Strategy–Two vital elements in the formation of an international strategic vision are the availability and selection of qualified personnel and the timeframe the company has estimated to obtain positive results from the new international venture. Although these points may seem obvious, the most common reason for failure in new international ventures is due to a company trying to enter a market at the lowest cost, based on a qualitative positive reading of the market, and then finding they never allocated the time and budgetary resources required to overcome the initial “bumps in the road” of any international venture.
The international expansion of any company doesn’t solely mean investing in to a few trips and phone calls or the establishment of a new entity in that market. To achieve success the company needs to develop strategies and take actions similar to those actions taken in its domestic market—a thorough market analysis, site location study, research on competitors, and review of the tactics implemented by leaders in the market. We also need to be cognizant that equipment will probably have to be sent on a permanent basis in the early stages of the venture and that undoubtedly a few other short-term economic challenges will arise.
Personnel –One of the errors committed by a Russian operator trying to expand into Latin America was poor selection of personnel, both at the local general manager level as well as with the executives responsible for the overall international expansion. As with other failed international endeavors, the company selected personnel with high political profiles. Unfortunately these individuals usually have their own agenda and in this example invested the company’s resources in non-essential assets.
There are also personnel errors made in selecting the expatriate team that will be operating the business day-to-day in a completely new country, both for them individually and for the company. One of the most common errors is to send very young, inexperienced executives; placing a priority on the cost of the executive, rather than emphasizing the adaptability and maturity of the team that will make or break the business.
Country –If you come from a country with a highly-regulated and protective market, as is the case in most European and U.S. markets, it will always be a challenge to adapt to Latin American where the rules are not as clear and there is more of a spirit of flexibility. Also keep in mind that in some markets, such as Colombia and Peru, the barriers to entry are low, so competition pops up continuously.
Simply put, a casino in Mexico, Colombia, Peru, Panama or the Dominican Republic cannot be operated in the same manner as one in Mississippi, Nevada, New Jersey or any of the European markets. Operators must realize that the security measures, both internal and external, need to be adapted to the market. This includes physical security as well as strict vigilance of possible fraud taking place within the casino on the slots and at the tables.
Size –As part of any sound international expansion strategy, the size and cash flow capacity of a property being acquired or built in an overseas market needs to be carefully considered. It doesn’t make sense to test any of the Latin American markets with a 30-machine or less slot parlor. The initial investment in personnel, location setup, communications, travel, hotels and taxes will be too large to squeeze out profitability in the near term. Also, a small casino by definition has less variety and ability to compete with larger, better-equipped properties.
Property size is a key element for evaluation and needs to be high on the priority list to ensure realistic financial projections.
Structure –The organizational structures, of both the company headquarters as well as of the team in the destination marketplace, cannot be rigid and static. The structure must be flexible so as to adapt to the size and growth of the business.
One prestigious Spanish operator structured its Mexico casino subsidiary to report to the bingo division at headquarters and the results were less than satisfactory. Although Mexican law refers to gaming establishments as “bingo halls,” the reality is that the gaming centers are casinos and therefore the management and operation of the business is far different than a bingo hall.
Similarly, at the company’s headquarters, there has to be sufficient priority given to the international expansion to attain success. If the international responsibilities are just an additional assignment to an already overloaded line executive, it will never work; the partners in the new international market are not going to accept delays in decision making due to corporate executives who do not view the far off market as a priority.
Product —As obvious as it may seem, to be successful in the development of an international casino expansion, it is essential to do an in-depth study to determine the mix of services and equipment should be offered. Decisions such as which technological platform will be most efficient based on the local gaming regulations and details such as table and jackpot size limits, must be carefully considered.
In some Latin American markets, a decision needs to be made as to whether a TITO system is practical. In Nicaragua for example, the regulations do not require a TITO system, nor is it really profitable to have one. Nonetheless, it is imperative to have one because the poor paper quality of the local currency gives the operators with a TITO system a large advantage.
If a company is specialized in route operations, it makes sense to contract the services of experts in casino operations. Likewise, if a company is specialized in land-based casino operations and it wants to initiate an online casino presence, it is essential to turn to eGaming experts. With this in mind, our advice for companies looking to expand internationally is to establish a new startup operation in a market where its core competencies are viable; otherwise it is best to acquire an existing operation which will allow for time to adapt to the new market.