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STRATEGIC MANAGEMENT

Assignment # 1
The Evolution of the Circus Industry

Submitted by: Amna Aslam Sheheryar Mahmood Madeeha Tahir Class: MBA-IV (F) Submitted to: Sir Suhaib Hussain Date: 13.02.12

Origins of the circus: For circuses, circus tent has been a unique icon. It was create in 1768 by Philip Astley. There are four main elements of a classical circus; equestrian acts, clowns, acrobats and jugglers. Circus was originally denoted by a galloping act of a horse with an equestrian performing tricks in the back. Astley added a clown to this mix transforming it into a real show. His innovation spread throughout Europe and America. Development of the traditional circus: Traditional circus had an image of drifters in flashy outfits, aggressive hawkers and a standard routine of acts, catering to the taste of children. P. T. Banum, originally starting with his own show, teamed up with James A. Bailey in 1882. After they both passed away, the show was bought by the five original Ringling brothers in 1907. Factors threatening profitability of the shows after World War II: Changing societal interests. Competition from television and movies. Rising cost of producing a traveling show. Open spaces were increasingly being taken up with civic and sports arenas. Rising labor and rail costs. As a consequence of these factors, in 1956 the Ringling brothers and co moved their shows to large civic arenas. Show was struggling to remain profitable until it was sold to Irvin Feld in 1968. Since cities like New York had large audiences, majority of circus acts in America were on permanent tour.

Emergence of three-ring format: Early American shows focused on European pattern of single ring tents. This limited the size, and the number of people surrounding a single ring couldnt be increased with out extending distance, which lowered the quality of the show. However, small shows traveling between small towns were not affected by this limitation. In the 19th century, a switch to rail travel allowed circuses to be in large towns having large audiences. Barnum added two rings, lengthening the tent rather than increasing diameter, so that the quality of show remained. Nature of three-ring format: The typical clown with garnish face paint, costumes to overcome visual distance, and oversized shoes. Individual acts are often hired as subcontractors for a specific tour. Mostly animals for the show are leased. Ringling Brothers and Co., however, owns its own elephants. Irving Feld purchased the Williams family circus in 1969. Traditional circus industry: Traditional circus performed from early spring to late fall, preparing their new shows over the winter. Logistical requirements were a significant success factor. They traveled overnight and performed the next day, hiring local young people in exchange for tickets. Unionization of local workforce and more restrictions on use of child labor in post World War II era added to setting up and tearing down costs. Hence they shifted to indoor arenas, which enabled the show to go on throughout the year. Main sources of revenue: ticket sales and concessions, hawkers selling drinks and other foods, sale stands selling novelty items. In 1997, there were approximately 90 traveling circuses in the US. Marketing and publicity normally took place as the circus came into town. 3

QUESTIONS: Question # 1: How attractive is the circus industry in the early 1980s? Would you enter into the circus industry? Changing Factors: Pre 1980s was the era, which had witnessed changing societal interests, competition from increasingly available and sophisticated movies and television and rising labor costs. Open spaces near city centers were increasingly taken up by civic and sports arenas. But by 1980s at least the rail costs had lowered. When Union Pacific and Central Pacific met to form a transcontinental railroad, this significantly increased the touring abilities of shows. As a consequence: By the 1980s, circus audiences were shrinking and even Ringling Brothers had trouble keeping pace. Kids who once begged their parents for circus tickets wanted the latest computer games instead. The market, as a whole, was struggling for new customers and revenue was on the decline. To make matters worse, expenses were increasing. Animals eat every day and food prices continue to rise. Animals require trainers, and trainers require salaries. Circus stars demand star treatment in an industry where the customers, accustomed to Hollywood celebrities, no longer find the stars of the circus impressive. In short in the circus industry revenue was on the decline as costs continued to rise. Profits were squeezed. I would enter the circus industry only if there was a unique new way of going about it that attracted people to switch from the already established big names. Otherwise, with the immense competition and the rising costs, it would be hard to try to be profitable.

Question # 2: What is the value proposition of the traditional circus industry? It is held that a value proposition comes into existence (value created) when a business model is being chosen along with the selection of the respective tactical choices, that it entail. According to Michael Porter Value proposition encompasses all the following.

As per the case The Evolution of the Circus Industry (A) by Matt Williamson (INSEAD), the value proposition of the traditional circus industry is as follows: Initially the traditional circus industry mainly had an audience (customers) of children and small town and city people. As technology advanced and rail networks were enhanced, the traditional circus also started targeting larger potential audience and crowds by majorly targeting larger towns. The Traditional circus marketed it self through various channels whilst entering the town in which they had to perform. The symbolic circus tent (colorful, evocative & unique), Posters, fliers, a flashy entrance in town and even the performers as well as animals, parading through town, also acted as channels of marketing and attracting customers. The Traditional circus industry fulfilled and met the needs of entertainment of the various customers that it targeted. This need was catered to by acts from trained wild animals (zebras, lions, elephants etc), human and animal curiosities or oddities (e.g. Tom Thumb the

proclaimed smallest human being in the world), acrobats, jugglers, clowns, educational entertainments and historical montages etc. The Traditional circus along with entertainment services also provided food (popcorns, candy, drinks, peanuts etc) and novelty products (posters, dolls, toys etc) to provide a better quality and memorable experience for its customers. The price of tickets sold, (the main source of revenue for the traditional circus industry) varied according to the location and distance of seats from the stage. This catered to various customers and their varying price sensitivity. Concessions were also a source of revenue, as lower priced tickets would ensure a higher number of people attending, which will subsequently result in more sales of food and novelty products. E.g. No charge for kids, while only adults are sold tickets. The pricing model is believed to be a combination or a mixture. Concessions and low pricing was used to increase the no. of people attending, increasing sales of food and novelty products, while seat prices varied according to the distance of seat from stage.