Cirque Du soleil - Marketing Analysis

Cirque du Soleil: A Blue Ocean Strategy by CirKeAlistik Frédéric Vuong - Programme Introduction  Cirque du Soleil, different from traditional circus?  Com peting in Red Oceans?  Red Oceans vs. Blue Oceans  Seeking Blue Oceans?  Creating a Blue Ocean business?  About Blue Ocean and Cirque du Soleil  BSL - EMBA - Marketing – Summer 2008 Introduction  Colourful  Les characters Échassiers performers  Young BSL - EMBA - Marketing – Summer 2008 Brief description  The company • • • • • • • Canadian Founded in 1984 Grew to 3’500 employees Shows in 40 countries 70+ million customer experience USD 600 million in revenues 4 Primetime Emmy Awards BSL - EMBA - Marketing – Summer 2008 In what way is it different from traditional circus?  The product • From circus to theater  Allure, factors of traditional circus and classic acrobatic  Story line, intellectual richness, artistic music and dance  Multiple productions breaking the rythm • Blue ocean through unprecedented utility • Tight cost control BSL - EMBA - Marketing – Summer 2008 Differences from traditional circus? BSL - EMBA - Marketing – Summer 2008 Differences from traditional circus? BSL - EMBA - Marketing – Summer 2008 Competing in Red Oceans  Red oceans represent all the industries in existence today  Industry boundaries are defined and accepted  Competitive rules of the game are known  Competition-based strategy: the valuecost trade-off  Intense competition and commoditization of products Competing in Red Oceans       Companies compete on factors that are taken for granted Companies imitate, they use the competition as their benchmark Try to outperform their rivals, “skillfully” Try to grab a greater share of existing demand Focus on dividing up the red ocean, where growth is increasingly limited Do not think outside the box to break from the competition, metoo businesses Competing in Red Oceans As opposed to the six paths framework, companies tend to:  Define their industry similarly and focus on being the best within it  Look at their industries through the lens of generally accepted strategic groups, and strive to stand out in the strategic group they play in  Focus on the same buyer group, be it the purchaser, the user, or the influencer  Define the scope of the products and services offered by their industry similarly  Accept their industry’s functional or emotional orientation  Focus on the same point in time—and often on current competitive threats—in formulating strategy Competing in Red Oceans  Traditional circus • Focus on benchmarking on another • Maximize their share of already shrinking demand by tweaking traditional circus acts Red Oceans vs Blue Oceans “The Art of W applies to competition and conflict in general... Its aim is ar invincibility, victory without battle, unassailable strength through understanding of physics, politics and psychology of conflict.” Sun Tzu, The Art of W ar BSL - EMBA - Marketing – Summer 2008 From Red Oceans to Blue Oceans   Business is war Companies should stop competing each other     Unknown Market Space creation Often created from Red Oceans Value & Cost Differenciation Good ROI BSL - EMBA - Marketing – Summer 2008 Red Oceans vs. Blue Oceans Red Ocean Strategy B Ocean Strategy lue Compete in existing marketspace Create an uncontested marketspace Beat the competition Exploit Existing Demand Make value-cost trade-off Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost Make the competition irrelevant Create and capture new demand Break the value-cost trade-off Align the whole system of a firm’s activities in pursuit of differentiation and low cost BSL - EMBA - Marketing – Summer 2008 A Good Blue Ocean Strategy 1. Focus • Strategic Value Curve • Factors Emphasis 2. Divergence • Red Ocean = Same Value Curve • Blue Ocean = Different Value Curve • Profile Differentiation 3. Compelling Tagline • Clear and honest message BSL - EMBA - Marketing – Summer 2008 Why should companies seek Blue Oceans? 1. To enjoy rapid growth in both revenues and profits by means of creating new uncontested market space with irrelevant competition. Investments 86% 14% Revenue Impact 62% 38% Profit Impact 39% 61% Red Oceans Blue Oceans Why should companies seek Blue Oceans? 2. To be different and attractive: Globalization has made many brands become increasingly similar pushing companies to simultaneously pursue differentiation and low costs to break the value-cost trade-off. COST VALUE INNOVATION BUYER VALUE Why should companies seek Blue Oceans? 3. 4. 5. To create the rules of the game: In Blue Ocean the competition is absent and rules are not yet set therefore there is a high opportunity for rapid growth of profitability, as well as for capturing a high market share. To reap the benefits without credible challenges for 10 to 15 years. To create brand buzz and loyal followers. Why should companies seek Blue Oceans 6. 7. 8. To avoid red ocean markets where supply outweighs demand: overcrowded industries lead to stoked price wars, and shrunken profit margins. To be the leaders and outperform the market leaving others to battle over incremental market share in red oceans of overpopulated markets. To create imitation barriers : Imitation will require companies to change their whole system of activities in order to switch to the divergent business model of blue ocean. 6 Principles of a Blue Ocean Strategy Form ulation Principles Reconstruct market boundaries Focus on the big picture, not the numbers Reach beyond existing demand Get the strategic sequence right Execution Principles Overcome key organizational hurdles Build execution into strategy BSL - EMBA - Marketing – Summer 2008 Risks Factors each principles attenuates Search risk Planning risk Scale risk Business model risk Organizational risk Managem risk ent The Value Curve BSL - EMBA - Marketing – Summer 2008 The 4 Action Framework Star Performers Animal Shows Aisle Concession Sales Multiple Show Arenas New Value Curve Unique Revenue Fun & Humour Thrill & Danger Theme Refined Environment Multiple Productions Artistic Music & Dance BSL - EMBA - Marketing – Summer 2008 The Strategy Canvas BSL - EMBA - Marketing – Summer 2008 The Three Tiers of Noncustomers BSL - EMBA - Marketing – Summer 2008 Pioneers, Migrators, Settlers Map BSL - EMBA - Marketing – Summer 2008 The Right Sequence B uyer utility Is there exceptional buyer utility in your business idea? Price Is your price easily accessible to the mass of buyers? Cost Can you attain your cost target to profit at your strategic price? A doption W are the adoption hurdles in hat actualizing your business idea? A com ercially viable blue m ocean idea BSL - EMBA - Marketing – Summer 2008 Organizational Hurdles BSL - EMBA - Marketing – Summer 2008 How could you create a business in a Blue Ocean?  Fundam entally shift the strategy canvas by reorienting the strategic focus from competitors to alternatives  Use space between industries to create value innovation Look across substitute industries  Competes with companies in other industries that produce alternative products or services  different functions and forms but the same purpose  Alternatives  Alternatives are broader than substitutes « W are the alternative industries to m industry? » hat y Look across strategic groups within industries  Ranked in two dimensions: price and performance, and tends to improve their competitive position within a strategic group which factors determine customer’s decision to trade up or down from one group to another « W are the strategic groups in m industry? » hat y  Understand Look across chain of buyers  Focus on the chain of buyers who are directly or indirectly involved in the buying decision (purchaser, end user & influencer) the conventional wisdom about which buyer group to target value curves to focus on a previously overlooked set of buyers « W hich buyer group does m industry typically focus y on? »  Challenge  Redesign Look across complementary product and service offerings  Untapped  Think value is often hidden in complem entary products or services about what happens before, during and after product or service is used the total solution buyers seek when they choose a product or service « W is the context in w hat hich m product or service y is used? »  Define Look across functional or emotional appeal to buyers    Transform the product from functional to emotional ones or vice-versa Strip away extras that add price without enhancing functionality  lower cost business model Add a dose of emotion  new life for the product « Does m industry com y pete on functionality or em otional appeal? » Look across time  Look at the external trends that affect the business over time observable today  Predicting the future is impossible  Finding insights in trends that are « W trends have a high probability of im hat pacting m y industry, are irreversible and are evolving in a clear trajectory? » About Blue Oceans… It is the intersection between the analytic techniques and the six principles of formulating and executing blue oceans that allow com panies to break from the competition and unlock uncontested m arket space About Cirque du Soleil… Cirque du Soleil success is not dependent on fierce com petition or expensive m arketing, but on sm art strategic moves that helped them to m ake the com petition irrelevant and created an uncontested m arket space with the lim itless potential of a blue ocean! Q&A Thank You BSL - EMBA - Marketing – Summer 2008