Mid-Term Case-2

Topic: Strategy for Cirque Du Soleil

Name: MAJEDUL HAQUE ASIF
ID: 1711269630
Course- Mgt489
Sec: 11

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Table of Contents
Visionary Framework: .............................................................................................................................. 3
Key issue: .................................................................................................................................................. 3
Goal: .......................................................................................................................................................... 3
Porter’s 5 forces: ...................................................................................................................................... 3
Key success factor: ................................................................................................................................... 4
Value chain: .............................................................................................................................................. 5
The Value Net: .......................................................................................................................................... 6
Strategy based on PARTS: ........................................................................................................................ 7
Resource based view:............................................................................................................................... 7
Dynamic capabilities: ............................................................................................................................... 8
3 generic strategies: ................................................................................................................................. 9
Competitive positioning view: ................................................................................................................. 9
Value innovation: ................................................................................................................................... 11
X factor: .................................................................................................................................................. 12
Distinctive competence:......................................................................................................................... 13
Game Theory: ......................................................................................................................................... 13
Best Strategy: ......................................................................................................................................... 14

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Visionary Framework:
These strategies are made Cirque Du Soleil private company.

Strategic intent:

1. Cirque du soleil offers dance, opera, theatre and circus in addition with live music and world class
choreography inspired from tradition circuses.

2. Cirque du soleil considered as world’s largest contemporary circus producer and entertainment
company with more than 36 years of working experience.

Mission:

1. Bring every imagination sensible and relate it with people’s emotion around the world.

2. Enhance the tradition circus with a flavor of all modern live events in one show.

Core values:

1. Passion for creativity

2. - To recognize and respect each individual’s contribution to their body of work

Core purpose: 1. To extend the limits of the possible

2. Entertain the people around the world in the best way they want to be entertained

Key issue:
The presence of new competitors and inefficient cost management causing a sudden loss of Cirque du
soleil indicating future loss of market share and revenue growth.

Goal:
Coming up with strategies to have cost advantages over its competitors and better investment decision
for its future sustainability.

Porter’s 5 forces:
Cirque du soleil falls under the entertainment industry.
Suppliers (Technologist,
DVD Company)

New entrants
(Cirque Eloize, Competitors Substitutors (online
Cirque Eos) Streaming Platform)

Buyers (Attenders,
customers)
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Barriers to entry: The cost of capital to enter the market is not that high. There are ample of
opportunities to entry at a small scale. Most of the major competitor started at a small scale like Cirque
Eloize, the Cirque Eos. These competitors started by doing small shows in home country like Cirque du
soleil.

So, the barriers to entry is low indicating it an unattractive industry.

Competitive rivalry: Cirque du soleil faced competition issue after so many years of its operation.
Though the market is very easy to enter, there are only a few players because it is not that easy to
entertain people. Creativity is a much-needed element in this industry which restricts other entering
from the market. There are also scope of market growth for each player

So, the low competitive rivalry makes it an attractive industry.

Power of buyers: Cirque du soleil focuses on quality which force them to spend a lot behind every
shows. Though there are only a few companies provide similar pattern of entertainments, people have a
lot more options for entertainment nowadays compare to 1990s.

So, power of buyer is high which makes it an unattractive industry.

Power of supplier: Cirque du soleil became their own supplier by doing vertical backward integration.
All of their inputs including costumes of participants to equipment is made and managed by them.

So, low power of supplier makes it an attractive industry.

Threat of substitutes: Currently, entertainment industry is one of the largest industries in the world.
There are ample of option for a person to be entertained. Online streaming platforms are substituting all
the other possible platform of entertainment.

So, high threat of substitutes makes it an unattractive industry.

Complementors (6th force): Possible complementary product for Cirque du soleil can be international
sport events which offers opening ceremony to its customer where Cirque du soleil can perform and
entertain people with a package of their offers.

Strategy based on Porter’s 5 forces:

According to our porters five forces analysis we can indenting that high power of buyer, low barriers to
entry and higher threat of substitutes makes it an unattractive industry. So, the strategy for this should
be to enter other possible platforms of entertainment industry like online streaming platforms with the
same core value and purpose to become the industry leader.

Key success factor:

The indicates the activities that Cirque Du Soleil already does and indicates those which it not
involved in.

1. that customers get entertained in such way where they don’t have to think about money.

2. Each employee has the freedom and space to shower his or her creativity.

3. Better quality service

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4. Frequent shows in every corner of the world at a possible cheaper price.

5. Offer service that is superior

6. That the events are family show where no inappropriate thing would be shown.

7. Online streaming platform service

8. Greater service range

9. Suitable location of events

10. Price should reflect the service quality.

The basis on which Cirque Du Soleil should complete with its competitors:

1. Superior service among all the player

2. Strong marketing campaign that will allow to promote it more towards people

3. Hire employees with unique creativity

4. Continuous research on matching the customers imaginations with their creativity

5. Decreasing cost of events

6. Sponsorship with bigger companies

7. Offer unique service

8. Greater service range

Strategy based on key success factor: So far, Cirque Du Soleil’s biggest weakness is its revenue
management where 80% comes from ticket price and 20% comes from sponsorships. They should
gather more sponsors to reduce its ticket price and make the market more competitive.

Value chain:
Step 1:

Main activities Design: Cirque Du Soleil design it’s shows in a possible way where customers can enjoy
every possible taste of entertainment under a single roof Outsource manufacturing: As a service
provider, it hires 70-80 local employees where ever they go for events to bring a taste of regional
culture.

Worldwide Marketing: Cirque du soleil focuses customers imaginations trough local hiring of
employees, experience from events, promotions.

Distribution service: Cirque du soleil conduct their events in every possible countries of the world
though both of their own and locally hired employees.

Step 2 (Critical value creating activities):

Cirque Du Soleil’s major critical value activities are design and distribution service since these two
elements will ensure their service quality.

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Step 3 (Internal Cost analysis):

Cirque Du Soleil doesn’t focus on cutting cost on their critical value activities as they think, quality is the
only thing to focus beyond any other things.

Step 4 (Internal differentiation analysis):

Cirque du soleil focuses on differentiating their every critical value activity to provide a unique service.
Their main business is making customer’s imaginations true with creativity where it must be
differentiated to sustain.

Step 5 (Industry profit pools):

According to case study, their profit margin from every show is 15-20% where 80 percent of their
revenue come from ticket price and 20% from sponsorship which force them to charge higher ticket
price.

Step 6 (Vertical linkage analysis):

Cirque du soleil focuses on both vertical backward and forward integration where they already succeed
in backward by becoming their own supplier of costumes, equipment, talents etc. They also focus on
forward integration by building their own complex to hold events at a lower possible cost but failed to
do so. But they should constantly work on it.

Step 7 (Iteration):

Tough they are already able to select their vertical linkages, they should constantly repeat the process to
come up with better linkages.

Strategy based on value chain: Cirque du soleil should design distribution service and vertical linkage
which will allow them to offer best service at a lower price. They should also do more marketing
campaign to gather a brand value which will allow them to have more sponsors to change their revenue
management system.
Supplier
The Value Net:
Technologist,
DVD company

Competitor Complementor
Cirque Du Soleil
Cirque Eloize, International
Cirque Eos Sports Events

Buyer

Customers,
attenders

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Strategy based on PARTS:
Cirque Du Soleil can change the player from its value net by establishing own platform of their live
shows. It can online streaming platform or their own complex to organize these shows so that
customers can afford tickets more affordably. And this will help them to be their own organizer.

Cirque Du Soleil can Change the Added Values in their service by introducing new elements like anime
shows to add more customer segments.

Cirque du soleil can Change the Tactic of their business by limiting their cost of organization. They can
hire employees on show basis rather than full time employment. They can offer wide range of services
which will encourage the customers to spend more. For example, by establishing their own complexes
for their shows, they will be able to accommodate their customers also.

They can change the scope by providing services which is unique and different form its competitors.
They are already doing it well currently.

Resource based view:

Factors of production:

People: it has competitive advantage over their people or employees because they are

• Valuable- very creative artists and that why get highly paid.
• Rare- though new people are coming with new creativities, each is rare.
• Inimitable- creativity is something which is God gifted or earned by practicing. These can’t be
imitable.
• Non-substitute- there are no other option than using Human Resources
• Organizational- Cirque Du Soleil has organizational capabilities of using their talent in their
platform to show up in front of world.

So, it supports VRINO model of competitive advantage.

Capital equipment: they also use their own capital equipment like costumes in every show which also
support VRINO model for every new shows. It is inimitable and substitutable but they basically don’t
reuse their equipment or use it by doing small modifications.

Technology: As they provide services, they always come up with new techniques to entertain the world
which is similar to technology adaptation. So, it also supports VRINO model for every single new show.
Land and buildings: Though Cirque Du Soleil has their own headquarters where they train their
employees, they don’t have any competitive advantage over it.

So, Cirque Du Soleil has competitive advantage over people, technology and capital equipment as these
hold casual ambiguity where no one from outside knows what will happen next, unique historical
condition where market was different when they initially started and they know how to adapt with the
market and finally time comparison diseconomies where before anyone imitate their technologies and
equipment, they change it through innovation and market research.

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 All other
Resource Diffusion: Competitor
Fast-cycle recourse are early
adopters

Adopters
Medium-cycle recourse

Slow-cycle recourse Cirque Du

Soleil is
innovator
Time

Dynamic capabilities:
These capabilities are those which will help Cirque Du Soleil to adapt with the market. Market is
continuously changing and we saw previously in resource-based view that though they have competitive
advantage over their technology and capital equipment, they continuously doing research to innovate
and alter it with every new show to maintain its uniqueness.

The process:

Continuous learning:

• Communication and coordination- Before doing a live show in a region, they do a thorough
research about their culture by hiring local employees. Employees of both the home and host
country make the environment very communicative and coordinative.
• Recognize dysfunctional routines- they gather experience from their learning process and
identify the errors in their operation. They come up with new strategies every time to solve that
error. For example, one of their artists got injured during a live show. Though he/she was not
that much injured, they tried their best to not to repeat it.
• Alliance and acquisition- Cirque du soleil don’t have any proper alliance but they are
continuously trying to from one by making their organizer as partner. But they failed to do that
with Parkview.

Acquiring new assets:

Cirque du soleil tried their best to build a complex in the heart of Montreal in 2001 at a lower cost but
failed to do so because of recession and its financial capabilities but they are continuously trying to build
one.

Transforming existing assets:

They adapting their human resource by giving empowerment so that they have the freedom to
experiment new ideas.

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 Dynamic Capability framework:

Offsetting- Robust

Relative Weakness

Low
undifferentiated advantage

Undermining Precarious

High
Advantage

Low High

Relative Strength

Cirque Du Soleil Stands in this position which means they have to do continuous
research to innovate and alter their competitive advantages and maintain its uniqueness

Cirque Du Soleil’s
Position where
customer
3 generic strategies: perceive
Cost Leader Differentiator uniqueness

Current
competitors low
cost position Focus

Competitive positioning view:

In case of competitive positioning view, it basically reflects the relation in between Cirque Du Soleil and
identify if there is any competitive advantage or not. As a service provider, Cirque Du Soleil always
stands as a differentiator where they always come up with new creativities, ideas with their shows.
They want to serve their customer something unique which was not served before and can only exist in
their imaginations without thinking about costs. They offer,

• High ticket price

• Extra entertainment under the same roof
• Maintain quality with creative persons who are highly paid
• Better service

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Market scope:

In case of market scope, Cirque Du Soleil fall under broad market scope where they serve

• Different segment worldwide

• They basically organize shows all over the world. So, they have a broad coverage
• They don’t have any market specialization. They hire local or regional employees while doing
shows there to put a regional cultural taste in it.

For differentiation strategy, commonly required skills and resources are,

• Strong marketing capabilities so that you can gather more brand value to shift your revenue
income from ticket price to sponsorships.
• Service engineering to come up with innovative and creative way of entertainment
• Strong research capabilities to adapt the customers imaginations and make them real
• Reputation for quality means provide service at such quality so that your service itself get to be
known for its quality
• Cooperation with channels or make channels under your own operation to maintain cost
effectiveness.

Common organizational requirements are

• Strong co-ordination among all the functions or channels means managing organizers and
customers more effectively. Though it is very costly for them as organizer cut a last portion
of profit pools, they insist their customer to pay more
• They hire their employees based on their quality not quantity. Each of their employees are
highly creative and highly paid by Cirque du soleil to be motivated

Generic Competitive Positioning:

Cost/Niche Cost/broad
Leader
Cost

Diff/Niche Diff/Broad
Differen
titation

Niche Broad

Cirque Du Soleil Stands in this position which is a heterogenous market, negative synergies
between groups means they shape unique shows based on local Cultures which may not be
accepted anywhere else but positively accepted in that particular culture, serves several
services

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Value innovation:
1. Industry: Usually everyone in entertainment industry compete based on how well they can
entertain their customers with their creativities and made this a red ocean. Where nowadays
customer wants many more thing rather than just to be entertained. Cirque Du Soleil can make
the environment more comfortable, add additional features like snacks, foods, accommodation
etc. which can be a suitable blue ocean strategy for them. So, going for building a complex can
be a blue ocean strategy for them right now. It is a continuous process. You can’t stuck to it for
long time. You have to innovate new blue ocean strategy continuously.
2. Competition: By building a complex with every possible feature, they can use it as competitive
advantage for a short time but they will find competition later. So, they have to keep that in
mind and build it in such way that they can continuously innovate it and do modifications like
our varsity NSU.
3. Markets: Cirque Du Soleil should look for latent demand of customers. This is the demand
which is even unknown to customer. They need it but don’t know that. So, we have to find the
key of that lock which will be bought by customers later. For now, latent demand for customer
can be more comfortable environment. It can be met by building a complex in their suitable
location or start online streaming in famous platforms where customers can enjoy it from their
home.
4. Capabilities: Tough Cirque du soleil don’t have sufficient financial capabilities to build
complexes, they tried. Whereas they can go for joint ventures where their creative show will be
their investment.
5. Products: We have to form our service based on the latent demand of customers which can be
anything. We can organize show with famous singers or rappers who will make sure that,
customer doesn’t feel bore.

Value curve:

Cirque Du Soleil

Other Competitors

Dancing Music Opera Theatre Circus Accmodation Comfy Online Streaming

Env.

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X factor:
X-factor is an organizational attribute of a firm that’s is valuable, not necessarily scare and not difficult
to imitate.

For Cirque Du Soleil, their X- factor is surely the quality of service or entertainment they provide.

It is,

1. Valuable: Their service quality is the only tool allowing them to top the market position. Though
new competitors are coming, they don’t bother about them at all as they can’t match their
quality. It is their main revenue generating tool but what they care about is their cost
management which they want to reduce due to competitive environment.
2. Not necessarily scare: As quality is something you can upgrade day by day, there’s no point of
scare
3. Not difficult to imitate: Cirque Du Soleil’s competitor can easily imitate their quality but they
are always in a process of continuous innovation. So, imitating their service will not affect them
that much as they won’t be repeat anything.

So,

• Tough firm has some competitive advantage over its people and capital equipment, competitive
advantage is not enough for them. They should focus more on their X-factors. For Cirque du
soleil, their superior performance= competitive advantage (people, equipment) + X factor
(quality of events)
• Cirque Du Soleil must master fundamental actions means identify or finalize their X-factor. They
should set the standard of their show’s quality by looking at the industry standard so that they
can set the benchmark.
• Competitive advantage may be unachievable because it is not something constant but if they
can work on their X-factor, they will be successful anyhow.

Efficient frontier of Cirque Du Soleil:

Efficient frontier

Cirque Du Soleil’s position

Cost position

Differentiation

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Distinctive competence:
Cirque Du Soleil’s distinctive competence is the creativity of their every artist who come up with
something new every time for their shows. They make our imaginations true. They can only differentiate
their service quality based on their employee’s participation.

1. Their employees are the most valuable resource for them which insist them to spend more on
them to maintain such kind of quality.
2. Cirque Du Soleil has that platform where they can use its employee’s creativity and present it to
the world
3. Tough their creative artist is the main strength which allows them to differentiate it from the
competitors but it also resulting higher cost for them. It made them to rethink their cost
management system. So, their distinctive competency is not the strongest for them.

Game Theory:
Cirque Du Soleil’s initial decision was to build luxurious complexes around the location of their shows
where they will be able to organize it in their own place at a lower cost was rational. Otherwise cost of
organizing their shows are rising day by day and it ultimately affecting their ticket prices. But they failed
to do so. This let them being worried about their customer loyalty. If they think that building their own
complex for shows is not suitable financial decision for them, they can change their revenue
management system by adding for sponsors. Though quality is the main concern for their shows, ticket
price will determine their future growth. They have to change their ticket price range to sustain in the
market.

So, their dominant strategy for this can be found in following way.

Ticket price war using Prisoner’s Dilemma:

Cirque Du Soleil

Price No- Price

Com-
Reduction Reduction
peti-
Price +,+ -,+
tors
Reduction

No- Price -,+ -,-

Reduction

Strategy based on Game theory:

The dominant strategy of Cirque du soleil will be to decrease ticket price of their shows which will be
possible only if they become their own show organizer or add more sponsors to manage their costs.

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Best Strategy:
Considering all the strategies, we should follow Porter’s Five force, KSF, Dynamic capabilities & 3 generic
strategy to come up with our final decision. Cirque Du Soleil almost got bankrupt during COVID-19 tough
it is not mentioned in the case. So, they should go for a contract with online streaming platform like
Netflix, Amazon Prime who will sponsor them for their further shows. They can conduct these shows in
their headquarter without any live audience. Their 70-80% revenue should come from these platforms
and they should manage other sponsors for the rest. It will allow them to provide a differentiate service
at a low cost.

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