Cirque du soleil case study analysis

Cirque du Soleil: Searching for a New Blue Ocean By Frank Rothaermel FOUNDED IN 1984 by two street performers, Guy Laliberté and Gilles Ste-Croix, in an inner-city area of Montreal, Canada, Cirque du Soleil today is the largest theatrical producer in the world. With its spectacularly sophisticated shows, Cirque’s mission is to “evoke the imagination, invoke the senses, and provoke the emotions of people around the world.”1 Employing some 5,000 people (one-third of them artists) and with annual revenues of about $1 billion, Cirque is hugely successful. Since its founding, some 200 million people worldwide have been dazzled by its high-quality artistic shows, with some 15 million viewers per year recently. How did Cirque become so successful while most circuses either shut down or barely survive? Cirque’s Blue Ocean Strategy and Value Innovation Using a blue ocean strategy based on value innovation (PLEASE LOOK AT THE PPTs TO UNDERSTAND THE CONCEPT OF BLUE OCEAN STRATEGY!), Cirque du Soleil created a new and thus uncontested market space in the entertainment industry. A blue ocean strategy attempts to make the competition irrelevant by creating new, uncontested market spaces. For a blue ocean strategy to succeed, managers must resolve trade-offs between the two generic strategic positions—low cost and differentiation. This is done through value innovation, aligning innovation with total perceived consumer benefits, price, and cost. Instead of focusing to compete directly with rivals, attempting to outcompete them by offering better features or lower costs, successful value innovation makes competition more or less irrelevant by providing a leap in value creation, thereby opening new and uncontested market spaces. Successful value innovation requires that a firm’s strategic moves lower its costs and at the same time increase the perceived value for buyers. Lowering a firm’s costs is primarily achieved by eliminating and reducing the taken-for-granted factors that the firm’s rivals compete on. Perceived buyer value is increased by raising existing key success factors and by creating new elements that the industry has not offered previously. To initiate a strategic move that allows a firm to open new and uncontested market space through value innovation, managers must answer the four key questions below when formulating a blue ocean business strategy. In terms of achieving successful value innovation, note that the first two questions focus on lowering costs, while the other two questions focus on increasing perceived consumer benefits. Value Innovation: Lower Costs 1.Eliminate. Which of the factors that the industry takes for granted should be eliminated? 2.Reduce. Which of the factors should be reduced well below the industry’s standard? Value Innovation: Increase Perceived Consumer Benefits 3.Raise. Which of the factors should be raised well above the industry’s standard? 4.Create. Which factors should be created that the industry has never offered? Let’s take a closer look at how Cirque used the eliminate-reduce-raise-create framework to reinvent the circus and to create a blue ocean of uncontested market space where competition is less of a concern. ELIMINATE In redefining the circus, Cirque du Soleil eliminated several taken-for-granted elements. First, Cirque did away with all animal shows. In recent years, the public has grown much more concerned about the humane treatment of animals. In addition, animals were the most expensive items for a circus because of their needed care, transportation, medical attention, insurance, and food consumption (a grown male lion can devour some 90 pounds of meat a day).