Cirque Du Soleil Case

Organizational Profile Cirque du Soleil is a Quebec based company recognized all over the world for highquality, artistic entertainment. Since its dawn in 1984, Cirque du Soleil has constantly sought to evoke the imagination, invoke the senses and provoke the emotions of people around the world. Cirque du Soleil is an international organization founded in Quebec dedicated to the creation, production and performance of artistic works whose mission is to invoke the imagination, to provoke the senses and to evoke the emotions of people around the world. In 1984, 73 people worked for Cirque du Soleil. Today, the business has 5,000 employees worldwide, including more than 1,300 artists. At the Montreal International Headquarters alone, there are close to 2,000 employees. More than 100 types of occupations can be found at Cirque. The company’s employees and artists represent more than 50 nationalities and speak 25 different languages. More than 100 million spectators have seen a Cirque du Soleil show since 1984. Close to 15 million people will see a Cirque du Soleil show in 2013 (Cirque Du Soleil). As part of their core philosophy, Cirque du Soleil seeks to develop strategic alliances with corporations looking to align themselves with a global brand that is synonymous with excellence, quality of service, strong community involvement, and of course making the impossible possible. They seek sponsors who not only share these values, but want to work with them to make an even greater impact (Cirque du Soleil). Their global partners include such companies as Infinity, M.A.C, Starwood Preferred Guest, CGI, Xerox, SAP. Additionally, Cirque also partners with companies for specific shows with roles as Presenting Sponsor, Official Sponsors, Cultural Supporters, Official Concierges and Official Suppliers (Cirque du Soleil).

Due to the nature of Cirque’s operations, it is important for them to plan far out ahead of time in order to save money on travel expenses. They have a very elaborate and formal planning process that included strategic planning, long-term planning, tactical planning, and operational planning. The strategic plan, which covers the next 3 to 5 years is formed by the senior management and seeks to align the itinerary with the company’s goals. The long-term planning is done at the biannual meeting and is developed by many individuals including Murray as well as other high level executives. This plan, which is supposed to be 30 to 36 months out, is then relayed to various directors. After long-term plan is the tactical plan which establishes the itinerary and other business deals and spans over the 18 to 30 months. Lastly, the organizational plan consists of the next 12 to 18 months (Jobin & Talbot, 2011). Critical Issue 1: Cirque du Soleil needs to determine whether or not Turkey is a worthwhile location for them to tour, especially given such short notice. Louise Murray of Cirque du Soleil is more than interested in arranging a performance in Turkey, however she is uncertain how feasible this would be. There are multiple items that need to be considered before she can determine if this would be a wise decision. Obviously she is concerned with whether or not this would be a profitable location, but is willing to travel to a less profitable venue if it could have potential strategic benefits. Because Cirque has never visited Turkey, they are completely unfamiliar with the structure, rules, and regulations of the country. Some countries have highly strict immigration laws, and some nations have unfortunate tax codes. Murray would need to acquaint herself with these matters before making her final decision on whether or not Turkey should be toured (Jobin & Talbot, 2011). Alternative 1a: Do not schedule a show in Turkey at this time due to the short notice and unfamiliarity with the country.

Cirque has a very thorough scheduling process that starts two to three years in advance, and involves many sectors of the organization. Murray would have to significantly veer from this planning method to accommodate a tour in Istanbul, also requiring approval from board members and input from other individuals along the way. It may be much simpler and inexpensive to not schedule a show in Turkey at this time, or move the date back, thus allowing Cirque more time to prepare as they are used to (Jobin & Talbot, 2011). This could be beneficial to Cirque because it would simply avoid the hassle and headache of taking all the mandatory steps to alter their schedule for 2010. With it already being on the verge of 2009, Murray and her team would have to do twice the amount of work to coordinate a show in Turkey. This could also distract them from the many other venues they are organizing, causing them to potentially miss other opportunities. Additionally, it does not mean that Cirque would never perform in Turkey, just simply not as quickly as the inquiries from the two interested parties proposed. While it may be simpler for Cirque to decline working in Turkey at this time, it may be a missed opportunity for significant profits and strategic positioning. A detailed quantitative analysis shown in figure 2 shows that profits would likely be realized if Cirque could perform in Turkey without an international transfer. Therefore, Cirque would simply lose any profit from a show in Istanbul if they chose to not perform there at this time. Additionally, with Istanbul being selected as the 2010 European Capital of Culture, there will be a large amount of tourism going on there that may further the profits of Cirque. Possibly more important than profits, it may be strategically advantageous for Cirque to perform regardless of high or low profits, because the exposure they would receive from performing would be high. Likely, more than Turks, but rather many Europeans from other nations would see Cirque at this time. So a performance in Istanbul

may serve the dual purpose of marketing to other European venues. Furthermore, this first performance in Istanbul could potentially lead to many other shows there. With all of these potential intangible benefits, it is almost impossible for Cirque to truly put a value on the eventual profits that could stem from visiting Istanbul at this time. Alternative 1b: Do whatever it takes to visit Istanbul in 2010 and reap whatever benefits can come from that performance. Cirque prides itself on going beyond their limits, as long as the challenge does not cause them to “burn out.” Cirque has established that their main concern is that their creativity will be hindered, and that it is vital for their artistic expression to “resonate with audiences.” They feel that their box office sales are the best gauge on if the venue is a good fit. Louise Murray determined that the sale of 100,000 tickets is highly probable, therefore it seems that Cirque’s primary fear can be alleviated (Jobin & Talbot, 2011). As seen in figure 2, Cirque would most likely have a profitable experience in Istanbul, which is the main reason for them to schedule a show there in 2010. As previously mentioned in the first alternative, they would likely gain even more exposure than just Turkey because of Istanbul being named a European Cultural Capital. Additionally, if they can get a favorable sponsorship, their profits could be much higher than forecasted in figure 2. They also have a show currently touring in Europe, so it is likely they could avoid the exorbitant expense of an international transfer. Above all, a show in Turkey seems to fit their two key goals of profitability and strategic positioning. Because of the short notice, performing in Istanbul in 2010 would create unanticipated work for Louise Murray and other individuals with Cirque. She would have to show that the annoyance of planning this on such short notice would have more benefits than disadvantages.

Because forecasting profits is not an exact science, Cirque could potentially lose money in Istanbul. At a minimum, working in a country that they have never visited is full of additional preparation and would require them partnering with a promoter. Historically, this has worked well for Cirque, but there have been instances where the promoter’s ideals did not align with Cirque. That risk cannot be overlooked when considering visiting Turkey (Jobin & Talbot, 2011). Recommendation Because Cirque prides itself on facing challenges and seeking profitable and strategic prospects, it is recommended that they do coordinate a performance in Istanbul. It is a prime opportunity to further their prestigious name. On the most basic level, they are fairly assured that it will be a profitable experience, which is reason enough to overcome the short notice issue. Additionally, Cirque builds in some flexibility for occasions just like this. Lastly, there is little risk that Cirque will encounter any obstacles in regard to creativity or artistic expression. Critical Issue 2 Cirque has two strong proposals from TTE, a Turkish telecommunications company, and from the Turkish Ministry of Culture. These two entities wish to bring a show to Turkey and are willing partners. The biggest issue would be who to partner with. There are several factors in this decision including freedom of creativity and expression and a strong desire for global and corporate social responsibility. Cirque has long been an advocate for strong community involvement. As such, a partnership with a government entity could help the company enter a heretofore unexplored venue. Since 2007, Cirque has entered into every contract with a social responsibility clause attached to the agreement. Their website states "[t]his clause covers a range of social

responsibility issues such as employee relations and working conditions, ethical sourcing, environmental protection and social and cultural action in the community. The purpose of this clause is first and foremost to clarify, respectfully but firmly, the values behind Cirque du Soleil when we engage in serious dialogue with partners, and to seek to create or adopt the best practices in the industry (Cirque du Soleil)." The concern for Cirque in this area should be whether or not they could get the ministry to sign such an agreement and how binding it would be on the government. Alternative 2a - Align your company with the Ministry of Culture and Tourism of Turkey in partnership with the City of Istanbul. Cirque is well positioned to present a show in Turkey. The ministry, as a government agency, could help Cirque successfully work through the maze of government bureaucracy and red tape they are surely to encounter, never having visited Turkey nor explored the possibility of performing there. The ministry is poised to help interpret and assist in the areas of customs and immigration, work visas, monetary exchange, and other administrative and logistical support issues. The ministry has already stated that it would provide the "basic municipal services" for free and a lower electric bill. This preferential treatment could result in higher revenues for Cirque and, therefore, could result in an additional revenue stream (Jobin & Talbot, 2011). However, three very negative issues exist with the potential agreement with the ministry. The first being the proposed dates of summer or fall of 2010. Any show that is available must be open for the time frame of eighteen months of operational planning (Jobin & Talbot, 2011). In January of 2009, that timeframe would bring the operational planning stage to an end on June, 2010. Any show that must be an international transfer would also eat into precious time. A similar move of Alegria took twenty one days to move from Santiago, Chile to Seoul, South

Korea. A cursory glance at the Gantt chart in Appendix 6 shows that Kooza, the show the Minister of Culture wishes to have brought to Istanbul, is scheduled only in the United States and would, therefore, require at least three weeks to arrive in Turkey and another week or two for setup and rehearsal. This puts the schedule dangerously close to missing other timelines. Another negative issue is that of creative control. Cirque prides itself and requires complete creative control. For the minister to request a particular show would infringe on Cirque's values. Finally, the ministry cannot completely guarantee there will not be other ministry interference with the agreement. Cirque could possibly run into other offices that may slow or halt any progress made by the company. Alternative 2b - Align your company with the Turkish Television and Entertainment (TTE) Society. Many arguments can be made for signing a contract with the TTE Society. The greatest reason would be that there is not as great a pressure for a timeframe, other than "Summer 2010 or later” (Jobin & Talbot, 2011). This takes great pressure off of Cirque to circumvent their normal planning processes. This would allow a greater range of shows to be available for Istanbul. Secondly, TTE did not have a proposed show, either. This allows Cirque a greater amount of flexibility on which show may resonate with the spectators and thus allow greater creative freedoms. TTE also has also accepted a fixed show fee which would further increase Cirque's bottom line. Their estimate of a potential 100,000 tickets is in line with Cirque's estimates. And, finally, TTE has interests in Russia, Poland, and the Ukraine, thereby increasing Cirque's market reach.

The obvious disadvantages for TTE is the lack of venue and governmental connections. TTE did not propose an arena or stadium for the performance. This agreement could be problematic if TTE is unable to secure an arena since moving of tents and other equipment across international borders are complex and prone to costly delays. It is also unclear if TTE has the ability to navigate through the regulatory requirements to bring foreign nationals into the country. Recommendation 2: Our recommendation is for Cirque to enter into an agreement with TTE in order to bring a show to Istanbul, Turkey some time between the fall of 2010 and spring 2011. Cirque could choose the best show by doing some research on the cultural disposition of Turkey, secure safe passage for its equipment and personnel, provide a proper marketing campaign with a ticket lead time of 8 or more months prior to the show. From a financial standpoint, Cirque could bring the Varekai production into Turkey from Europe with little effort, but this show may not necessarily meet the cultural demands of the Turkish citizens. Obviously, Cirque should exercise its artistic and creative choice to select the show that best meets their business needs. Action Items Step 1: Louise Murray needs to start the planning process of performing in Turkey, conducting whatever research necessary to convince the board this is a wise option. It would be essential to show the data that proves this would likely be a profitable venue, and one that would not require Cirque to give up their creative control. Step 2: Once the board approves Louise’s recommendation, it would be time to pick which of the two proposals to accept. While both have different benefits, it is recommended that she selects the TTE option.

Step 3: Work closely with TTE, due their flexibility of dates and show selection to achieve a solid partnership. Murray would need to inform them that the best show for them to do would be the European show so an international transfer will not be necessary. Step 4: Once a more specific date is selected, simply continue working with TTE until the time of the show.

Figure 2 100,000 tickets expected to be sold  (2,500 seats in the venue x 85% average attendance rate) = 47 total shows (47 total shows – 6 shows for first week)  7 shows a week = 5.85 weeks Therefore after the first week, it would take less than 6 weeks to complete the remaining shows at only 7 shows a week. Because we add in the first week, that means it would take less than 7 weeks to complete 40 shows. Because Cirque has the capacity to do up to 10 shows a week after the first week, it is feasible for them to fulfill the 100,000 tickets without overextending themselves beyond their typical 6-week stay. 100,000 tickets expected to be sold x $90 a ticket = $9 million in box office revenue $9 million in box office revenue + 2% of box office revenue for merchandise sales = $9,180,000 When Cirque utilizes a promoter, their revenues can increase anywhere from 10% to 80% of box office revenue, therefore, if they only realized the additional revenue of 10%, they would receive an extra $900,000 because $9 million x 10% = $900,000. Total Revenue could be calculated as follows: $9 million in box office revenue + 2% of box office revenue for merchandise sales + $900,000 = $10,080,000 It costs Cirque approximately $1 million per week, so as few weeks as possibly is ideal. If Cirque ran the full 6 weeks, it would cost them $6 million. $10,080,000 – $1.5 million installation costs – $1.5 million fixed costs – $6 million = $1,080,000 in total profits However, this amount could be substantially higher if they were able to do their shows in only 5 weeks, or if acting with a promoter yielded them a much higher percentage than 10%. Lastly, if an international transfer is required, then an additional $2 million dollar expense is incurred. Under the 10% additional revenue from sponsorship revenue scenario, this would put them in the negatives.