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Strategic Management TP020298

Table of Contents
1.0 Question A ........................................................................................................... 2 1.1 1.2 1.3 Business Model of Traditional Circus ........................................................... 2 Business Model of Cirque du Soleil (CdS) .................................................... 3 Evaluation ........................................................................................................ 5

2.0 Question B............................................................................................................... 7 2.1 Blue Ocean Strategy (BOS) ............................................................................... 7 2.1.1 APPLE, Inc.: PATH 6 Look Across the Time ........................................... 7 2.1.2 THE BODY SHOP (TBS) : Path 5 - Look Across Functional of Emotional Appeal to Buyers.................................................................................................... 9 3.0 Reference .............................................................................................................. 12 4.0 Appendix ............................................................................................................... 15 4.1 Five Forces Analysis ........................................................................................ 15

Strategic Management TP020298

Cirque Du Soleil

1.0 Question A
Evaluate the traditional business model of the circus industry and the new business model of Cirque du Soleil.

1.1 Business Model of Traditional Circus

From time to time, circus is known as theatre, music, dance, clowning, animal attraction, etc. circus is a broad industry which straddle from large-scale commercial operations to the small scale and experimental. In order to analyze an industry, it is important to learn what sort of business model it is following. As a matter of fact, traditional circus enters the market with a low priced, low-margin product that appeals to the mass market. Traditional circus implemented read ocean strategy such as; cost leadership strategy that able to charge a lower costs than other competitors and still make a satisfactory profit. Consequently, the business models used by traditional circus causes lose sight of evolving customer tastes and preferences - only focusing in price without concerning the needs of customers and the potential encroachment of competition. Traditional circus focused on benchmarking one another and maximizing their shares of shrinking demand by tweaking traditional circus acts offering animal shows, hiring star performers, presenting multiple show arenas in the form of three rings, and pushing aisle concession sales to motivate buyers buying their tickets. For this reason, the result was rising costs without rising revenues, and a downward spiral of overall circus demand. Likewise, cost leadership strategy leads to competitive advantages due to the lower cost that allows them to earn profits during the heavy competitions and having lower cost position also gives the business a defense against rivals. Merely, cause of the high market shares, cost leadership strategy has high bargaining power in terms of suppliers (because it buys in large quantities). Its also creating a barrier to entry 2

Strategic Management TP020298 because few new entrants will be able to match the leaders cost advantage, (refers to porters analysis in appendix). Furthermore, Focus strategy from generic strategies is also applied as one of the business model in traditional circus. Traditional circus is strongly focus on a particular buyer group children and families and attempts to serve only this niche. Besides, the focus strategy is imitated - competitors can identify the advantages of the segment which company is using. As a result, customers preferences become structurally unattractive (demand disappeared) and the company might not have the opportunity to serve other markets.

1.2 Business Model of Cirque du Soleil (CdS)

As can be seen, CdS realized that to win in the market, companies must stop competing to beat the competitors. From time to time, CdS has become a rival to the traditional circus, CdS applied several concepts to build their business model, such as; cost reductions through the use of yearly productions that allowing them to get faster recovery cost, eliminates the high cost acts animal and star performers, and create a variety of production with themes and story line that appeal to spacious audience demographics.

Figure 1, Cirque du Soleil Business Model (source:

Strategic Management TP020298 One of the business model utilized by CdS is Value innovation it is beating the competitors by creating a leap in value for buyers and the company and opening up a new and uncontested market space. Besides, value innovation is a new way of thinking about and executing strategy that results in the creation of blue ocean strategy and a break from competition. CdS strategy is sees as making a choice between differentiation and low cost. In contrast, those that seek to create blue oceans pursue differentiation and low cost simultaneously. Incidentally, CdS created a new market space in the entertainment sector, generating strong, profitable growth as a result. In other words, CdS broke the best practice rule of the circus industry, achieving both differentiation and low cost by reassemble elements across boundaries. For instance; Cirque du Soleil is a new market innovator in the circus Industry They create new non-circus factors, such as; opera, ballet, theater, themes, and story line. Another business model used by CdS is Differentiation from Porters Generic Strategy it aimed at the broad mass market and involves the creation of a product or service that is perceived throughout its industry as unique. Differentiation is a practicable strategy for earning profits in a specific business because the resulting brand loyalty lowers customers sensitivity to price. As can be seen, Cirque du Soleil creates their own uniqueness by reinventing the circus industry in a very different way from traditional circus. The strategy is more potentially to render higher profit that does a low-cost strategy because differentiation creates a better entry barrier. Whereas traditional circuses focused on offering animal shows, hiring star performers, and etc., CdS extinguished all this factors. Conversely, by breaking the market boundaries of theater and circus, CdS derived a new understanding not only of circus customers but as well as of circus noncustomers adult theater customers. Additionally, in terms of profit, CdS gained its profit from the tickets sale. CdS lifting the price point of the circus industry by several multiples while still pricing its production to capture the mast of adult customers, who were used to theater prices. Henceforth, by dispensing the concept of multiple productions and by giving people reason to come to the circus more often, CdS has perfectly increased demand, reduced its cost structure, and reach both differentiation and low cost.

Strategic Management TP020298

1.3 Evaluation

Figure 2, Comparison between traditional circus with Cirque du Soleil (source:

In comparison with traditional, Cirque du Soleil has accorded their customers the thrilling experience of the modern circus with the intellectual sophistication and artistic richness of the theater. By using differentiation as their business model, Cirque du Soleil has created new market for their business and has invented a new form for live entertainment that is markedly different from traditional circus. Correspondingly, traditional circus business model is lacking in many aspects and leads the industry to suffer from decreasing audiences and declining revenue and profit. Traditionals strategy is formed reactively as it tries to keep up with the competitors loose its uniqueness. Partially, Competitors could easily imitate traditional circus strategy because the business only focused in lowing the ticket prices achieving cost leadership. When it comes to imitation, it requires company to make substantial changes to their existing business practices, this is why traditional circuses threats of new entrants is high.

Besides, for traditional circus to achieve cost leadership and interact customers traditional circus must be willing to discontinue any activities in which the do not have a cost advantage and they should consider other activities with cost advantage. In Traditional Circus, they were not able to discontinue any activities that do not have a cost advantage animal acts, start performers. However, there was increasing public discomfort with the use of animal. Likewise, animal acts are one of the most costly activities for circus industry due to the costs of training, veterinarian care, shelter, and transportation. Similarly, traditional circus focused on featuring stars; in the mind of

Strategic Management TP020298 public the so-called stars of the circus were trivial next to movie stars. Again, they were a high-cost component carrying little sway with spectators that obviously cause cost implication. Comparatively, Cirque du Soleil eliminated all the costly pieces that characterize the traditional circus industry because CdS founded that many aspects from traditional circus considered expandable and costly. In other words, CdS employed innovation in the business strategy value innovation that involves going beyong the conventional boundaries of an industry and creating a new kind of value by bringing in unique elements, frequently from other industries. Based on the strategy they used, CdS were able to increase their profits from their ticket prices unlike traditional circus blue ocean strategy pursue cost leadership and differentiation, resulting in benefits both to the firm and the customers.

Conversely, in the circus industry there is little effort to attract new buyers to the industry, thus the traditional circus and CdS basically focus on customers in purchasing their product and services. In comparison with traditional circus, CdS is focus more on trying to increase the size of the industry by attracting people who have never purchased in the circus industry because the whole idea CdS strategy is to have high value at low cost. Unlike Cds, traditional circus concentrating only on the current customers,. Despite, Traditional circus could easily catch up by applying the same strategy as CdS did, because nowadays a lot of traditional circuses transform their business strategy from red ocean strategy to blue ocean strategy red ocean there are a lot of business competing against each other for the current markets. In the blue ocean, new markets are created to serve, which means there is less or no competition.

Overall, traditional circus strategy involves to override competitors in existing market place, in other words the strategy is more on market-competing. While CdS is used a market-creating strategy trying to alight from the current market limits and creates possible demands. That is to say, traditional circus desired to compete in a fixed market space because of the thought that structural condition of a firm is given thereby firms are oblige to compete. Therefore, if traditional business model needs to be change in order to get better profits and market share in the market.

Strategic Management TP020298

2.0 Question B
Evaluate the Blue Ocean Strategy in the context of Cirque Du Soleil

2.1 Blue Ocean Strategy (BOS)

Blue Ocean Strategy is about new products, new technologies or diversification beyond a companys core business. (Guanli Xue Jia, 2008). Blue ocean strategy is not about customer orientation, but its about creating new customers demand and creating new target buyers based on noncustomer insights.

Figure 2, Cirque du Soleil strategy (source:

In line with Cirque du Soleil (CdS), out of the Six Paths of The Blue Ocean Strategy, CdS used two of the six paths, which are; Path 1- Look across Alternative Industries theater (Adding Music, Ballet, Lighting, and Storyline - see figure 3), and Path 3 - Look Across the Chain Buyers from children to Adults Audience. 2.1.1 APPLE, Inc.: PATH 6 Look Across the Time In contrast with Cirque du Soleil, Apple is one of the company that employed BOS Path 6: Look across the Time. Apple is a computer manufacturer that alters to electronic powerhouse. Apple created Blue Ocean Strategic by looking across time from the value that they deliver today to the value it might deliver tomorrow. By stipulate unexampled value for buyers attains non-customers to customers, Apple offers Macintosh, iPod, iPhone and iPad, and displacing the companys market value exponentially. The figure bellow shows the blue ocean strategy that Apple used to attract its customers.

Strategic Management TP020298

Figure 3, The Reinforcing Blue Oceans of Apple (source: INSEAD Blue Ocean Strategy Institute, 2012)

Apple combined several methods or different type of idea to create a new product, For instance; iPhone the tight integration of iTunes/iPod and Smartphone. Apple improved use interface from blackberry. They created device that could download the music directly and all the basic functionalities of the smartphone with brilliant touch screen compared to blackberry that had issued with the keyboard size, ease of use, etc. iPhone has made huge success for Apple in Smartphone Industry due to the uniqueness in term of design and functionality. (See figure 4)

Figure 4, Apples profit growth from 1995-2012 (source: source: INSEAD-BOS Institute, 2012)

Besides, another example from Apple is iTunes. Apple succeeds to use blue ocean strategy in the Music Industry by looking across time from the trend in the 8

Strategic Management TP020298 market today and trend that might deliver tomorrow. Apple has created music digital sharing programs that offered legal, easy-to-use and flexible a la carte song downloads through iTunes. The iTunes Music store allows users to burn songs onto iPod and CDs up to seven times, which is enough to satisfy the customers and merely far too make professional piracy an issue because Apple protect recording companies by inventing copyright protection (see figure). Hence, by establishing iTunes, Apple has disengaged a blue ocean strategy in digital music that increased the attractiveness of its iPod player. Similarly, another company that utilized the same path 6 is CNN that creates the first real-time 24hours global news network based on the rising tide of globalization. 2.1.2 THE BODY SHOP (TBS) : Path 5 - Look Across Functional of Emotional Appeal to Buyers To succeed you have to believe in something with such a passion that it becomes a reality" (Dame Anita Roddick, human rights activist & founder of The Body Shop, 1976).

Figure 5, The Body Shop Five Core Values (source:

Strategic Management TP020298 In view of Blue Ocean Strategy, Body Shop is one of the companies that applied BOS in their business. TBS as a cosmetic company, which produces skin and hair care products, find opportunities by competing on the basis of emotion as well as price and function. TBS did the reverse, transforming the emotionally driven industry of cosmetics into a functional, no-nonsense cosmetic house. The Body Shop strategy considered as blue ocean strategy by executing through social and value innovation the strategy was based on a set of actions in a particular time, implementing creativity that led to TBS change the rules of the game and breaking the criterion in the cosmetic industry (Kim and Mauborgane 2005). Besides, customers reactions always impacted TBS success in the market depends on how customer accept the products and make it a habit to include TBS product in their life. In TBS case, cosmetics have been largely used in the society and customers accepted it warmly along with its idea of being vegetarian. In terms of value innovation, The Body Shop added benefits for customers in terms of price and quality. However, TBS also reducing its production cost not using any advertisement or even celebrity endorser to promote their products. Without advertising TBS has managed to achieve high visibility for its products and corporate identity through effectiveness manipulation of news organisation that keep the corporation in the news (Kaplan, 1995). Moreover, TBS started their business with Ethical Approach pursuing the fight for human rights and ethical treatment of animals (against animal testing). The uniqueness of TBS is all of their products are Vegetarian - cosmetic products are made from all natural ingredients. In addition, from its first launch in 1976 TBS experience rapid growth, expanding at a rate of 50% annually. TBS stated that they are different from others cosmetic brands cause of their values. The Value Curve below illustrates the key elements that brought TBS to its success Its shows difference between TBS and the overall cosmetics industry.


Strategic Management TP020298

Figure 6, TBS key elements of products, service and delivery (source:

Hence, it is showed that TBS success was discovered by a blue ocean strategy, which was based on the creativity and innovation in cosmetics industry, as well as TBS values of protecting animal, human, and planet, which led them to be a considered as a company with a high corporate social responsibility. Another company that uses the same method as TBS is Starbucks providing customer with emotionally coffee experiences. --In Summary, by thinking across conventional boundaries of competition, every company can see how to make convention-altering, strategic moves that reconstruct established market boundaries and create blue oceans. The process of discovering and creating blue ocean is not about predicting or preempting industry trends but a process of implementing fresh new business ideas that happens come across the managers minds. In short, trough reorganizing the existing market elements across the industry and market boundaries they will be able to free themselves from tied competition in the red ocean strategies.


Strategic Management TP020298

3.0 Reference (2010) Blue Ocean VS. Red Ocean Marketing Strategy - Which Is Better?. [online] Available at: [Accessed: 27 Feb 2013]. (2012) cirque du soleil | businessmodellingblog. [online] Available at: [Accessed: 10 Feb 2013]. Buzzell, R.D. Competitive Behaviour and Product Life Cycle. In New Ideas for Successful Marketing, edited by John Wright and J.L. Gold stucker, pp. 46-68. Chicago: American Marketing Association, 1966. (2010) Red ocean : The difference of red ocean strategy from blue ocean. [online] Available at:

[Accessed: 15 Feb 2013]. CNNMoney (2011) How Cirque du Soleil got started. [online] Available at: ne/index.htm [Accessed: 2 Mar 2013]. Co-operative News (2012) Cirque du Soleil: an artistic example of cooperation. [online] Available at:

example-cooperation [Accessed: 5 Mar 2013]. Fouraker, L.F., and Siegel, S. Bargaining and Group Decision Making: Experiments in Bilateral Monopoly. New york: McGraw-Hill, 1960. GMBAcircus (2013) Cirque du Soleil Questions. [online] Available at: [Accessed: 6 Mar 2013]. (2009) Cirque du Soleil--The High-Wire Act of Building Sustainable Partnerships Harvard Business Review. [online] Available at: [Accessed: 3 Mar 2013]. 12

Strategic Management TP020298 (n.d.) Cirque du Soleil Drives Creativity and Expansion with SAP Solutions. [online] Available at: [Accessed: 1 Mar 2013]. Kim, C. and Mauborgne, R. (2005) Blue Ocean Strategy. United States of America: Harvard Business School Publishing Corporation, p.10-80. Kim, C. and Mouborgne, R. (2004) Blue Ocean Strategy: Red Ocean vs. Blue Ocean. [e-book] Available through: [Accessed: 27 Feb 2013]. Kotler, P. Marketing Management. 2nd ed. Englewood Cliff, N.J.: Prentice-Hall, 1972. Layton, D. (2009) Blue Ocean Strategy: Red Ocean vs. Blue Ocean. [online] Available at: [Accessed: 25 Feb 2013]. Life long faith (n.d.) Becoming an Innovative Leader. [online] Available at: [Accessed: 4 Mar 2013]. Meister, M. (2012) Cirque du Soleil: An example of a Global Export Company. [online] Available at: [Accessed: 8 Feb 2013]. Mi, J. (2008) Six Misconceptions about Blue Ocean Strategy. [report] China: p.3 Mar 2013. Osterwalder, A. and Yves Pigneur, Y. (2010) Business Model Generation. [e-book] Canada: John Wiley & Sons, Inc.. p.10. Available through: google scholar epage&q&f=false [Accessed: 26 Feb 2013]. (2008) Promoting Creativity Is Cirque du Soleils Business Strategy. [online] Available 13 at:

Strategic Management TP020298 [Accessed: 7 Mar 2013]. Sidhu, I. (2010) Profiles In Doing Both: Why Cirque du Soleil Isn't Clowning Around About Business Models Forbes. [online] Available at: [Accessed: 3 Mar 2013]. Tarzijan, J. (n.d.) Strategic Management Circus Case B. [e-book] p.5. Available through: 28 Feb 2013]. the Guardian (2009) How Cirque du Soleil's hippy circus took over the world. [online] Available at: [Accessed:

[Accessed: 5 Mar 2013]. Blog (2013) Blue Ocean Strategy for Travel Agents: Moving from Transaction to Strategy. [online] Available at: [Accessed: 4 Mar 2013]. Unknown. (2012) Success Story Cirque du Soleil "Fast Tracks" Leadership Development with Whole Brain Thinking. [e-book] Herrman Global, LLC.. p.6. Available through: [Accessed: 6 Mar 2013].


Strategic Management TP020298

4.0 Appendix

4.1 Five Forces Analysis

Cirque was a new entrant in an industry, which was afflicted with falling revenues and profit for a long time ago. As industries become more competitive, based on the case study the paragraph below will evaluate the business model between traditional circus and Modern Circus in circus industry.

In order to do so, both traditional circus and Modern Circus will be analyzed using Porters 5 forces that will determine the nature of competition within the industry.

Figure 1, The Five Forces Analysis (Source:

Modern Circus has to understand the dynamics of its industries in order to compete effectively in the marketplace. Michael Porter (1980) defined that the forces that drive competition, contending that the competitive environment is created by the interaction of five different forces acting on a business. The table bellows show the key major differences between Cirque du Soleil as an example of Modern circus with Traditional Circus.


Strategic Management TP020298

Figure 2, Differences between Traditional and Modern circus business model, (Source: Jorge Tarzijan,

1. Bargaining Power of Supplier Suppliers can exert bargaining power over participants in an industry by threatening to raise prices or reduce the quality of purchased goods and services (Michael E. Porter, 1980). The more concentrated and controlled the supply, the more power it wields against the market (source:

Compared to traditional circus, Modern Circus has a fairly low bargaining power of supplier. The reason is that, Modern Circus is such a big company that are involve in many raw materials such as clothing, wood and so on. Besides, they have a multiple production, which means that raw materials sometimes have to be changed Modern Circus change costumes almost in every different shows. Therefore, suppliers would not lose such opportunity to work with such successful company and is more likely to sign a long-term contract. Furthermore, suppliers are likely to keep their prices low in order to reduce the choices in choosing suppliers by Modern Circus.

If we look in the traditional circus side, the bargaining power of suppliers is high. To prove the fact, traditional circus uses Star as the performer. Logically, Star Performers (as supplier) charges higher price for the performance they perform and at the same time, traditional circus will want to attract customers. Therefore, traditional circuses have fewer choices, as the Star Performers choices are not limited.


Strategic Management TP020298

2. Bargaining Power of Buyers The power of each of the industrys important buyer groups depends on a number of characteristics of its market situation and on the relative importance of its purchases from the industry compared with its overall business (Kotler, P, 1972)

Modern Circus has a low bargaining power of buyers because it has a Unique Selling Point (USP) Perceived benefits of a good or service that differentiates it from the competing brand or companies, and gives its buyer a logical reason to prefer it over other brands. That is, Cirque du Soleil as one of the Modern Circus is known for its uniqueness compared to traditional circus. They maximized the used of technology in order to be more acceptable in social and business market. Likewise, They offer much more combination of art, circus, theater with its own music and online media trial show in their website with different kind of languages in different countries to attract them. Therefore, Modern Circus is likely to have customers all the time. Besides, buyers decisions are affected by the media and by the location of the show. Referring to the buyers Mordern Circus target market, it does not consist only children but also adults, family, and tourists.

Figure 3, Cirque du Soleil website (Source:

By offering the best of both the circus and the theater, Modern Circus has drawn people to its performances that would never have considered attending a traditional circus. Its prices are in range from $40 to $125 per ticket, which is considered higher compared to traditional circus but worthy. Referring to traditional circuses, the bargaining power of buyers tends to be high. Logically, traditional circuses have 17

Strategic Management TP020298 competitors ad buyers have the option to choose between them. In addition, traditional might be amusing to some groups but repetitive. Customers can shift to Modern Circus that attempted for supplementary spectacular shows, which explains why the bargaining power of buyers in traditional circuses is high.

3. Threats of New Entrants The threat of entry into an industry depends on the barriers to entry that are present, coupled with the reaction from the existing competitors that the entrant can expect (McGraw-Hill, 1960). The threat of new entrants for Modern Circus is relative low, because the barriers for the new entrants are high. Economies of scale, product differentiation and capital requirements are the major sources of barriers for the new entrants to compete with Modern Circus. As we know, this type of business requires a huge capital investment in order to be competitive and to establish a brand name in the new market. Therefore, it is regrettably hard for the traditional Circus to compete with Modern Circus where the innovation and creativity were at the core of the companys business. 4. Threats of Substitutes Identifying substitute products/services is a matter of searching for other products/services that can perform the same functions as the product/services of the industry (Buzzell, R.D, 1966). In the case of Modern Circus market, the substitute is limited or low. Modern Circus has established the niche market demand for a very specializes product or commodity - of live entertainment mixed with artistic innovative shows that avoided laud background music, which was used by the traditional circus. Traditional circus could not substitute Modern Circus, because of the product differentiation. Modern Circus provide a much better and unexpected shows to the public and customers are less likely to find comparable reasons to meet their needs versus traditional circus. Hence, Modern Circus tempted to has Substantial Product Differentiation that will have a long-term positive impact on the business. In traditional circus, it is more about fun compared to artistry, which is present in 18

Strategic Management TP020298 Modern Circus. Therefore, traditional circuses are more likely to have higher threats of substitute as customers may choose other entertainment such as casinos, opera, theatre and fairway entertainment. 5. Intensity of Rivalry Rivalry occurs because one or more competitors either feels the pressure or sees the opportunity to improve their position-using tactics like price competition, advertising battles, product introductions, and increased customer service or warranties. (Spence, A.M, 1977) As mentioned before, Modern Circus has low threats of substitute, which automatically means that, it has exceedingly low intensity of rivalry. Modern Circus is not precisely as a circus but it is more on top of Traditional Circus. Modern Circus redefined its market by fusing art and entertainment; therefore their market share was increasing from year to year, which is threatening to traditional circus because the total industry size is also growing. Thus, large industry size allows Modern Circus to multiple firms and produces to prosper without having to steal market share from each other. However, traditional circuses do face rivalry as mentioned before opera, theatre and so on. Conclusion In conclusion, after analyzing the two types of circuses using the Porters 5 forces, it can be seen that Modern is more on the bright sight compared to traditional circus. That is, in line with the forces, Modern Circus, consisting of Unique Selling Point has more competitive strength than traditional circus within the industry. To achieve such strength, Modern Circus has been able to eliminate some aspects that were considered unfavorable in traditional circus such as animals, which provide negative odor, do away with Star performers, and has reintegrated some unique concept. Cirque du Soleil has been delineated as a modern circus, by being unique make and able to consistently put together a well show/performance and has merely the ability to make a different experience, which created a loyal customer base - customers who have bought the products or used the services of a particular company.

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