1 Case Study: The Desert Palms Hotel & Casino (Your Name Here) February 10, 2008 Name of School Name of Class Name of Professor 2 Robert Hoffman was a retired 55 year-old man. He was approached by the CEO of National Gaming, Inc. in an attempt to take over the Laughlin property. The Laughlin property had fundamental issues, and Hoffman believed that much change was needed there. There had not been any significant changes to the property in over 6 years. Also, the casino made nearly $15 million in 1995, but in 2001 in only made $1 million. In order to remedy the situation, Hoffman decided to reduce property staffing by 20%. Basically he repositioned people from areas in which were overcrowded to areas that need further assistance. Hoffman also paid close attention to the operational aspects of the casino. He wanted to increase speed, service, and overall efficiency at the casino, and he did via benchmarking. He incorporated ideas from other profitable casinos such as repositioning service areas and formats to decrease wait times and improve customer satisfaction. Hoffman also paid attention to the organizational hierarchy. He got eliminated two levels of management which he deemed unnecessary. In addition, he reduced marketing and advertising expenses, and as a result, after only 3 months of his reorganization efforts, property expenses were down an astonishing 40%! Hoffman decided to instill a new plan for the casino. This plan consisted of three phases. The first phase was to include additional amenities. By having additional amenities, the casino would be able to compete more with their competition. Phase two consisted of the implementation of new games. He introduced the only 25 cent crap game that was available in the area. He also lowered the limits of the blackjack tables. Hoffman also reduced prices of other amenities and brought in new entertainment. In 3 order to do all of this he had to reduce the advertising budget. However, he was able to compensate for this by implementing an aggressive marketing campaign. Hoffman’s effect ton the casino was so positive, that one of the biggest concerns now was the lack of room for their customers. The casino was simply too busy. He noticed that the casino that neighbored Desert Palms (Regency) was going out of business. He thought this would be a wonderful opportunity to purchase it in order to expand Desert Palms. He thought a water park should be placed there and was confident that it would bring in huge revenues. Hoffman’s next obstacle was to convince Michael Sharp and Steve Sodergraf of his idea. In order to convince Michael Sharp and Steve Sodergraf of his idea, Hoffman would have to prove to them that the idea would generate profit for them. He would have to “sell” them the idea. He would have to convince them that this long-term investment would pay off, and that it would be worthwhile. He would have to remind them of their competition, and stress the fact that the changes that he had made so far were attempts to separate themselves from their competition – they were attempts to become the market leader in the casino industry – and it paid off. This idea, the idea of purchasing the Regency would also be one of those attempts and it would surely pay off as well. The best way to sell an idea to someone is to present the facts with data (Mintzberg, 2005). A market analysis is crucial in order to justify any severe actions of making a large purchase such as the Regency. A risk analysis would also be appropriate in this situation. The quote that Hoffman received from the National 4 Gaming development offices for building the water park within the Regency square footage was around $10 million. Hoffman would have to come up with some intriguing data in order for Michael Sharp and Steve Sodergraf to agree to his proposal. According to Hoffman’s research (which we will assume is based on real statistics), the park would attract over 30,000 customers on an annual basis. Out of those 30,000 customers, 50% of them (15,000) would be staying in the hotel. In addition, out of those 30,000 customers, 25% of them (7,500) would be new customers. This would certainly bring in new customers, additional game-play, and increase overall revenue. The costs involved in this would be substantial at first. Hoffman would be able to build his park for $11,500,000. There are also many risks that come along with this price-tag. These risks involve how the stakeholders feel about the initiative and the consequences of the initiative were to fail (Traverso, 2000). If this initiative failed, it could have detrimental effects on the entire company and its employees and stakeholders. The market analysis that Hoffman conducted showed that most people who are 40 and older opposed the idea. Even though a water park would attract younger people, the majority of people who come to such a destination are older. The addition of younger people and greater occupancy would be a deterrent for older casino players. The younger people that were polled were very into the idea, however. This, however, does not play such a big factor or carry significant weight since according to Table 3, the Desert Palms’ customers’ median age is 57. Since this is the case, it is fair to 5 assume that a majority of Desert Palms’ customers would not be in agreement with this proposal. The question now becomes if it is worth making a majority the customers unhappy in an attempt to gain additional revenue (Kearney, 2001). Even though new customers will be attracted to the casino, the idea of current customers leaving the casino was never considered. Before a quality decision is made, this question would surely need to be addressed through both qualitative and quantitative research. Effective risk mitigation strategies and strategic decisions need to be made “in order to improve the quality of [this] strategic decision” (Mintzberg, 2005). If effective risk mitigation strategies are put into place, then the “strategic decisions can be taken with more assurance” (Traverso, 2000). In our case, Hoffman is pursuing his strategic decisions in an efficient manner and entrusting augmented efforts that are protected by effective risk mitigation strategies. This strategic decision making structure will enhance the decision making capability of Michael Sharp and Steve Sodergraf by clearly identifying the objectives, framework and guidelines within which the decision to purchase the regency Casino can be made. This strategic decision making framework will also give them a clear idea of the impact of the decision on the overall strategy of the organization. Likewise, in the deficiency of such cost-related data, their strategic decision will most-likely fail since they can go all-in with their spending without focusing on bottom line efficiency (Mintzberg, 2005). . 6 Works Cited Kearney, A. (2001). Total quality management: a business process perspective. Kearney Pree Inc. Mintzberg, H. (2005). The Strategy Process, Prentice-Hall, Harlow. Traverso, D. (2000). Outsmarting Goliath, Bloomberg Press, Princeton.