Harvard Case - MGM Resorts International: Responsibility versus Profitability
"MGM Resorts International: Responsibility versus Profitability" Harvard business case study is written by Won Yong Oh, Jinsuh Tark. It deals with the challenges in the field of General Management. The case study is 12 page(s) long and it was first published on : Oct 18, 2021
At Fern Fort University, we recommend MGM Resorts International (MGM) adopt a multifaceted approach to balancing profitability with its commitment to corporate social responsibility (CSR). This strategy involves a comprehensive framework encompassing strategic planning, operational efficiency, and innovative initiatives that prioritize environmental sustainability, community engagement, and employee well-being while ensuring long-term financial success.
2. Background
MGM Resorts International is a leading global gaming and entertainment company with a diverse portfolio of properties across the United States and internationally. The case study focuses on the company's struggle to balance its commitment to social responsibility with its pursuit of profitability. The company faces pressure from various stakeholders, including investors, employees, and local communities, who demand ethical and sustainable business practices.
The main protagonists in the case are:
- Jim Murren: Former CEO of MGM Resorts International, who championed CSR initiatives.
- MGM Board of Directors: Responsible for overseeing the company's strategic direction and financial performance.
- Investors: Seeking strong financial returns and responsible investment practices.
- Employees: Expecting fair treatment, safe working conditions, and opportunities for growth.
- Local Communities: Concerned about the impact of MGM's operations on the environment and social fabric.
3. Analysis of the Case Study
To understand MGM's situation, we can analyze the case using the following frameworks:
a. Porter's Five Forces: This framework helps assess the competitive landscape and identify opportunities and threats. The gaming industry is characterized by:* High Threat of New Entrants: Due to high barriers to entry, including capital investment and regulatory hurdles.* Moderate Bargaining Power of Buyers: Customers have limited options, but online gaming and alternative entertainment present some competition.* Moderate Bargaining Power of Suppliers: MGM relies on various suppliers, including gaming equipment manufacturers and entertainment providers.* High Threat of Substitutes: Online gaming, sports betting, and other entertainment options pose a threat.* Moderate Rivalry Among Existing Competitors: The industry is dominated by a few major players, leading to intense competition for market share.
b. SWOT Analysis: This framework helps identify internal strengths and weaknesses, and external opportunities and threats.
Strengths:
- Strong brand recognition and reputation
- Diversified portfolio of properties
- Strong financial performance
- Experienced management team
- Commitment to CSR initiatives
Weaknesses:
- High operating costs
- Dependence on gambling revenue
- Regulatory scrutiny
- Potential for negative publicity
Opportunities:
- Expanding into new markets
- Developing new gaming and entertainment experiences
- Leveraging technology to enhance customer experience
- Increasing focus on CSR initiatives
Threats:
- Economic downturn
- Increased competition
- Regulatory changes
- Negative public perception
c. Balanced Scorecard: This framework provides a comprehensive view of MGM's performance across different perspectives:
- Financial Perspective: Revenue growth, profitability, shareholder value
- Customer Perspective: Customer satisfaction, loyalty, brand perception
- Internal Processes Perspective: Operational efficiency, innovation, quality
- Learning and Growth Perspective: Employee engagement, talent development, corporate social responsibility
4. Recommendations
MGM should implement a comprehensive strategy to balance profitability with its commitment to CSR. This strategy should include the following key initiatives:
a. Strategic Planning:
- Define a clear CSR strategy: Develop a comprehensive framework outlining MGM's commitment to social responsibility, aligning with its core values and business goals.
- Integrate CSR into business decisions: Embed CSR considerations into all aspects of business operations, from investment decisions to product development.
- Set measurable targets: Establish specific, measurable, achievable, relevant, and time-bound (SMART) goals for CSR performance.
b. Operational Efficiency:
- Optimize resource allocation: Allocate resources efficiently to support both profitability and CSR initiatives.
- Embrace technology and analytics: Leverage data-driven decision making to improve operational efficiency and identify opportunities for sustainability improvements.
- Implement lean management principles: Streamline processes and reduce waste to enhance cost-effectiveness and environmental sustainability.
c. Innovation and Sustainability:
- Develop sustainable business practices: Invest in renewable energy sources, reduce water consumption, and minimize waste generation.
- Promote responsible gaming: Implement measures to prevent problem gambling and promote responsible gaming practices.
- Embrace digital transformation: Leverage technology to enhance customer experience, streamline operations, and improve sustainability.
d. Community Engagement:
- Invest in local communities: Support community development initiatives, provide educational opportunities, and create jobs.
- Build strong relationships with stakeholders: Engage with local communities, employees, and investors to address concerns and build trust.
- Promote diversity and inclusion: Create a welcoming and inclusive workplace that values diversity and celebrates differences.
e. Employee Well-being:
- Promote employee health and safety: Provide a safe and healthy work environment, offer wellness programs, and promote work-life balance.
- Invest in employee development: Offer training and development opportunities to enhance employee skills and career growth.
- Foster a culture of respect and inclusion: Create a workplace where employees feel valued, respected, and empowered.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with MGM's core competencies in hospitality, entertainment, and gaming, while also supporting its mission of creating memorable experiences for its guests.
- External customers and internal clients: The recommendations address the needs of external customers, employees, and local communities, ensuring a positive impact on all stakeholders.
- Competitors: The recommendations aim to differentiate MGM from its competitors by showcasing its commitment to CSR and sustainability, attracting customers and investors who value these principles.
- Attractiveness: The recommendations are expected to enhance MGM's financial performance by increasing operational efficiency, attracting new customers, and improving employee engagement.
6. Conclusion
By implementing these recommendations, MGM Resorts International can achieve a balance between profitability and social responsibility. This approach will not only enhance the company's financial performance but also strengthen its brand reputation, attract investors, and create a positive impact on its stakeholders.
7. Discussion
Alternative approaches to balancing profitability and CSR include:
- Prioritizing profitability over CSR: This approach may lead to short-term gains but could damage MGM's reputation and alienate stakeholders.
- Focusing solely on CSR: This approach could limit MGM's financial performance and make it difficult to compete in a highly competitive industry.
The recommendations presented in this case study solution offer a balanced approach that considers both financial and social considerations. However, it is important to note that the success of these recommendations depends on various factors, including the company's commitment to implementation, the support of key stakeholders, and the changing external environment.
8. Next Steps
To implement these recommendations, MGM should:
- Establish a dedicated CSR team: Create a team responsible for developing and executing the CSR strategy.
- Develop a comprehensive CSR reporting framework: Establish a system for tracking and reporting on CSR performance metrics.
- Communicate the CSR strategy to stakeholders: Share the company's commitment to CSR with employees, investors, and the public.
- Continuously evaluate and adapt the strategy: Regularly assess the effectiveness of the CSR strategy and make adjustments as needed.
By taking these steps, MGM can effectively balance profitability with its commitment to corporate social responsibility, creating a sustainable and ethical business model that benefits all stakeholders.
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Case Description
MGM Resorts International (MGM), a global hospitality and entertainment company operating in various locations, including Las Vegas, faced a choice between profitability and responsibility. The company needed to attract as many customers to its casinos as possible to increase its profits from gambling. However, MGM had also been advancing an image of an ethical corporation by promoting its responsible gambling program, which was meant to discourage overspending on gaming activities. Should MGM choose to profit by attracting more customers who are willing to spend money at its casinos, or should it profile its image as an ethical company and promote its responsible gambling program? Was there a way to do both?
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