STRATEGIC MANAGEMENTCIRCUS CASE B

Jorge Tarzijan

1. Is the business model of Cirque Du Soleil different from the business model of traditional circus? Why?

2. What are the main differences between the choices selected by Cirque Du Soleil and the traditional circus?

3. When you compare Cirque du Soleil with the conventional circus, which are the elements kept by Le Cirque? Which ones were downplayed and which ones were played up?

4. How does Cirque du Soleil create superior profits?

5. What are the main learning points of this group of cases?

Questions: Cirque du Soleil

BACKGROUND INFORMATION. ANNUAL REVENUES: Feld Entertainment vs. Cirque du Soleil

Ann

ual R

even

ue (U

S$ M

illio

ns)

0

100

200

300

400

500

600

700

1995 1996 1997 1998 1999 2000 2001

In 2009, Cirque Du Soleil revenues were U$ 810 million (approx). Feld Entertainment has bought other companies, thus comparisons are not very meaningful anymore.

Is the business model of Cirque Du Soleil different from the business model of traditional circus? Why? ELEMENTS OF THE BUSINESS

MODEL (DIFFERENT CHOICES?)

Non-Star PerformersYear roundMultiple ProductionsAdult AudienceNo AnimalsStory/ThemeHigh PriceProfits from TicketsEmphasis on ArtistryRefined Viewing EnvironmentOne Ring

Star PerformersSeasonalOne ShowChild AudienceAnimalsUnrelated Acts Low-Medium PriceHigh Push for Concession SalesEmphasis on Fun/ThrillsFunctional Viewing Environment3 Ring

Traditional Circus Cirque du Soleil

EXAMPLES OF ELEMENTS ELIMINATED BY CIRQUE DU SOLEIL

Animal shows– Easier logistics, no smell, no need for animal trainers, costs down (security and

other), no problems with animal activists.

Star performers– Ringling Brothers attracts viewers with big name acts (“greater Sebastian”)– Cirque du Soleil’s performers remain anonymous

Aisle concessions– Viewers not distracted– Eliminates the ‘huckster’ image of traditional circus

EXAMPLES OF ELEMENTS CREATED BY CIRQUE DU SOLEIL

Theme– Contrast Le Cirque’s “theme” to the sequence of unrelated acts of traditional circus– The themes bring harmony and an intellectual element to the show

Refined viewing environment– Increased level of comfort (compared to traditional circus)– Comfortable seating

Multiple productions– A series of unique shows highly differentiated from one another– Creates the potential for repeated business

Individualized music and dance– Le Cirque accentuate the artistic content and appeal of the show

EXAMPLES OF ELEMENTS KEPT BY CIRQUE DU SOLEIL

Diversity of emotions and acts– Cirque du Soleil has maintained the magical appeal of the circus and some of

the best acts in the classic circus: clowns and wheel man.

Humor and fun– Humor, in general is maintained but has moved away from physical, sarcastic

humor to a sweeter more sophisticated style.

Danger and Thrill– The acrobats and other dangerous acts are also maintained, although they are

made more elegant and artistic, and have moved from individual acrobatics to team performances.

8

Cirque du Soleil – Business Model

Source: Ramon Casadesus.

• Multiple Productions: more visits per customer Higher Volumes

Revenue Generation

• New, more profitable segment of customers Higher Willingness to pay: Price

• No head-to-head competition Higher WTP Higher Price

• Increased value for customers Pulls New Customers into the Industry

HOW DOES CIRQUE DU SOLEIL CREATE SUPERIOR PROFITS?

Cost Reduction

• Eliminating High Cost elements (“stars”, animals, trainers)

• Yearly productions allow for faster recovery of fixed costs (usually they stay in the same place for years)

• Leveraging high value, lower cost talent group of people (Russia, China, Latin America)

HOW DOES CIRQUE DU SOLEIL CREATE SUPERIOR PROFITS?