Cirque Du Soleil Strategy

                                 Cirque du Soleil

Cirque du Soleil is a Canadian entertainment company. Founded in the 1980’s, it became one of the largest theatrical producers in the world with more than 150 million spectators in more than 40 countries.

The secret being: “Reinventing the Circus”. Indeed, Cirque du Soleil took the world by storm by creating a new market space and challenging the conventional assumptions about how to compete. It did not win by taking customers from the already shrinking circus industry (Red Ocean) but created a blue ocean of new market space. This allowed it to have a huge success during many years in Las Vegas, its core market segment.

However, at the end of 2007, the forecasts of Cirque’s performances in the USA were pessimistic. This led the company to consider new markets to target and create new blue oceans, which might be either Macao or Tokyo or Dubai.

Tokyo has a large tourist and local population (+38M) with the highest average daily budget (1036$) but not such a high entertainment budget (55$). At the same time it presents high hotel occupancy rates and the society is rich and prosperous. Even though it seems a feasible option due to its rich and large possible market, it is not a suitable location to implement a blue ocean strategy. For instance, the low net profit margin (4.74%) of the competition shows how companies in the sector struggle to compete in this environment.

Another issue is the audience it targets. Since the price of the tickets is considerably high, Cirque du Soleil has to choose a specific niche market. But people visiting the amusement park cannot be considered as a niche market for Cirque du Soleil. As nearly 70% of the Tokyo resort’s visitors are in and around the locality, the average length of stay is very low (8.4 hours in 2007). Also, the average revenue the resort generated per guest was 9309JPY but the lowest price of Cirque du Soleil tickets which ensured 100 percent occupancy (from Cirque Soleil’s Strategic Marketing Plan) was 600JPY. Taking the average length of stay and the relatively high price of the show’s tickets, the local population would focus on going to the amusement park and not to the show. Also, while planning to open a theatre in the Maihama region, the weather conditions pose as a business risk, for the number of visitors varies according to the weather and temperature and bad climatic conditions for a long duration may affect the performance by reducing the number of guests.

Macau is an interesting market for Cirque de Soleil. With a growing (rate of 22.71%) tourist population of 26.9 Million which is the highest amount the three cities and a contribution of USD 17407 Million (96%) to the GDP, the city presents great opportunities for travel, tourism and entertainment. The major part of the tourist population comes from Mainland China followed by other International destinations. With increasing salaries in China and low unemployment rates, the average amount of spending budget is rising for gambling but the same is decreasing for entertainment. Carbon dioxide emission is low in Macau, which is beneficial to build an environment-friendly brand image for Cirque du Soleil. Also, the water is easily available at lower costs adding to the benefit of the company.

Only 22% of this visitor population attends shows and cultural events making the city primarily a gambling destination where the tourists spend only 1.28 nights in average leaving very little space for entertaining cultural experiences. While the fixed operating costs are the lowest in Macau, the revenues also are the lowest. Also, the price sensitivity is higher for Macau where a price change from USD 10 to USD 52 brings the occupancy down by 39%. However, the Chinese middle class is developing really fast and their consumption habit is changing. Their need for entertainment is expected to grow.

Cirque du Soleil offers great experience to their audience, however in Macau the local Chinese circus offers professional quality stunts with very less cost making it difficult for Cirque du Soleil to offer a unique and uncommon experience. Also it is very difficult for Cirque du Soleil to be successful in the market without adopting the local culture and including the same in their performances to cater to the local Chinese taste of cultural experience.

With 7.5% of GDP growth, Dubai seems to be the fastest growing city, in which tourism sector is still underdeveloped (contributing with only 3.5% to GDP). Tourists are represented at 95% by foreigners (mainly from US and Western Europe) who consider it as a luxury destination. Their main expenses are made on lodging (average of $328/night) due to lack of entertainments, especially cultural activities. Nevertheless, with the ambitious target of Dubai's Department of Tourism to attract 15 million tourists by 2015 (20 million by 2020), the opportunity is given to the economic actors to explode this sector.