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INTERNATIONAL BUSINESS STRATEGIES Group essay: Cirque Du Soleil On The Global Market

Students: Ponomarenko Polina, IM-2 Romanov Stanislav, IM-3 Darina Zaytseva, IM-3 Maria Puchkova, Marketing

2012

Contents
History of Cirque du Soleil and its situation nowadays. ............................................................................... 3 External and Internal analysis ....................................................................................................................... 4 Resource based view: ................................................................................................................................ 4 Headquarter: ............................................................................................................................................. 5 Organizational Culture: ............................................................................................................................. 5 X Factors: ................................................................................................................................................... 6 Strategy: .................................................................................................................................................... 6 Implementation: ....................................................................................................................................... 6 Companys background. ................................................................................................................................ 6 Competition............................................................................................................................................... 7 Alternatives ............................................................................................................................................... 7 Strategic Group Analysis ............................................................................................................................... 8 The New York City Ballet. .......................................................................................................................... 8 Chinese State Circus. ................................................................................................................................. 9 West End Partnership................................................................................................................................ 9 Industry Overview .......................................................................................................................................10 Porters Five Forces Summary: ................................................................................................................10 SWOT .......................................................................................................................................................10 Challenges of Cirque du Soleil .....................................................................................................................10 Blue Ocean Strategy. ...................................................................................................................................14 Value Innovation: ....................................................................................................................................16 Internationalization and network approach. ..............................................................................................23 Circue du Soleil in Russia. ............................................................................................................................24 Recommendations for Cirque Du Soleil ......................................................................................................28 List of references .........................................................................................................................................30

History of Cirque du Soleil and its situation nowadays.


Founded in 1984 by a group of young street performers, Cirque du Soleil has been in constant evolution since its creation. The company enjoys excellent international recognition and is reputed to have reinvented circus arts. While Cirque du Soleil had sales of $1.7 million, 50 employees and 23 performers in 1984, in 2000, sales will reach $407 million and it will employ 1,370 employees and 445 performers. It will present seven shows in 2000 on three continents: North America, Europe and Asia. Also, in order to adequately manage all its personnel, it has four separate headquarters. Besides International Headquarters in Montreal, it has four other head ofces: Headquarters America, also in Montreal, Headquarters Europe. in Amsterdam, Headquarters Las Vegas in Las Vegas, and, lastly, Headquarters Asia-Pacific in Singapore. While Cirque du Soleil would like to nd and exploit new niches related to presenting shows, the majority of its revenues come from ticket sales. Thus, the vital nucleus of the Cirque remains presenting shows. In this respect, the Cirque has four fixed shows, two touring shows in Asia, one in North America and another in Europe. A touring show comprises 150 to 200 people, including 50 to 70 performers, and it has to relocate, on average, every six weeks, which demands very skilled logistics and effective planning of the entry authorizations for the different countries on the tour. Relocating means moving personnel, their baggage and the Cirques equipment from town to town. It also means lodging all these people and ensuring they obtain the required visas and work permits in order to be able to practice their art in the countries the tour is visiting. To attain the level of excellence set by Cirque du Soleil, talent scouts and recruiters travel the globe in search of artists, creators, coaches, musicians, etc. Consequently, the Cirques performers and personnel come from more than 30 countries and speak various languages. Also, while the average age of employees is relatively young at 32, the age of the performers and employees varies from 3 to 62. In short, Cirque du Soleil is an international company, fuelled by the level of excellence it has achieved in the past and its constant desire to push the limits Cirque Du Soleil was founded by Guy Laliberte, Gilles Saint-Croix and Daniel Gauthier. The firm blends opera, dance, theatre and circus with live music, excellent choreography and amazing pyrotechnics. The firm intends to present the circus in a different way which moves peoples emotions and takes them to a happy peaceful world. The firm did not face much direct

competition until very recently. Therefore now, the firm intends to improve and sustain their current position and move in new areas of similar kind of business.1

External and Internal analysis


The external analysis comprises of industry analysis which includes the competitors and financial analysis. Cirque du Soleil started off as a street band and now is a very popular circus that blends opera, dance, and theater and is very popular since last twenty years. They performed in 90 cities and achieved many awards and still have a lot of demand for shows and there is also high demand for jobs, these shows that they have strong product features and brand positioning. They make small profit ranging from 15 to 20%. However it has local competitors who have international recognition and also foreign competitors. Even though these competitors are not very strong, they do create problems to retain top performers and create issues regarding payment. The financial analysis reveals that one problem the company is facing to diversify and expand its business is due to the lack of internal financial resource. Although the company has sufficient liquidity to maintain and sustain its position but in order to expand its business, the company requires large sums of money which it is unable to generate internally. The company is looking for partners and even came to arrangements twice with two institutions but both times the projects failed once due to exclusivity disagreements and the other time due to economic downturn. Analysis on resources and capability show that they have a very good Human Resource Management that takes care of their employees and even manage talent hunt so that there is never a shortage. There is both vertical and horizontal job mobility which allows employees to gather experience. The costumes are custom made including dying and treating their fabrics.

Resource based view:


1. Technical skill: Cirque Du Soleil has a talented troupe. It recruits performer from major sporting events and train them for three months. These skilled performers are valuable for the company but it is not rare. Competitors like cirque Eloize, cirque Dos, Feld Entertainment may have skilled performers. So having skilled artist is not a competitive advantage of Cirque Du Soleil.
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Study mode[Electronic resource] // Case study : http://www.studymode.com/essays/Bbvxcvv1037787.html, . . .

2. Brand Image: Cirque Du Soleil is very renowned in entertainment industry. They have twenty years of experience. They have been performed over ninety cities and about thirty seven million people have seen their show .In every show they performed stunning. The president of the organization Mr.GuyLaliberte is known as creative dreamer in the industry. Cirque Du Soleil also has garnered many awards in many categories. So the organization has strong brand image and it works as a competitive advantage for the organization as because this brand image is valuable .It is rare, inimitable and non-substitutable. 3. Management skill: Human Resources: Cirque Du Soliel is very sound in managing their human resources. As they have created an outstanding management strategy. In 2002 its HR department won Workforce Magazine Optimas award in the global outlook category. Such management skill is a competitive advantage of the organization because it is valuable, rare, not imitable and non-substitutable. 4. Business Process: Vertical Integration: Cirque Du Soleil is vertically integrated. All the steps for providing superior entertainment service to the consumers are done by the organization itself like- recruiting, show theme creating, costume preparing etc. Vertical integration is valuable but it not rare or incomparable or non-substitutable. So it does not work as a competitive advantage for the organization.2

Headquarter:
Cirque Du Soleils headquarter is located on seventy five thousand square meters of land in the North End of Montreal. Formerly it was a waste dump area, Building the headquarters in that area was a part of an urban revitalization plan for that area. This large headquarter may give the organization a competitive advantage as it is valuable, rare, non-substitutable. And competitors cannot copy it very quickly.

Organizational Culture:
Cirque Du Soleil is a decentralized organization. It has offices in America, Middle East and Europe, Oceania and Africa. Very smoothly it is managing its twenty five hundred employees from forty nationalities speaking in twenty five different languages. Appropriate organizational culture may work as a competitive advantage for the company because it is valuable and rare..It is not easily imitable and substitutable.
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Scribd[Electronic resource] : http://www.scribd.com/doc/51450679/case-analysis-cirque-dusoleil ,. . .

X Factors:
Creation and Innovation is an X factor of Cirque du Soleil. They have satisfied customer's pursuit of novel and their teams are highly motivated with creation and innovation. This comprised of the universal language and the fact that there are no animals in the shows.

Strategy:
To ensure that Cirque Du Soleil stays at the forefront of the industry, the company should follow the following strategies. Due to competition in finding talent, Cirque must continue to scout for potential talent in the Olympics and the sporting events but also improve the training programs for their future performers. This would lead to an elevated talent pool and result in consistent quality of their shows. The company should diversify its product line which would include building the Montreal Mega Complex and improving the quality of the television show to add further value to their brand image.

Implementation:
The company should go public and initiate an IPO to gather finance for its two strategies. Funds from the IPO should be used to finance the Montreal Mega Complex and provide extra benefits in discovering talent. This would add great weight to the company`s capabilities and increase its reputation and hopefully its success as well.3

Companys background.
A rational look at the circus industry, at least in North America, would have caused most rational business people or even visionaries to choose another path. The modern circus was already a century old and in decline when Cirque formed. Circus popularity had been dwindling since the sixties as a plethora of alternate forms of entertainment including movies, television and theatre were wooing audiences. While brand names such as Ringling Brothers and Barnumand Bailey still held some sway; other companies in North America were merging to stay afloat or simply just existed as small entities. Internationally the situation was no less grim; although the circus tradition was centuries old in Europe, Asia, South America and Africa new audiences were not attracted to the big top.

Scribd[Electronic resource] : http://www.scribd.com/doc/51450679/case-analysis-cirque-dusoleil ,. . .

Attracting audiences depended heavily on drawing new acts; as are sult the talent or stars held increasingly larger power of the circus owners. Not in itself a problem if revenue is growing to offset the increased demand; but this was not the case. Additionally, the animals that were a key component to the attraction of the circus were causing ethical headaches for the industry also. By the eighties the cry from animal rights groups was gaining greater traction; further hurting the luster of the industry in the eyes of the general population.

Competition
Depending on how wide one casts the net, Cirque was competing for the entertainment dollar on many fronts. In the circus industry Ringling Brothers and Barnum & Bailey (RBBB) were by far the biggest company globally when Cirque was founded in 1984. RBBB traces its combined origins to 1907 and has changed ownership several times over its century plus of existence. RBBB is currently part of Feld Entertainment (producers of Disney on Ice) who generates about $US675 million across all of their properties. RBBB currently offers 4simultaneous productions that it tours in the United States and occasionally in Canada and parts of Europe. Although at its inception Cirque was similar in narrative and show elements to the Moscow Circus it is now much wider in scope of productions, size and global foot print. The success of Cirque has led to many imitators; even some spawned from former Cirque employees. These imitators tend to have French sounding names and sub-specialize to differentiate themselves. Over time as Cirque grew to dominate the industry its competitive threats came from outside of the industry in the likes of other live productions and alternate forms of entertainment

Alternatives
In the wider scope of things Cirque was competing against a variety of entertainment forms closely related to performing arts and further removed. The most prominent being:

Broadway/Theatre Dance Opera Sporting Events Music Concerts

Movies4

Strategic Group Analysis

HIGH

PRICE

LOW
Main competitor in case of price and global presence: NARROW New York City Ballet

BROAD

GLOBAL PRESENCE

The New York City Ballet.


The New York City Ballet is a ballet company founded in 1948, is one of the foremost dance companies in the world, is unique in US artistic history. Solely responsible for training its own artists and creating its own works, the New York City Ballet was the first ballet institution in the world with two permanent homes, the David H. Koch Theater at Lincoln Center and the Saratoga Performing Arts Center in Saratoga Springs, New York. Explore what New York City Ballet has to offer its rich company history, repertoire of ballets, and world-class dancers.5

Case study [Electronic resource] // Scribd : http://www.scribd.com/doc/64318725/Case-StudyCirque-.., . . .


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The Company [Electronic resource] // New York City Ballet : http://www.nycballet.com/Explore/The-Company.aspx, . . .

Chinese State Circus.


Chinese State Circus is a touring circus that aims to present Chinese circus arts to European audiences. The show is based on Chinese acrobatic acts. All the performers come from China and are trained in the Chinese tradition of Ma Xi, or hippodrama (horse theatre). The show combines kung fu martial arts from the Shaolin Temple, artists from the Peking Opera and other Chinese acts. Continuity is provided by the figure of the Monkey King who appears between acts. The show also includes a lion dance, plate spinners, diablos, aerial silks and an excerpt from the Chinese opera.6

West End Partnership


London's West End is the world's top cultural, entertainment , shopping and dining destination, with a global mix of over 2,500 restaurants and bars, 2,000 shops, 40 renowned theatres, 30 museums and galleries, 17 Michelin-starred restaurants and seven tranquil green spaces. The West End Partnership brings together a range of businesses and organisations with a shared interest in the continued success of the West End. The vision of the partnership is to make the West End even more famous as the destination for unrivalled shopping, dining, entertainment and culture through collaborative promotion and marketing.7 Members of the partnership include: Crown Estate, Covent Garden London (Capital and Counties), Heart of London Business Alliance, London and Partners, New West End Company (incorporating the Regent Street Association), Shaftesbury PLC, Society of London Theatre, West End Culture Quarter and Westminster City Council. As far as you can see there are no direct competitors, just except Chinese State Circus, but it has lower global presence than Cirque Du Soleil do.

The Show [Electronic resource] // Chinese State Circus :http://www.chinesestatecircus.com/introduction.html, . . .


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West End Partnership [Electronic resource] // WestEndLondon :http://www.westendlondon.com/homepage/about-us/, . . .

Industry Overview
This classic framework on industry attractiveness clearly indicates that in all material respects the circus industry was not one that newcomers should enter and expect to achieve any significant level of success.

Porters Five Forces Summary:


Competitive Rivalry Competitor Balance Industry Growth Rate High Fixed Costs Low Differentiation Barriers to Entry Some Barriers to Entry High Cost Based High Capital Investment Distribution Price Power of Suppliers Concentrated Suppliers High Switching Costs Power of Buyers No Brand Loyalty Low Switching Cost Buyer Competition Threat Threat of Substitutes No Brand Loyalty No Close Consumer Relationship Price No Switching Costs for Consumer

SWOT
Strengths Unique and original shows, status of a noncircus show Leader on the market High quality Strong corporate image Well-organized logistics Production diversity Absence of animals Opportunities Diversification of product portfolio that could fit to diverse audiences Expand geographically Offer of more affordable tickets Weaknesses Threats Competition from opera, dance, and circus shows High prices may result in customers choosing lower cost substitutes High stuff turnover (18-22%) High overheads Lack of strategic planning No place for big name acts High prices for tickets No permanent show outside the US

Challenges of Cirque du Soleil


Lack of strategic planning: Given its growth plans, both in terms of the number of shows presented and the establishment of new commercial activities, Cirque du Soleil must apply itself to adapting its structure and, above all, to ensuring that its managers have the ability to support such development. In this respect, several managers who have grown up with Cirque du Soleil and who have thus acquired broad operating experience are having some difficulty moving to a
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strategic management mode. Given their extensive knowledge of how the Cirque operates, they too often remain occupied or preoccupied with operating questions, rather than investing their energy more in strategic planning. 8

High stuff turnover: Also, given the increased number of tours planned, another problem that already exists is likely to get bigger. Due to the difficult touring conditions, such as the frequent relocations, the increased number of shows per week and working conditions in general, the turnover rate among employees is very high. On average, they work for the Cirque between 19 and 24 months, which creates a turnover rate of 18-22%. In spite of the efforts made to reduce the inconveniences inherent in touring, problems still remain. For example, the Cirque offers the services of a tutor to child performers and to the children of performers. However, because of the costs this would entail, this service cannot be offered to all the children of its personnel. Despite the advantageous salaries, Cirque du Soleil is experiencing some difficulties in retaining its touring personnel.

Cultural diversity of the stuff: It is important to note that, in the touring shows and in International Headquarters in Montreal, the presence of many people of different nationalities, speaking different languages, is a challenge. Indeed, while the presence of Quebec or Canadian performers at International Headquarters and on tours is often secondary, having several nationalities greatly inuences the quality of communications. And, depending on the cultural baggage of each person, the perception of the message communicated can differ greatly. Since cultural references are very divergent, what are innocuous gestures to some have unexpected implications for others.

However, despite these difficulties in perception, Cirque du Soleil has always greatly valued cultural diversity and has always emphasized the richness it brings, rather than the differences it creates. Communications are extremely open and the moral authority that certain hierarchical titles could impose is practically non-existent. Cirque du Soleil has to constantly manage stereotypes and prejudices. This situation is even more palpable at International Headquarters in Montreal since the performers who work there are, for the most part, passing through, either with the aim of learning a new number, or to take up training again following an injury. Also, people of the same nationality often remain among themselves without mixing very much with other performers of different nationalities.9 Moreover, a centralized organizational structure has both
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Case study[Electronic resource] //Le Cirque Du Soleil:How to manage growth : http://www.portailrh.org/excalibur/en/case/etude_de_cas_2001_an.pdf , . . . 9 Case study[Electronic resource] //Le Cirque Du Soleil:How to manage growth : http://www.portailrh.org/excalibur/en/case/etude_de_cas_2001_an.pdf, . . .

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weak and strong sides. Separations can exist between show participants and administrative employees. An even bigger understanding gap could occur between for performances in different geographical markets. Competitors: The overview of the strategic group analyses illustrated that Cirque du Soleil has the highest level of both global presence and prices. However, one of the main rivals of the company the Chinese State Circus is constantly broadening its global presence whereas the prices for tickets are lower than in case of Cirque du Soleil. This may result in competitive advantage for the Chinese State Circus and loss of customers and money for Cirque du Soleil. Speaking about the whole situation on the particular industry, creating the new market leads Cirque to blue ocean strategy, which making Cirque very successful over a decade. However there are some competitors who dont have to invest in the marketing perception of customers entering to the same market. For example one rival, Cirque Oz from Australia tried to create something similar with Cirque but open wild to family market. Finally with all of the investment that Cirque spends on market education all these years might be catch up by new rivals who dont have to spend any of their investment to switching customer behavior. Narrow market: Therefore Cirque pretty much focuses on the live entrainment market, which suits adult audiences but not for the family (Delong and Vijayaraghavan, 2002, p.8). It makes the Cirque target market smaller than it should be. The problem addressed in Asian market that Cirque couldnt have the cost break-even in 1997. Moreover Asia organizers didnt see the show performing value, they tried to negotiate to pay Cirque less to manage the costs . Too much on the performance investment: Most of investments go to the human resource department. All of the money that Cirque has invested on the human resources is completely supporting the performing artist as the organizations expectation. However Cirque doesn't think about barrier cost that the company has to spend to prevent the new rivals and the organization doesnt work on market study to look for the need of customer.

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Lack of concentration on customers needs: Customers wants and new entry competitors is not under the concern of Cirque: In contrast, All of Cirque shows dont depend on the market needs but charisma of artists. However the creative marketing strategies might not be enough for Cirque when there are the competitors in the market who can intergrade the mix elements, which suit customer needs especially family market that is not brand positioning of Cirque Lack of promotion: Market positioning of Cirque is the innovation strategy, which the creation of marketing mix that enables the business to achieve its objectives in a target market. There is one element missing from Cirque market strategy that is the promotion. In this case, Cirque doesnt have to give away free tickets or has any discount for the audience. What Cirque really needs to do that is the marketing study, which means looking for what the audiences like and dont like, and searching for what do they want more from the show.10 As for future expansion, Cirque faces both new and old challenges. Some of the old challenges are the possible saturation of the market, shortage of high caliber talent and diversity of the employees making teamwork harde11 Ethical challenges: Although Cirque du Soleil is really involved in social responsibility, it has to deal with some ethical challenges that can result in a bad image of its ethical performance. One of the ethical issues this company is facing and was facing was a discriminatory lawsuit with one of the performers in the circus who tested HIV positive and who was laid off due to the fact of the dangers of the job performing (high risk of injury) and possibly infecting others while on the job. Cirque had other performers who were also HIV positive but they stated that in the case of this performer, the stakes were too high to take a risk. The performers filed suit against Cirque for discrimination while Cirque defended that it was a safety issue. Cirque stayed with its plea that it was a safety issues but settled with the performer to implement a companywide training on discrimination a specials training program for HIV positive employees. Also, due to the fact that Cirque du Soleil is in all parts of the countries, it is hard to have a centralized management system due to the fact that every country has its own rules and
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Doctor of Education[Electronic resource] //Cirque du Soleil Case Analysis : http://doctorineducation.blogspot.com/2012/07/cirque-du-soleil-case-analysis.html, . . .


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Gold Estate[Electronic resource] //Cirque du Soleil : http://gold-estate.com/index.php/cirque-de-soleil/, . . .

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legislation. Therefore, Cirque du Soleil has decentralized its management system which every country has its own rules and regulations. They have 3 headquarters in the world (Amsterdam, Montreal and Las Vegas) which handles the overall HR activities. In this way, Cirque does have a centralized system for the HR activities for all employees involved, but it depends on the country in which these performers are in, which HR legislation rules will and should be followed. Possible challenges in the future. We believe that one of the most important challenges that Cirque du Soleil has to face is to be loyal to its global citizenship principles which are based on establishing arts, business and social initiatives that can contribute to making a better world. Apart from that, Cirque du Soleil has to face the challenge of continuing with international expansion while offering its creators the freedom to dream the wildest dreams and make them come true as well as maintaining its social programs. Moreover, it has to take into account economic crisis. The actual crisis situation that is present worldwide can result in two different consequences. The first one would be a drop of revenues because circus spectacles can be seen as a luxury good that is only affordable as an extra. In this case, Cirque du Soleil will have to create new strategies to deal with the problems like modifying tickets prices, offering special packs with discounts or other aspects that enable people to keep going to the circus but ensuring the same high quality performances. The second one is that in crisis times people wants to forget all their problems and in that sense, Cirque du Soleil can provide them the possibility to dream and to be involved in a magic world in where problems are not present for a while. In this case, it will maintain the profits that will enable it to innovate in the creation of new performances, offering the best quality and having the possibility to increase its socials projects. Therefore, depending on the consequences of the economic crisis Cirque du Soleil will be required to establish one strategy or another one but without forgetting its main core competences: make people dream and be social responsible in contributing to a better world. 12

Blue Ocean Strategy.


As it was already told above, Cirque du Soleil could achieve success in almost dying branch. Cirques rapid growth occurred in an unlikely setting. The circus business was in long-

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We Dream Business[Electronic resource] //Cirque du Soleil : http://wedreambusiness.org/Cirque-Du-Soleil.html, . . .

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term decline. Alternative forms of entertainmentsporting events, TV, and video gameswere casting a growing shadow. Children, the mainstay of the circus audience, preferred PlayStations to circus acts. There was also rising sentiment, fueled by animal rights groups, against the use of animals, traditionally an integral part of the circus. As a result, the industry was hit by steadily decreasing audiences and increasing costs. Whats more, any new entrant to this business would be competing against a formidable incumbent that for most of the last century had set the industry standard. And now it is important to understand how did Cirque increase revenues by a factor of 22 over the last ten years in such an unattractive environment? The tagline for one of the first Cirque productions is revealing: We reinvent the circus. Cirque did not make its money by competing within the confines of the existing industry or by stealing customers from Ringling and the others. Instead it created uncontested market space that made the competition irrelevant. It pulled in a whole new group of customers who were traditionally noncustomers of the industryadults and corporate clients who had turned to theater, opera, or ballet and were, therefore, prepared to pay several times more than the price of a conventional circus ticket for an unprecedented entertainment experience.13 So to understand the nature of business achievement, we need to realize that the business universe consists of two distinct kinds of space: red and blue oceans. Red oceans represent all the industries in existence todaythe known market space. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are well understood. Here, companies try to outperform their rivals in order to grab a greater share of existing demand. As the space gets more and more crowded, prospects for profits and growth are reduced. Products turn into commodities, and increasing competition turns the water bloody. Blue oceans denote all the industries not in existence todaythe unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over.14 Accelerated technological advances have substantially improved industrial productivity and have allowed suppliers to produce an unprecedented array of products and services. The result is that in increasing numbers of industries, supply exceeds demand. The trend toward globalization compounds the situation. As trade barriers between nations and regions are dismantled and as information on products and prices becomes instantly and globally available,
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Cirque du soleil case analysis [Electronic resource] // Slideshare : http://www.slideshare.net/jadrankas13/cirque-du-solei.., . . . 14 Case study [Electronic resource] // Scribd :http://www.scribd.com/doc/64318725/Case-StudyCirque-.., . . .

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niche markets and havens for monopoly continue to disappear. While supply is on the rise as global competition intensives, there is no clear evidence of an increase in demand worldwide, and statistics even point to declining populations in many developed markets. The result has been accelerated commoditization of products and services, increasing price wars, and shrinking prot margins. In overcrowded industries, differentiating brands becomes harder in both economic upturns and downturns. All this suggests that the business environment in which most strategy and management approaches of the twentieth century evolved is increasingly disappearing. As red oceans become increasingly bloody, management will need to be more concerned with blue oceans than the current cohort of managers is accustomed to. There are two ways to create blue oceans. In a few cases, companies can give rise to completely new industries, as eBay did. But in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry. As will become evident later, this is what Cirque did. In breaking through the boundary traditionally separating circus and theater, it made a new and profitable blue ocean from within the red ocean of the circus industry.15

Value Innovation:
The companies caught in the red ocean followed a conventional approach, racing to beat the competition by building a defensible position within the existing industry order. The creators of blue oceans, surprisingly, didnt use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy. It is called value innovation because instead of focusing on beating the competition, company should focus on making the competition irrelevant by creating a leap in value for buyers. Value innovation places equal emphasis on value and innovation. Value without

innovation tends to focus on value creation on an incremental scale, something that improves value but is not sufcient to make you stand out in the marketplace. Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for. In this sense, it is important
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Cirque du Soleil - Case Study [Electronic resource] Youtube // : http://www.youtube.com/watch?v=ZRcN0p0jUqM, . . .

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to distinguish between value innovation as opposed to technology innovation and market pioneering. Value innovation occurs only when companies align innovation with utility, price, and cost positions. If they fail to anchor innovation with value in this way, technology innovators and market pioneers often lay the eggs that other companies hatch. Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean and a break from the competition. Importantly, value innovation dees one of the most commonly accepted dogmas of competition-based strategy: the value-cost trade-off. It is conventionally believed that companies can either create greater value to customers at a higher cost or create reasonable value at a lower cost. Here strategy is seen as making a choice between differentiation and low cost. In contrast, those that seek to create blue oceans pursue differentiation and low cost simultaneously. Before arising of Cirque du Soleil, other circuses focused on benchmarking one another and maximizing their share of already shrinking demand by tweaking traditional circus acts. This included trying to secure more famous clowns and lion tamers, a strategy that raised circuses cost structure without substantially altering the circus experience. The result was rising costs without rising revenues, and a downward spiral of overall circus demand. 16 These efforts were made irrelevant when Cirque du Soleil appeared. Neither an ordinary circus nor a classic theater production, Cirque du Soleil paid no heed to what the competition did. Instead of following the conventional logic of outpacing the competition by offering a better solution to the given problemcreating a circus with even greater fun and thrillsit sought to offer people the fun and thrill of the circus and the intellectual sophistication and artistic richness of the theater at the same time; hence, it redened the problem itself. By breaking the market boundaries of theater and circus, Cirque du Soleil gained a new understanding not only of circus customers but also of circus noncustomers: adult theater customers. This led to a whole new circus concept that broke the value-cost trade-off and created a blue ocean of new market space. Whereas other circuses focused on offering animal shows, hiring star performers, presenting multiple show arenas in the form of three rings, and pushing aisle concession sales, Cirque du Soleil did away with all these factors. These factors had long been taken for granted in the traditional circus industry, which never questioned their ongoing relevance. However, there was increasing public discomfort with the use of animals. Moreover,

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Community Relations [Electronic resource] Cirquedusoleil // : http://www.cirquedusoleil.com/en/about/global-citizen.., . . .

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animal acts were one of the most expensive elements, including not only the cost of the animals but also their training, medical care, housing, insurance, and transportation.17 Similarly, while the circus industry focused on featuring stars, in the mind of the 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. Gone, too, are three-ring venues. Not only did this arrangement create angst among spectators as they rapidly switched their gaze from one ring to the other, but it also increased the number of performers needed, with obvious cost implications. And although aisle concession sales appeared to be a good way to generate revenue, in practice the high prices discouraged audiences from making purchases and made them feel they were being taken for a ride. The lasting allure of the traditional circus came down to only three key factors: the tent, the clowns, and the classic acrobatic acts such as the wheelman and short stunts. So Cirque du Soleil kept the clowns but shifted their humor from slapstick to a more enchanting, sophisticated style. It glamorized the tent, an element that, ironically, many circuses had begun to forfeit in favor of rented venues. Seeing that this unique venue symbolically captured the magic of the circus, Cirque du Soleil designed the classic symbol of the circus with a glorious external nish and a higher level of comfort, making its tents reminiscent of the grand epic circuses. Gone were the sawdust and hard benches. Acrobats and other thrilling acts are retained, but their roles were reduced and made more elegant by the addition of artistic air and intellectual wonder to the acts. By looking across the market boundary of theater, Cirque du Soleil also offered new no circus factors, such as a story line and, with it, intellectual richness, artistic music and dance, and multiple productions. These factors, entirely new creations for the circus industry, are drawn from the alternative live entertainment industry of theater. 18 Unlike traditional circus shows having a series of unrelated dacts, for example, each Cirque du Soleil creation has a theme and story line, somewhat resembling a theater

performance. Although the theme is vague (and intentionally so), it brings harmony and an intellectual element to the showwithout limiting the potential for acts. Le Cirque also borrows ideas from Broadway shows. For example, it features multiple productions rather than the traditional one for all shows. As with Broadway shows, too, each Cirque du Soleil show has an original score and assorted music, which drives the visual performance, lighting, and timing of

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Cirque du Soleil Inc. History [Electronic resource] // Fundinguniverse : http://www.fundinguniverse.com/company-histories/cirq.., . . . 18 A Fantastic Journey [Electronic resource] Cirquedusoleil // : http://static01.cirquedusoleil.com/en/~/media/press/P.., . . .

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the acts rather than the other way around. The shows feature abstract and spiritual dance, an idea derived from theater and ballet. By introducing these new factors into its offering, Cirque du Soleil has created more sophisticated shows. Moreover, by injecting the concept of multiple productions and by giving people a reason to come to the circus more frequently, Cirque du Soleil has dramatically increased demand. In short, Cirque du Soleil offers the best of both circus and theater, and it has eliminated or reduced everything else. By offering unprecedented utility, Cirque du Soleil has created a blue ocean and has invented a new form of live entertainment, one that is markedly different from both traditional circus and theater. At the same time, by eliminating many of the most costly elements of the circus, it has dramatically reduced its cost structure, achieving both differentiation and low cost. Le Cirque strategically priced its tickets against those of the theater, lifting the price point of the circus industry by several multiples while still pricing its productions to capture the mass of adult customers, who were used to theater prices. So the creation of blue oceans is about driving costs down while simultaneously driving value up for buyers. This is how a leap in value for both the company and its buyers is achieved. Because buyer value comes from the utility and price that the company offers to buyers and because the value to the company is generated from price and its cost structure, value innovation is achieved only when the whole system of the companys utility, price, and cost activities is properly aligned. It is this whole-system approach that makes the creation of blue oceans a sustainable strategy. Blue ocean strategy integrates the range of a rms functional and operational activities. In contrast, innovations such as production innovations can be achieved at the subsystem level without impacting the companys overall strategy. An innovation in the production process, for example, may lower a companys cost structure to reinforce its existing cost leadership strategy without changing the utility proposition of its offering. Although innovations of this sort may help to secure and even lift a companys position in the existing market space, such a subsystem approach will rarely create a blue ocean of new market space. 19 In this sense, value innovation is more than innovation. It is about strategy that embraces the entire system of a companys activities. Value innovation requires companies to orient the whole system toward achieving a leap in value for both buyers and themselves. Absent such an integral approach, innovation will remain divided from the core of strategy.

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Blue ocean strategy [Electronic resource] Info Edu // :http://info.psu.edu.sa/psu/fnm/ymelhem/blue ocean str.., . . .

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We outlined the key features of red and blue ocean strategies: Red Ocean Strategy Compete in existing market space Beat the competition Exploit existing demand. Make the value-cost trade-off. Align the whole system of a rms activities Blue Ocean Strategy Create uncontested market space. Make the competition irrelevant Create and capture new demand. Break the value-cost trade-off Align the whole system of a rms activities in

with its strategic choice of differentiation or pursuit of differentiation and low cost. low cost.

Competition-based red ocean strategy assumes that an industrys structural conditions are given and that rms are forced to compete within them, an assumption based on what the academics call the structuralist view, or environmental determinism. In contrast, value innovation is based on the view that market boundaries and industry structure are not given and can be reconstructed by the actions and beliefs of industry players. We call this the reconstructionist view. In the red ocean, differentiation costs because rms compete with the same best-practice rule. Here, the strategic choices for rms are to pursue either differentiation or low cost. In the reconstructionist world, however, the strategic aim is to create new bestpractice rules by breaking the existing value cost trade-off and thereby creating a blue ocean. Cirque du Soleil broke the best practice rule of the circus industry, achieving both differentiation and low cost by reconstructing elements across existing industry boundaries. Is Cirque du Soleil, then, really a circus, with all that it eliminated, reduced, raised, and created? Or is it theater? And if it is theater, then what genre a Broadway show, an opera, a ballet? It is not clear. Cirque du Soleil reconstructed elements across these alternatives, and, in the end, it is simultaneously a little of all of them and none of any of them in their entirety. It created a blue ocean of new, uncontested market space that as of yet has no agreed-on industry name.

The six principles of a blue ocean strategy. Formulation principles Reconstruct market boundaries Focus on the big picture, not the numbers Reach beyond existing demand Get the strategic sequence right Execution principles
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Overcome key organizational hurdles Build execution into strategy Risk factor each principle attenuates Search risk Planning risk Strategic profile

Scale risk Business model risk Risk factor each principle attenuates Organizational risk Management risk

Cirque du Soleils strategic prole meets the three criteria that dene blue ocean strategy: focus, divergence, compelling tagline.

Cirque du Soleils strategy canvas allows us to graphically compare its strategic prole with those of its major competitors. The canvas shows clearly the extent of Cirque du Soleils departure from the conventional logic of the circus. The gure shows that the value curve of Ringling Bros and Barnum & Bailey is the same basic shape as those of smaller regional circuses. The main difference is that regional circuses offer less of each competing factor because of their restricted resources. By contrast, Cirque du Soleils value curve stands apart. It hasnew and noncircus factors such as theme, multiple productions, rened watching environment, and artistic music and dance. These factors, entirely new creations for the circus industry, are drawn from the alternative live entertainment industry of theater. In this way, the strategy canvas clearly depicts the traditional factors that affect competition among industry players, as well as new factors that lead to creation of new market space and that shift the strategy canvas of an industry.

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From Head-to-Head Competition to Blue Ocean Creation Head-to-Head Competition Blue Ocean Creation

Industry

Focuses on rivals within its industry

Looks

across

alternative

its

industries Strategic group Focuses on competitive position Looks within strategic group Buyer group across strategic groups

within industry

Focuses on better serving the buyer Redenes the industry buyer group group

Scope of product

Focuses on maximizing the value of Looks across to complementary product and service offerings within product and service offerings the bounds of its industry

Functional emotional orientation Time

- Focuses

on

improving

price Rethinks the functional- emotional

performance within the functional- orientation of its industry emotional orientation of its industry Focuses on adapting to external Participates in shaping external trends as they occur trends over time

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So, having completely analyzed strategy of the blue ocean we with confidence can tell that the choice of this strategy exactly helped for their successful internationalization. They offered new entertainment which was interesting not simply adult, but the adult worldwide.

Internationalization and network approach.


The network approach argues that economic activity is a part of social interaction. Thus, economic processes, such as price formation and distribution of resources are under influence not only economic factors, but also social interaction between the seller and the buyer. The market is considered as set of specific independent subjects which by means of interaction build the long-term relations. All subjects of a network are interconnected. These relations or straight lines (with suppliers and distributors), or indirect (with end users and competitors). In a case with Cirque du Soleil it is the indirect relations. By means of gradual internationalization circus and its audience becomes interdependent that provides stability of this company. However it is possible to argue that dependence incomplete that creates conditions for dynamism and flexibility of a network. The network approach emphasizes importance of the long-term relations between the companies. Firms are inclined to creation of the long-term relations as it provides with it a certain position in the market. According to model internationalization the network approach considered as development of a position of firm and establishment of relationship with partners in the foreign markets. The Cirque du Soleil carries it out by means of penetration on the international markets and there the developments of positions. Such approach allows the company to notice all new possibilities of the market. Process of internationalization of firm considerably is defined by its position. The position is characterized, in particular, by two parameters: extent of internationalization of the company and extent of internationalization of branch to which the company belongs. Extent of internationalization of branch reflects quantity and force of communications between subjects of a global production network in this branch. A combination of two parameters give a matrix consisting of four cells Extent of internationalization of branch Low Extent internationalization of Low of
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High The late wandering

Early the starting

firm

High

International and alone

One among the equal

Considering activity of Cirque du Soleil and being guided by the above-stated analysis of competitors, it is possible to tell that it accepts a situation international and alone. This situation is characterized by high extent of internationalization of firm, it already has a quantity of considerable foreign communications. While extent of internationalization of branch low, that is other companies didn't manage to develop such relations yet. Such position has more advantages, than shortcomings: First of all, the firm possesses knowledge and experience in the foreign markets. The company position in foreign networks favourably differs from a position of competitors. Such situation gives the chance for control of activity of competitors in foreign markets. The international firm tests less difficulties at an exit to the new markets. Expansion isn't so dependent on similarity existence between foreign and internal the markets. Besides, the international firm has at the order wider set of models of penetration on the market. As to strategy international alone gets considerable advantages to expansion and penetration implementation, especially in highly structured networks. However, before firm there is a question of activity coordination in the various markets that gives the importance of strategy of the international integration.

Circue du Soleil in Russia.


For Cirque du Soleil Inc., showing Zarkana inside the Kremlin means unparalleled exposure in Russia, a market it has targeted as the right fit because of its huge size, rich theatrical tradition and emerging middle class for a major expansion. Getting inside the Kremlin is a big step, even for a company that has already established itself as one of the few truly globally-known Canadian brands. With about $1-billion in annual revenue, and 5,000 employees worldwide, it represents a significant cultural export for a country that can boast of few iconic brands beyond the BlackBerry and Four Seasons Hotels. More than 100 million people in 40 countries have seen Cirque du Soleil shows over the past 2 decades. Indeed, Russia now ranks among the top five countries for Cirque du Soleil, along with the United States, Japan, Spain and Brazil.
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To break into the Russian market, in 2008 the company created a subsidiary called Cirque du Soleil Rus and opened a permanent Moscow office. In the first three years, the company invested $42-million in the country and sold over 700,000 tickets to the touring shows Varekai, Corteo and Saltimbanco. But it was the three-month, $57-million Russian production of Zarkana which required a feat of engineering to get it inside through the narrow 15th century Kremlin gates that cemented Russia as its fastest-growing market. Its a startling success in a country where just 2 per cent of the population knew what Cirque du Soleil was in 2008. Mr. Lamarre, president and chief executive officer of performance troupe Cirque du Solei, says there are two reasons the leap into Russia has worked as well as it has. The first was a decision to hire an all-Russian staff for the Moscow office, people that knew the environment the company would be operating in. (The performers were already more than 20 per cent Russian, a testimony to the strong circus tradition in the country. Mr. Lamarres other move was to reach out to a pair of veteran Russia hands, the father-and-son team of George and Craig Cohon, who agreed to become 25 per cent partners in Cirque du Soleil Rus. Zarkanas themes of love and revolution (which get lost amid the incredible feats of athleticism that are naturally the shows real draw) might have been deemed provocative in the current environment had Cirque du Soleil put on the same version of the show that they did at Radio City Music Hall in New York. But instead of having the lead characters open and close the show by singing all we need is a revolution! as they did in English during Zarkanas New York run Cirque du Soleil replaced the shows dialogue and song lyrics with an invented language. (The non-word revolna is now sung where revolution had been in the original script.) Maybe its the highrisk nature of the show they put on, but Mr. Lamarre says the company will expand, rather than limit, its exposure to Russia. Its a long-term commitment to Russia, he said. And the next target market wont be any easier to crack. Were spending a lot of time right now doing in China what we did in Russia, which is talking to a lot of people and exploring the market. We hope for a big breakthrough in China soon. Thats certainly our main priority now. Saltimbanco that has recently started its tour in Russia offers its spectators to see a Cirque du Soleil signature show. Launched in the year 1992, this spectacle has been seen by more than 12 million people in over 200 cities across the globe. In 2007 Saltimbanco was restaged for
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arenas to embark on a brand-new journey. Today the Saltimbanco troupe performs at the best sports arenas in the world and manages to visit more and more cities bringing vigor, drive, talent and artistry that are intrinsic to all Cirque du Soleil productions. The name of the show comes from the Italian saltare in banco, which literally means to jump on a bench. Saltimbanco is inspired by the urban fabric of the metropolis drawing spectators into a fanciful world of joyful acrobatics and unbelievable athletism in a metropolis. Considered to be a signature show, Saltimbanco keeps dazzling audiences around the world with its bright images, colorful costumes and a highly eclectic cast of characters. October 17th, 2011, Ekaterinburg On Saturday, Cirque du Soleil premiered with Saltimbanco in Ekaterinburg, a new city on its geographical portfolio in Russia. Saltimbanco that has recently started its tour in Russia offers its spectators to see a Cirque du Soleil signature show. Launched in the year 1992, this spectacle has been seen by more than 12 million people in over 200 cities across the globe. In 2007 Saltimbanco was restaged for arenas to embark on a brand-new journey. Today the Saltimbanco troupe performs at the best sports arenas in the world and manages to visit more and more cities bringing vigor, drive, talent and artistry that are intrinsic to all Cirque du Soleil productions. The name of the show comes from the Italian saltare in banco, which literally means to jump on a bench. Saltimbanco is inspired by the urban fabric of the metropolis drawing spectators into a fanciful world of joyful acrobatics and unbelievable athletism in a metropolis. Considered to be a signature show, Saltimbanco keeps dazzling audiences around the world with its bright images, colorful costumes and a highly eclectic cast of characters. It is a true family show. Even very young Cirque du Soleil friends will sincerely enjoy travelling to the dreamlike world with myriad forms of inhabitants, acrobatic prowess and artistic clown performances. As all Cirque du Soleil shows, Saltimbanco is distinguished for an international team of artists all in all there are 51 artists from more than 20 cities. The Saltimbanco tour that started in Ekaterinburg will later travel to Kazan, Moscow and Saint-Petersburg, and the last city on the schedule will be Kiev, Ukraine. It is always such a big excitement to come to new cities boasting specific entertainment preferences and cultural traditions. And of course it is a pleasure to witness time after time that Cirque du Soleil
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shows keep resonating with the hearts of the Russian audience. Ekaterinburg greeted us with such a warm welcome that we even added one more matinee show that will take place on October 20th, said Natalia Romanova, Director General of Cirque du Soleil Rus. Unlike other shows that already visited Russia, Cirque du Soleil productions of this kind usually stay in the cities for a very short period of time, i.e. from several days up to a couple of weeks. That is the reason why Cirque du Soleil would like to appeal to its admirers willing to open up new horizons and learn new things with a request not to put off acquiring tickets: Cirque du Soleil box offices are already operating at the venues of the show in Ekaterinburg and Kazan (cash sales); box offices in Moscow and Saint-Petersburg will open in the course of the next week Saltimbanco is the third show on Cirque du Soleils portfolio in Russia. Its tour is supported by the MasterCard Company, being the Official Card of the show. Across the whole span of the Saltimbanco venues in Russia, Cirque du Soleil spectators will be able to acquire five kinds of prepaid MasterCard PayPass cards emitted by the Russian Standard Bank and valued starting from 1,000 to 15,000 rubles. These prepaid cards will be accepted not only at the venues of the show, but also at every place accepting the MasterCard cards. Since these cards feature the Saltimbanco Cirque du Soleil imaginary, which is exclusive for the tour in Russia, they will surely become a perfect gift and remembrance of the show, All Saltimbanco engagements in Russia will be traditionally supported by the Infiniti luxury car brand. In March 2010 Infiniti announced the launch of global partnership with the globally recognized Cirque du Soleil company as its official sponsor and an exclusive car partner. This is the first ever sponsorship experience of this kind both to Infiniti and Cirque du Soleil. This global partnership is based upon the cooperation background that Infiniti and Cirque du Soleil already enjoy on such markets as Canada, Russia, Korea and the Middle East. The two brands are perfectly aligned with the Inspired Performance philosophy, which arouses inspirations and offers highly positive experiences. Saltimbanco partners in Russia: Official card Official automobile partner Official suppliers MasterCard Infiniti Rich, Kronenbourg 1664, William Grants & Sons and LINDT PERSONA
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Official beauty partner Media partners TV partner

Elle RIA Novosti, Yandex STS Channel

Recommendations for Cirque Du Soleil


On the base of the current situation we figured out a set of recommendations for the company. Strategic planning

One of the challenges of the company which was mentioned before is lack of strategic planning. We suppose that the first job that the company has to focus immediately is that the balancing between the making money, keeping good performing, creating the shows that serve customer need by not killing the soul of Cirque. 20That`s why Cirque Du Soleil should form a strong strategic management team, or, at least find business partner who has the business decision-making senses. HR-management

This sphere should certainly be paid a lot of attention due to such problems of Cirque Du Soleil as high turnover despite high salaries and cross-cultural misunderstandings between personnel of the company. Some training supporting corporate morals and giving the performers and other stuff the sense of unity should be implemented. Finding talents

Due to competition in finding talent, Cirque must continue to seek for potential talent in the Olympics and the sporting events but also improve the training programs for their future performers. This would lead to an elevated talent pool and result in consistent quality of their shows. Diversification

The company should diversify its product line. The organization must understand that the same performance and the same production might not work well in every market. The customers in different culture and different country have the unique perception in creativity and innovation. The market study will help Cirque to create the best performance that match with customer culture. Besides, company can use celebrity icons as a theme for the shows. This approach can bring innovation and join all the continents together at the same time.

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Doctor of Education[Electronic resource] //Cirque du Soleil Case Analysis : http://doctorineducation.blogspot.com/2012/07/cirque-du-soleil-case-analysis.html, . . .

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Celebrities are extremely popular theme nowadays, which can attract more customers. For instance, now the show Michael Jackson Immortal is gaining more and more popularity. Joint venture

Creating a joint venture would be profitable for the company both in terms of promotion and financing. For instance, Cirque can work with sportswear and sports equipment companies such as Nike, Addidas and so on. Both parties fill have their benefit. Market penetration Introduce viral advert to make people interested in new shows, but dont provide them with the ability to substitute live show with the Internet, TV, etc.

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15. Cirque du Soleil - Case Study [Electronic resource] Youtube // : http://www.youtube.com/watch?v=ZRcN0p0jUqM, . . . 16. Community Relations [Electronic resource] Cirquedusoleil // : http://www.cirquedusoleil.com/en/about/global-citizen.., . . . 17. Cirque du Soleil Inc. History [Electronic resource] // Fundinguniverse : http://www.fundinguniverse.com/company-histories/cirq.., . . . 18. A Fantastic Journey [Electronic resource] Cirquedusoleil // : http://static01.cirquedusoleil.com/en/~/media/press/P.., . . . 19. Blue ocean strategy [Electronic resource] Info Edu // :http://info.psu.edu.sa/psu/fnm/ymelhem/blue ocean str.., . . .

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