armstrong, 2004)
Action items
Implementation of the strategy would require some changes that includes
- Structural changes would involve establishing new departments and functions that would be responsible for the new products and services, operations as the new service lines would require new skills set as well as operation systems.
- Leadership changes would be required in order to have new management teams to oversee the new operation lines. This would mean an addition of the leadership and management staff and well as sourcing for skilled staff to head the teams. Further, the new establishment would require a more consultative leadership in order to enhance smooth introduction of the new service lines in the market with a consideration of wider views from all the stakeholders
- In order to ensure commitment with the strategy’s pursuit, the business would require providing incentives in terms of promotions as well as bonus payments for great performance and incentives.
- Controls in implementation program will involve both formal and informal. The formal controls will entail audits and output assessment in order to establish the extent of the operations success and the required changes or enforcements. On the other hand, informal controls will take the form of the employees actions that reflect suitable standards and the business culture in ensuring that the business achieves its objectives. (Kotler & Armstrong, 2004)
Action plan
The implementation actions, timeframe, budget and responsible departments are summarized in the table below.
- Timeframe and budget
Therefore, the strategy will be implemented through establishment of the a new product line whose process will begin on January 2014 and end with the launch on September 2014 and which will require a budget of $637,000. (Fred, 2011)
Conclusion
The analysis demonstrates Trump Taj Mahal as one of the leading businesses in the hospitality and entertainment industry in New Jersey and one that is subject to various aspects that define the industry environment and trends. In addition, the industry has through the porter five forces been shown as very competitive hence a need to development suitable strategies to address competition. Finally, in consideration of the market environment and the businesses position, the analysis has identified diversification as the most suitable strategy that the business should apply in addressing the rising competition and capture the benefits of serving new young generation target segment that is being defined by the industry trends.
References
Caesars. (2013). Company Information. Retrieved from,
http://www.caesars.com/corporate/index.html
CIA. (2013). World Fact book: US. Retrieved from,
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
Fred, R. D. (2011). (13th Ed.). Strategic Management: Concepts and Cases. New Jersey
Prentice Hall. ISBN-13: 978-0-13-612098-8
Kotler, P. & Armstrong, G. (2004). Principles of Marketing. London: Prentice Hall.
Porter, M. (1980). Competitive strategy: Techniques for analyzing industry and competitors.
New York: Free press .
Revel. (2013). About Revel. Retrieved from, http://www.revelresorts.com/about/about-revel
Trump Taj Mahal. (2013). Company: About us.
http://www.trumpcasinos.com/onecardmicro/index.cfm
Trump Taj Mahal. (2012). Quarterly Report. Retrieved from,
http://www.nj.gov/lps/ge/docs/Financials/QuarterlyFinRpt2012/TajMahal2ndqtr2012.pdf
