The Other Kind of Gamer

MGM Mirage (MGM) is another great example of a company that is constantly finding ways to expand its customer base. When people consider MGM, they often think of the downtown Las Vegas strip, slot machines, neon signs and dealers waiting to take your money. MGM Mirage does very well in its dealings in Las Vegas and other casino resorts across the nation, but recently, MGM has made some moves that will give the company a new image, and help them to recognize profits in sectors that are so far untapped.

For instance, the company took steps to create non-gaming resorts so that consumers who want all the entertainment and the luxury of the MGM Mirage resort - but don’t want the gambling scene - could still be served. In other words, MGM Chief Executive Officer J. Terrence Lanni has realized that the MGM brand conveys an image and a value that transcends nickel slots, poker chips and a scotch on the rocks to take the edge off.

As Money Morning reported last year, most of these non-gambling facilities are being set up overseas, with a focus on markets in China. So not only does this provide classy places for wealthy Chinese consumers (and visiting business executives) to party, relax or even catch 40 winks, it also enables MGM to profit from China’s torrid growth. Increasingly, China’s emerging middle class is becoming very brand-conscious, and that holds true for their growing tourism forays: Consumers want the opportunity to stay in name-brand hotels and resorts. And MGM wants to make that happen; the result is that the company is going to dazzle them - with real neon lights.

The bottom line: MGM has become a high-profit play on China. And many other markets, too. It’s not just a gaming company anymore.

Mastering Bite-Sized Bids

Some companies aren’t mastering “small bids;” they’re mastering microscopic ones.

Global titan Yum! Brands Inc. (YUM) knows the importance of ultra-frequent, ultra-miniature deals. While the companies mentioned above are seeking out million-dollar contracts, Yum’s Taco Bell subsidiary is discovering ways to make hundreds of thousands of people say, “I’ll take the burrito supreme” - every day.

Yum’s latest focus? China, of course! The company is seeing a rising share of its profits coming from overseas in general, but the People’s Republic of China is developing into a frontrunner for sales growth. This comes as no surprise to us here at Money Morning. With all of the money flowing in, through and all around China lately and the looming Beijing Summer Olympics attracting attention from all corners of the globe, companies that depend upon disposable income are storming through the markets.

With full knowledge of this, Yum! has been adjusting to capture many more miniature bids. In 2007, Yum’s operating profit in China increased 30%.With only the KFC franchise alone they are expecting to have 3,000 stores in China by the end of the year.

Another company that is turning these micro-bids into huge profits is PepsiCo Inc. (PEP), - also a great example of a company that is recognizing its global potential. PepsiCo’s first-quarter profits were up 5% due to international growth, which left the company with a hefty net income of $1.15 billion.

In a quarter that was riddled with rough days in the U.S. economy, PepsiCo managed its way around the U.S. consumer malaise by capitalizing on overseas growth. Sales volumes were particularly strong in China, South Africa, the Middle East and India, while the Americas fared rather poorly, volumes falling slightly.

Companies like PepsiCo know where to focus their marketing when the time is right. Having a global presence during a downturn in its native U.S. market is an example of shrewd diversification.

And that makes PepsiCo - you guessed it - another Master of the Small Bid.

History shows that companies in this category generate consistent returns no matter how tough the markets get. And by moving forward at all times, these firms are positioned to really outperform their peers when the economy returns to normal.

And return to normal it will - when everyone least expects it.

Source: Investing View: Why Small Contracts Can Lead to Big Profits During Turbulent Times

Pages: 1 2

Pages: 1 2