Now, I am going to talk about future market trends and industry

structures
Before we begin, The Asian casino market is at an early stage while
American market is at maturity. And as Lynn said earlier, it is a completely
supply-driven market. Therefore, Greater supply can bolster the domestic
casino market growth and many Asian countries are aggressively building
casinos. But Among Asian countries, Korean market is very attractive for
several reasons.
1) Macau (Our main substitute) is pulling down and its effect on Korea
Xi Jinpings ongoing anti-corruption drive has deterred government officials
and individuals from state-owned enterprises from visiting Macau, and this
campaign will remain until end of XI JINPINGS PRESIDENCY IN 2022. Of
course, Korean will not be entirely immune from the negative fallout of the
ant-corruption campaign in China, but we expect the magnitude of the
negative impact to be limited because of 4 following reasons.
First, Koreans VIP customer base is equivalent to Macaus mass to premium
mess segment
Also, Koreans target customers are mostly located in Chinas northern
territories that have low gaming penetration compared to Macaus target of
the southern region
Also, structural growth of Chinese travels to Korea, and Governments
favorable policy stance and plans to foster the tourism market makes
campaigns magnitude limited.
2) Capacity expansion continues until 2020
Secondly, first physical expansion of gaming floor area of the Korean
foreign-only casinos will likely drive visitation and drop growth. Some
estimates in 2015-2017, GKL and paradise combined table growth should see
13% of growth. Also, four additional Integrated CasinoResorts are slated to
be opened in Incheon and Jeju island, along with table expansion at Paradise
city in 2020. Capacity expansion also happened in Kangwon land, even
though it raises the question like Will greater casino access for Korean
nationals generate earning momentum? : the answer turned out to be yes as
you can see in the graph.
3) Structural growth of Chinese travels to Korea
Simply, more Chinese people visit Korea, as you see the graph, Number of
Chinese visitors to Korea via Incheon airport is increasing, and if you look at
the other graph, the number of Chinese passengers increases faster than the
growth of Chinese GDP. And as you can see those graphs, structural growth
of Chinese tourists directly goes into the growth of Chiense casino
customers.
4)
Key marketing regions within China for the Korean casinos include Beijing,
Tianjin, Lioning, Shandong and Shanghai. These regions are within two hours
by flight and are closer to Korea than Macau. Koreas foreigner-only casino
within Chinas key marketing cities is currently low at 0.5%. However,

Looking at Macaus key marketing area, Guangdong, the penetration rate for
Macau reached 8.4% in 2014. Therefore, if Koreas penetration rate in its key
marketing areas in China reaches half that of Macaus the Korean gaming
market could grow much further.
5) Governments favorable policies two new plans were unveiled by the
government in Jan 2015; 1) it passed the bill to allow the establishment of
cruise casinos; and 2) introduced an economic stimulus package allowing for
two more IRs by end-2015 through a competitive bidding process.
Forecast:
Threat of new entrant, it will be higher than current situation. Because the
Korean government has a favorable policy towards building integrated casino
resorts. As I mentioned earlier, the Korean government recently passed the
bill to allow the establishment of cruise casinos and they will also introduce
three IRs in Youngjongdo and Jeju.
Competitive Rivalry
-Even though Korean casinos are expanding their capabilities through
mergers and acquisition, as I mentioned earlier there will be at least 5 more
casinos in addition to the 17 current ones by 2020. Therefore, the threat of
competitive rivalry will same as the current situation that Lynn laid out
earlier.
Threat of substitutes:
Our biggest substitute are the casinos in Macau, but because of the situation
in Macau mentioned earlier regarding Chinas anti-corruption policy, it
becomes the biggest influence in terms of lowering our threat of substitute.
Threat of substitute will become moderate instead of staying high thanks to
Macaus influence.
Overall, we believe that Korean casino industry will be more attractive for the
incumbents.
But every firms implementing mentioned strategies are not top performers.
Some companies can earn profits, while others dont. So what makes the
difference? this question is related how companies effectively make use of
their competitive advantage consistent with their resources and capabilities .
Our top performer: Kangwon land has exclusive right to allow Korean
customers to participate in gambling. That means it has strong resources to
protect their market shares considering that Korean casino market is
vulnerable to external factors. However, expanded their capabilities too
much by merger and acquisition, so DEA analysis shows that their use of
resources arent efficient compared to its main competitor GKL. Also,
although Landing casino is at lowest rank, but they will improve their
strategy by expanding capabilities a lot.