MANAGING FINANCIAL PRINCIPLES & TECHNIQUES

Managing Financial Principles & Techniques



International Game Technology (IGT)

Company Overview

International Game Technology (IGT) is one of the leading companies in gaming equipment designing and manufacturing industry. International Game Technology is listed in New York stock exchange and achieved listing in Standard & Poor's 500 index in the year 2001. IGT has global operations in North America, Europe, Latin America Africa, Middle East, and Asia Pacific regions. IGT design and markets computerized gaming equipment, systems, and offers related services. The IGT has divided its business operations in two geographic divisions: North America division, and international division. The company has operating centers in Argentina, Mexico, Australia/New Zealand, Netherlands, China, Singapore, Japan, South Africa, Macau, and UK. IGT distributes its gaming equipment under the brand names IGT DynamiX, Wheel of Fortune, Jokers Wild, Megabucks, and Star Wars (IGT, 2010a). Major competitors of International Game Technology include Bally Technologies, WMS Industries, PokerTek, Multimedia Games Inc., and Aristocrat Leisure Limited (Data Monitor, 2011).

The overall PC market continued to recover from the recession in the second half of 2010, even though major challenges still remained. The IT gaming industry grew rapidly globally, providing a platform for the development and provision of software services throughout the world. Software companies in Canada and North America remained in demand as software development activity picked up in all consumer segments. IT services spending is forecast to total around US$20.1 billion in 2011, up from US$19 billion in 2010, and the market is likely to exceed US$24 billion by 2015 (Data Monitor, 2011). One demand driver will be organizations looking for help to utilize efficiencies from cloud computer gaming.

In 2010, the company spent more than $200.1 million on product development, compared with domestic rivals WMS and Bally Technologies, which spent $105.9 million and $80.3 million, respectively (IGT, 2010b). IGT has myriad patents, insulating the company from competition. Currently the company owns or licenses more than 5,000 patents and holds more than 3,100 trademarks (Data Monitor, 2011).

Cost concepts to the decision-making process

2.1 Importance of costs in the pricing strategy of an organization

Price is a function of supply and demand. Notice the phrase “cost” doesn't happen there. It is factual that cost is, over the long period, a smaller compelled for price - else you'd proceed out of business. It is furthermore factual that high upfront repaired charges can conceive obstacles to application and thus smaller supply. The only case in which price is very resolute by (variable) charges is in a commoditized market. A market is commoditized when competing products are competently interchangeable and thus clients make conclusions founded solely on price. In commoditized markets, price tends to converge in the direction of cost.

2.2 Costing system for use within an organization

We will use Activity-based costing (ABC) for use in this organization. Under this system, there is no change in the short-run because these costs are correlated with supplying the capacity essential to carry out the manufacturing operations, marketing operations, or administration. They consist of facility-level costs such as depreciation, ...