Cirque Du Soleil

Cirque Du Soleil The Nature Of The External Environment Surrounding The Company: Cirque Du Soleil wants their audience to bring imagination, while challenge the senses and bringing out the emotions of people around the world. Their vision is to continually introduce anew and exciting show. The environmental opportunities and threats of Cirque Du Soleil, that apply all the concepts on industries and microenvironments to analyze the environment the company is confronting they are: Opportunities:  Financial Markets - Rise money through debt, etc.  Emerging Markets & Expansion Abroad - Untapped location  Innovation - Continue to innovate show formats  Online - Using social media as a tool to increase market penetration & recruit new customer  Product & Services Expansion - Sister company Threats:  Competition - From the Chinese state circus  Cheaper Technology - High cost base  Economic Slowdown  Exchange Rate Fluctuations  Lower Cost Competitors or Imports - Low switching cost  Product Substitution – Consumer could downgrade The importance at the industry level is Porter’s Five Forces model: Bargaining Power of Suppliers:  Large number of substitute inputs: When there are large numbers of substitute inputs, suppliers have less bargaining leverage over producers. This is due to competition among substitutes. Greater completion positively affects Cirque Du Soleil.  High competition among suppliers: High levels of competition among supplier’s acts to reduce prices to producers. This is a positive for Cirque Du Soleil.  Critical production inputs are similar: When critical production is similar, it is easier to mix and match inputs, which reduces supplier bargaining power, a positive for Cirque Du Soleil.





Volume is critical to suppliers: When suppliers are reliant on high volumes, they have bargaining power, because a producer can threaten to cut volumes and hurt the supplier’s profits. This can positively affect Cirque Du Soleil. Low cost of switching suppliers: The easier is to switch suppliers, the less barraging power they have. Low supplier switching costs positively affect Cirque Du Soleil.

Bargaining Power of Customer:  Large number of customer: When there is large number of customers, no one customers tends to have bargaining leverage. Limited bargaining leverage helps Cirque Du Soleil.  Product is important to customer: When customers cherish particular products they end u paying more for that one product. This positively affects Cirque Du Soleil. “Product is important to customer” has a significant impact, so an analyst put more weight into it.  Limited buyer choice: When customers have limited choices they end up paying more for the choices that are available. Limited buyer choices are a positive for Cirque Du Soleil. Intensity of Existing Rivalry:  Large industry size: Large industries allow multiple firms and produces to prosper without having to steal market share from each other. Large industry size is a positive for Cirque Du Soleil.  Fast industry growth rate: When industries are growing revenue quickly, they are less likely to complete, because the total industry size is also growing. The only way to grow in slow growth industries is to steal market share from competitors. Fast industry growth positively affects Cirque Du Soleil. “Fast industry growth rate” has a significant impact, so an analyst should put more weight into it.  Relatively few competitors: Few competitors mean fewer are competing for the same customer and resources, which is a positive for Cirque Du Soleil.  Low storage costs: When storage costs are low, competitors have a lower risk of having to unload their inventory all at once. Low storage costs are a positive for Cirque Du Soleil. Threat of Substitutes:  Substitute has lower performance: A lower performance product means a customer is less likely to switch from Cirque Du Soleil to another product or services. “Substitute has lower performance” has a significant impact, so an analyst should put more weight into it.  Substantial product differentiation: When products and services are very different, customers are less likely to find comparable product or services that meet their needs. This is a positive for Cirque Du Soleil.



“Substantial product differentiation” has a significant impact, so an analyst should put more weight into it. “Substantial product differentiation” will have a long-term positive impact on this entity, which adds to its value. This statement will lead to an increase in profits for this entity “Substantial product differentiation “is an easily defendable qualitative factor, so competing institution will have a difficult time overcoming it. Limited number or substitutes: A limited number of substitutes mean that customers cannot easily find other products or services that fulfill their needs. Limited substitutes are a positive for Cirque Du Soleil.

Threat of New Competitors:  Strong distribution network required: Weak distribution networks mean goods are more expensive to more expensive to move around and some goods don’t get to the end customer. The expense of building a strong distribution network positively affects Cirque Du Soleil. “Strong distribution network required” has a significant impact, so an analyst should put more weight into it.  High capital requirement: High capital requirements mean a company must spend a lot of money in order to compete in the market. High capital requirements positively affect Cirque du Soleil.  Strong brand names are important: High sunk costs make it difficult for a competitor to enter a new market, because they have to commit money up front with no guarantee of returns in the end. High sunk costs positively affect Cirque du Soleil.  Advance technologies are required: If strong brands are critical to compete, then new competitors will have to improve their brand value in order to effectively compete. Strong brands positively affect Cirque du Soleil.  Advanced technologies are required: Advanced technologies make it difficult for new competitors to enter the market because they have to develop those technologies before effectively competing. Requirement for advanced technologies positively affects Cirque du Soleil.  Industry requires economies of scale: Economies of scale help producers to lower their cost by producing the next unit of output at lower costs. When new competitors enter the market, they will have a higher cost of production, because they have smaller economies of scale. Economies of scale positively affect Cirque du Soleil. "Industry requires economies of scale" will have a long-term negative impact on this entity, which subtracts from the entity's value. This qualitative factor will lead to an increase in costs. This statement will lead to a decrease in profits.  Geographical factors limit competition: If existing competitors have the best geographical locations, new competitors will have a competitive disadvantage. Limiting geographic factors positively affect Cirque du Soleil.

The product life cycle for circuses was on the decline and innovation was required to enter a different market. Cirque demonstrated by leaving the circus industry that they had environmental awareness as it is unarguably true that the circus industry is now unpopular perhaps in part due to animal rights campaigners and Cirque Du Soleil have clearly distanced themselves from traditional circus acts. Cirque Du Soleil do not target circus-going customers and do not compete with traditional circus acts as they have successfully created their own market segment by following a blue ocean strategy. A blue ocean strategy is when the organization sets out to obtain new customers and create new demand by creating a good or service that is not currently in existence. A blue ocean strategy can be seen as extremely high risk however Cirque have successfully created their own uncontested market space and eliminated their competitors. SWOT Analysis: Strength * Innovation, unique show * Diversified product portfolio * Flexible working force * Established brand name

Weakness * HIgh overheads and management cost * Sole owner decision maker * Can easily copy the business model * High staff turnover

Cirque Du Soleil Opportunities * Expand to larger nuber of cities * Diversification of portfolio could fit to different audience * Increase number of location

Threats * Competition could enter the market * Become too commercial and loose its spirit * Overdependence on the existing owner * Economic downturn