Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
Chapter 2
Implementing Strategy: The Value Chain, the Balanced
Scorecard, and the Strategy Map
Teaching Notes for Cases
2-1. Atlantic City Casino: Value Chain Analysis; The Balanced Scorecard
Most cases in value chain analysis are in the retailing or manufacturing industries. This case gives
an opportunity to develop a value chain for a service firm and to see the differences in application in that
context. The point is to show the students that the value chain concept has useful application in both
contexts.
Some useful background information regarding the actual case situation is provided below. This
information can be used to enhance the discussion when needed. A good starting point of the discussion is
to have the students describe the competitive environment of Atlantic City gambling casinos, at which
time, much of the following information may emerge. If not, the information can be supplied during the
discussion, or if desired it can be added to the case material given to the students to prepare.
Background Information:
Customer surveys indicated that a vast majority of the visitors to Atlantic City gambling casinos
are middle-age adults who live within 150 miles of Atlantic City. Further, there are 2 distinct groups of
visitors. Approximately 17 percent of the visitors are frequent visitors, averaging 24 visits per year and
accounting for 67 percent of all visits. The remaining 83 percent of the clientele are infrequent visitors
averaging 2 to 3 visits per year and accounting for 33 percent of total visits. The firm found that
approximately 11 percent of the people living within a 150 mile radius visit Atlantic City annually. This
compares with 14 percent of the people living in Las Vegas’ primary marketing area who visit Las Vegas
annually. Thus it appears that future market expansion is possible.
The firm also noted that there has been a change in the mix of mode of transportation for visitors.
Initially 92 percent of all visitors arrived by private car, now 44 percent arrive by bus. This change is
significant as there is a difference in spending patterns. Auto travelers tend to spend a couple of days in
the city. Hence they eat more meals and need lodging. Bus travelers are usually day trippers who come
only to gamble. They do not need lodging and generally only eat lunch, some snacks and beverages.
Casino winnings average $37 per visit for bus travelers and $120 per visit for auto travelers.
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Education.
1. The value chain for the Atlantic City Casino (ACC) follows, both with and without the theme park. The
class discussion of strategy will likely have a number of divergent views. Many will say ACC competes
on differentiation, thinking that gambling is not a “cost-sensitive” business. However, I push the class to
look carefully about what brings a customer into one casino rather than another. Some students will say
that gamblers only want access to gambling, and that service and other enhancements (as in a
differentiation strategy) will not be important. They will also point to the fact that the case says the ACC
has “no distinguishing characteristics.” On balance, most students argue that what brings customers into a
casino is the “pizzaz” and excitement generated by the casino, and they observe that most casinos have a
Looking at the steps in the value chain, one can target possibilities for cost reduction and/or value
enhancement. For example, a close look at steps two and three in the chain can help to study and identify
the most effective forms of advertising and promotiontypes of advertising for example which are more
targeted to the types of customer and the mode of transportation they use to come to the casino.
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Education.
Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
STEPS IN
THE VALUE
CHAIN
ACTIVITIES AT
EACH STEP IN THE
VALUE CHAIN:
WITHOUT THEME
PARK
ACTIVITIES AT EACH
STEP IN THE VALUE
CHAIN: WITH THEME
PARK
DIFFERENCE ;
STRATEGIC ISSUES
Step 1: Obtain
the right to
compete: federal
and local laws
and ordinances
Licenses, fees, and other
activities and reports to
support compliance
Licenses, fees, and other
activities and reports to
support compliance
Little difference: potentially
some additional compliance
required for new services for
children; baby-sitting, etc.
Step 2:
Advertising and
promotion
Advertising focused on
traditional media locations;
mostly local, and targeted to
specific audiences – those
living within 150 miles, and
are middle aged or older
Advertising and promotion
focused on a younger
audience, those with kids,
promotions for families (kids
stay free etc…)
Probably little difference in
the amount of advertising and
promotion, though the nature
of the advertising will differ.
Will younger adults be
attracted to the casino as older
be same as without the theme
park, with more children
around, security will need to
be increased
worry about safety?
Step 5: Hotel
Operations
Traditional coverage and
security
While the coverage of the
hotel operations is likely to be
same as without the theme
park, with more children
around, security will need to
be increased. Also there will
be a demand for new services:
baby-sitting, activities for
New mix of services;
increased need for security?
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Education.
Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2. The value chain analysis above, and in particular the right-hand column comparing the options and
indicating strategic issues can be used to help understand the strategic issues in the choice facing Atlantic
City Casinos. Perhaps noting the increase in the number of visitors coming by bus (and not staying
overnight), casino management is looking for ways to attract a different audience who will also use the
hotel. If the theme park is successful, it will provide the needed new audienceparents with children who
The benefit of the value chain for management analysis is that it helps to show how the theme
park will affect current operations “upstream” of the casino, i.e., the effect on transportation patterns and
the like.
In addition to the value chain analysis, an analysis can be done on the data in the tables in the
case. Exhibit 1 illustrates an example of a type of data analysis. Note that Atlantic City Casino is currently
near the median of the 10 casinos on all the reported descriptors (note also that the data for Casino #9 is
only part year and should be either ignored are extrapolated). In contrast, Casino #6 is clearly the
differentiator, with higher prices, less space, and higher operating costs. Also, least squares regressions on
beverages). Also, note that ACC is among the highest hotel revenue per room and casino revenue per
square foot. This suggests that it is more upscale than some of the other casinos. This is a plus for the
environment of security desired for families, but then the price might be too high for families.
Exhibit 1
Casino Room
Casino Number of Net Revenue Revenue
Sq Ft Rooms Restaurants Casino Rooms
Beverage
Income per Sq ft per Rm
ACC 50,850 521 7 220,183 14,862 36,833 23,921 4.3300492 28.52591
1 59,857 727 9 254,753 17,604 36,457 40,979 4.2560269 24.2145
2 59,296 645 9 224,077 14,836 34,493 18,834 3.7789564 23.0015
3 59,439 512 9 237,700 15,787 35,168 47,146 3.9990579 30.83398
4 49,639 501 14 158,602 9,897 18,788 1,574 3.1951087 19.75449
5 52,083 750 7 210,848 13,870 35,265 64,765 4.0483075 18.49333
Revenues
Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
3. Four areas of the balanced scorecard, and potential critical success factors:
a. Financial Performance: hotel revenue per room, casino revenue per visitor, trend in earnings
by month, trend in revenues (casino, hotel, food services) by month,
b. Customers: survey of customer satisfactions, number of visitors per month relative to other
casinos, number and nature of customer compliments and complaints, changes in customer
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Education.
2-2. Sovera Enterprises: Strategic Analysis
1. At least four general characteristics that differentiate the three Sovera Enterprises subsidiaries include:
Growth potential
Profitability
Discretionary cash flow
2. The likely effects of these three strategies on the behavior of the top and middle management of each of
the three businesses include the following:
LaBue Videodiscs:
Top management will be challenged to develop a moderately priced unit and to capture market share
Middle managers will view the strategy of developing the corporation’s future officers in the
videodisc subsidiary as limiting their careers.
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Education.
2-3. Recreational Products, Inc.: Strategy; International
1. A class discussion of competitive strategy is likely to take many directions. The important thing is to
develop a productive discussion, and to make sure that each idea is well supported, and not to insist on a
2. The Singapore plan will work as long as the differentiation strategy can be achievedhigh quality
production and innovative features. Would the Singapore location be an advantage in achieving quality
3. Some of the key international issues are noted in the case. There are differences in taxes, and Singapore
offers the advantage of a tax holiday (how many years?) and a subsidized loan. Other issues to consider
are the stability of the Singapore dollar relative to the United States dollar. In recent years the Singapore
dollar has been appreciating relative to the US dollar, which has both advantages and disadvantages. As
1. What is meant by sustainability? What measures are included in a sustainability report?
The article states that “Sustainability reporting includes economic, environmental, and social
2. How many companies issued sustainability reports in 2005? Cite your source for this information.
About 1,500 as reported by the Association of Chartered Certified Accountants, London, England.
3. Are sustainability goals important to shareholders of public companies? Why or why not?
4. How can sustainability be included within the balances scorecard? Base your answer on the Global
Reporting Initiative (GRI) reporting guidelines and its three categories of indicators:
economic indicators
environmental indicators
