CIRQUE DU SOLEILCASE ANALYSISCotrugli Business School – MBATeam 6:Nino BenetaSrećko ButoracSven Stjepan NovakJadranka ŠarićSanja ŠijanecMargarita Zlatkova
CIRQUE DU SOLEIL FACTSHEET PAST PRESENT (2001) o 100% owned by Laliberte (bought Gautier’s half in 1987)o Founding Year 1984 o Lalibertè refusing to go public,o Founded by group of street performers reasoning that it would constrain Cirque’s creative freedomo Montreal based o Montreal based (had tried witho Managed equally by two owners: three regional divisions, NA, Europe, Guy Lalibertè (Creative) Asia) Daniel Gautier (business and finance) o 2.100 employees, over 500 artists, over 40 nationalities and over 25o 73 employees spoken languageso Touring 1 show at a time, initial 3 years o 8 simultaneous Cirque productions only in Canada running on 4 continentso On average 270.000 spectators per year o 6 million spectators in 2001
PRODUCT “We’re not a product company, we’re an artistic works company” – Mario D’Amico – Executive VP Marketingo Circus combining street performers, clowns, acrobats and gymnasts (no animals). Latin sounding music that transcends cultural boundaries and top scale production and lighting.o Price targeting upper middle class families (Avg. North American ticket price @ 55 $)o Diversified commercial activity towards multimedia, publishing and merchandising.o 1998 Cirque opened it’s 1st merchandise store in Wald Disney Resort in Floridao 1999 Cirque du Soleil Images released it’s 1st film “Alegria”o 2003 planning to open entertainment complex in Montreal
SWOT STRENGTH WEAKNESSESo innovative, unique show o high overheads and management costso diversified product portfolio – movies, o sole owner and decision maker TV shows, merchandise o a business model that could be easilyo flexible working force, devoted artists copiedo established brand name o a lot injuries that need to be preventedo well organized logistic o high staff turnover OPPORTUNITIES THREATSo expand to larger number of cities o real competition that could enter theo diversification of the product portfolio market which could fit to different audiences o to become too commercial and loose itso increase number of impermanent spirit location based shows o overdependence on the existing owner o economic downturn will lead to customers choosing lower cost substitutes
PORTER’S FIVE ANALYSISThreat of substitute products-HIGH Barriers to Entry – LOWConventional circus-animals,clowns,etcLow cost substitutes-movies,TV, internet Low to moderate entry barriersOther substitutes-theatres,concerts, cinema Low to moderate costs of equipmentIn economic downturn customers-choose low Moderate initial employee costscost entertainmentBargaining Power of Customers – VERY Bargaining Power of Suppliers – LOWHIGH High number of suppliers for technicalProduct is highly differentiated/unique equipment and logisticsThe service of Cirque du Soleil is difficult to Limited number of suppliers for tents andbe directly replaced scenesNot a product satisfying basic needs; Relatively low supplier switching costs“luxury good” Competitive Rivalry – MODERATE Few competitors like Cirque Oz compete locally Lots of circuses globally
PESTEL ANALYSIS • Tax issues POLITICAL • Stability • Energy efficiency ECONOMICAL • Global crisis – reduced purchasing power • Limited number of touring cities • Cultural entertainment preferences SOCIAL • Religios views • Demographic chart •Influence of web based free contentsTECHNOLOGICAL •Automatization of production leading to lower costs •Higher CAPEX due to short lifecycles of new technologiesENVIRONMENTAL • Strict local logistics regulation (eg CO2 emmision) LEGISLATION •Working permits •Visa policy
VALUE CHAIN Support activities: Logistics and infrastructure Artist recruitment (HR) Procurement (own and outsourced) SHOW LOGISTIC ON MARKETING SITE SALES SHOWPRODUCTION Primary activities:
ISSUEThey re-invented circus. Everybody has seen it. Now what?
NEGATIVE CONSEQUENCEo Cirque du Soleil saturated the market – they will stagnate or lower the businesso If Mr. Lalibertè doesn’t decrease his influence (autochratic leadership) it will not be possible to sustain growth level CDS has shown in the past
ALTERNATIVESExpand geographically• Find new audiences – go to new places• Find places with high inflow of tourists for fixed location showsContinue diversifying commercial activities• Movies, amusement parks, music, commercial goodsRegional approach – market adjustmentTo fit to diverse conditions in current markets
DECISION MAKING CRITERIA Alternative 1 Alternative 2 Alternative 3 CRITERIA Weight Strength Weighted Strength Weighted Strength Weighted (1-10) Rating Score Rating Score Rating ScoreGrowth 10 4 40 4 40 3 30opportunityCost influence 8 1 8 2 16 4 32Ease of 6 3 18 1 6 2 12implementationOpportunity of 4 1 4 4 16 3 12innovationTOTAL 70 78 86
RECOMMENDATIONRegional approach – market adjustmentTo fit to diverse conditions in current markets
ACTION PLANdecentralize the decision making (by CEO/owner)set up regional divisions with separate marketing andmarket research (economical, demographical, etc.) byregional management/consultancydefine diverse strategic approaches (e.g. pricing policy,level of show production)
Blue ocean strategy doesn’t last forever. Be prepared for Red ocean!