STRATEGIC MANAGEMENT

CIRCUS CASE B Jorge Tarzijan

Questions: Cirque du Soleil

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

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

700

Annual Revenue (US$ Millions)

600 500 400 300 200 100 0 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?)
Traditional Circus
Star Performers Seasonal One Show Child Audience Animals Unrelated Acts Low-Medium Price High Push for Concession Sales Emphasis on Fun/Thrills Functional Viewing Environment 3 Ring

Cirque du Soleil
Non-Star Performers Year round Multiple Productions Adult Audience No Animals Story/Theme High Price Prots from Tickets Emphasis on Artistry Rened Viewing Environment One Ring

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 Soleils 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 Cirques 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.

Cirque du Soleil Business Model

Source: Ramon Casadesus.

8

HOW DOES CIRQUE DU SOLEIL CREATE SUPERIOR PROFITS?

Revenue Generation New, more profitable segment of customers No head-to-head competition Higher Willingness to pay: Price Higher Price Higher Volumes

Higher WTP

Multiple Productions: more visits per customer 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)