MMICC 2010 - USC
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Balancing Growth
Implementing the 3C Strategy
Shaun SakhraniSahil TankJenny JaoJoshua Wong
Conquest Consulting
Overview Correct Change ImplementationCreate
Value Proposition
Maintaining sustainable long term growth by leveraging partnerships and exploring new ventures
Objectives
Overview Correct Change ImplementationCreate
Value Proposition
Overextension MarketSaturation
Long Term Growth
Objectives
Critical Issues
Maintaining sustainable long term growth by leveraging partnerships and exploring new ventures
Overview Correct Change ImplementationCreate
Value Proposition
Overextension MarketSaturation
Long Term Growth
Reorganization
Objectives
Critical Issues
Solutions Hybrid Strategy Hotel Market
Maintaining sustainable long term growth by leveraging partnerships and exploring new ventures
Overview Correct Change ImplementationCreate
Value Proposition
Overextension MarketSaturation
Long Term Growth
Reorganization
Objectives
Critical Issues
Solutions Hybrid Strategy Hotel Market
Maintaining sustainable long term growth by leveraging partnerships and exploring new ventures
The 3 C Strategy
Correct
Change
Create
Overview Correct Change ImplementationCreate
Value Proposition
Value Added Establish new revenue streams while enhancing current internal operations
Overextension MarketSaturation
Long Term Growth
Correct(Reorganization)
Objectives
Critical Issues
Solutions Change(Hybrid Strategy)
Create(Hotel Market)
Maintaining sustainable long term growth by leveraging partnerships and exploring new ventures
Overview Correct Change ImplementationCreate
Value Proposition
Value Added NPV of $234 million
Overextension MarketSaturation
Long Term Growth
Objectives
Critical Issues
Solutions
Maintaining sustainable long term growth by leveraging partnerships and exploring new ventures
Correct(Reorganization)
Change(Hybrid Strategy)
Create(Hotel Market)
Overview Correct Change ImplementationCreate
Company mission statement and target customer
Highly Educated(College Degree)
Higher Income Home Owner Traveler
Upper middle class adults with discretionary income who regularly attend live artistic performances such as opera and ballet
Typical Cirque Du Soleil Customer
Mission Statement:
Invoke, provoke and evoke the imagination, the senses and the emotions of people around the world.
Overview Correct Change ImplementationCreate
Core Competencies
Keys to Success
Uncompromising Focus on Creativity and Quality
“Show Before Business”
Well Structured Contracts
Exclusive and Original Experiences“Clowns, yes. Clones, no.”
Strong Portfolio of Premium Partners
Overview Correct Change ImplementationCreate
Reinforcing business model
Creativity and Human Capital
Partners
Custom ProductionsAnd Facilities
Unique ExperienceHigh End Clientele
Brand EquityPremium Prices
Overview Correct Change ImplementationCreate
Reinforcing the model through the 3 C`s
Creativity and Human Capital
Partners
Custom ProductionsAnd Facilities
Unique ExperienceHigh End Clientele
Brand EquityPremium Prices
Correct
Change
Create
Overview Correct Change ImplementationCreate
Correct1. Over-
extension
Generating Increase Returns
Increase Returns
Manage Costs
Drive Revenue
OperationalEfficiency
Shows
Other Channels
1. Residency2. Touring
Big Top3. Arena
1. Hotel2. Nightclub3. Spa4. Restaurant
Create3. Hotel
Partnership
Change2. Hybrid
Model
Overview Correct Change ImplementationCreate
Correct1. Over-
extension
Generating Increase Returns
Increase Returns
Manage Costs
Drive Revenue
OperationalEfficiency
Show Venue
Other Channels
1. Residency2. Touring
Big Top3. Arena
1. Hotel2. Nightclub3. Spa4. Restaurant
Create3. Hotel
Partnership
Change2. Hybrid
Model
Overview Correct Change ImplementationCreate
Cirque du Soleil Faces Overextension Problems
Overflowing with New Production
Issues
Don’t want to outsource
Maintain Centralized Model
Fear of Compromising Quality / Artistic Integrity
BUTNeed to
Grow With Complexity of Business
Move Departments into Surrounding Offices in
Montreal
Each Building will Focus on 1 of 4 Main Divisions
Keep Creative arm at Current HQ with
Management
Solution
Overview Correct Change ImplementationCreate
Cirque du Soleil Faces Overextension Problems
Overflowing with New Production
Issues
Don’t want to outsource
Maintain Centralized Model
Fear of Compromising Quality / Artistic Integrity
BUTNeed to
Grow With Complexity of Business
Move Departments into Surrounding Offices in
Montreal
Each Building will Focus on 1 of 4 Main Divisions
Keep Creative arm at Current HQ with
Management
Solution
HQ
Overview Correct Change ImplementationCreate
Correct1. Over-
extension
Generating Increase Returns
Increase Returns
Manage Costs
Drive Revenue
OperationalEfficiency
Show Venue
Other Channels
1. Residency2. Touring
Big Top3. Arena
1. Hotel2. Nightclub3. Spa4. Restaurant
Create3. Hotel
Partnership
Change2. Hybrid
Model
Overview Correct Change ImplementationCreate
Saturated Vegas Market
Treasure Island
Bellagio
New York- NY
MGM Grand
The MirageAria
Luxor
Overview Correct Change ImplementationCreate
Need to Expand Outside Vegas
Treasure Island
Bellagio
New York- NY
MGM Grand
The MirageAria
Luxor
Key Takeaway
Exclusive Contract with MGM
7 out of 7 Key Hotels
2 More Planned for Las Vegas
Need to Expand Elsewhere
Overview Correct Change ImplementationCreate
Expanding Into Developed Markets
Smaller Venues on Rent Basis
Geographically Staged Expansion
Implementation
FactsResident• Benefit = Best Experience• Flaw = Limited Reach
Touring• Benefit = Wide Reach / Low Cost• Flaw = Lower Quality, Short Run
Facts
How to enter Mature Markets?• No Casinos• Business model?• Partners?
Solution
Hybrid Model• Lower Cost • Higher Quality• Wider Reach
Key Questions
Solution
Overview Correct Change ImplementationCreate
Less Capital Intensive Allow Entry into Mature Entertainment Markets
Brings Cirque Du Soleil to CustomersQuick Entry
No Need for Casino Partner Combine Best of Both Worlds
Easy Exit Broaden Target Market
Entering Developed Markets
Benefits Impact and Results
Allow Successful Entrance into New Venues in Developed Markets
Overview Correct Change ImplementationCreate
Potential Locations for Hybrid Shows
Overview Correct Change ImplementationCreate
Top 50 Tourist Destinations
Alice Springs Cairns Kuala Lumpur Montreal Rome
Amsterdam Cairo Kyoto Munich Salzburg
Athens Christchurch Las Vegas Naples San Francisco
Auckland Costa del Sol Lisbon New York City Sydney
Ayers Rock Dubai London Nice Tokyo
Bangkok Dublin Los Angeles Oahu Vancouver
Barcelona Edinburgh Madrid Orlando Venice
Bayeux Florence Melbourne Paris Vienna
Boston Franz Josef Miami Perth Washington DC
Brisbane Geneva Milan Phoenix Zurich
Overview Correct Change ImplementationCreate
Evaluation Criteria for Hybrid Implementation
Evaluation Criteria for Hybrid ImplementationGDP Per Capita Internet Penetration Rate Import / Export Percentage
Income Per Capita Government Expenditures Price of Crude Oil
GDP Real Growth Rate Cable Penetration Employment Rate
Central Bank Discount Rate Discretionary Spending / Capita Literacy Rate
Electricity Production Income Disparity Government Debt
Electricity Consumption Government Influence Heath Insurance Coverage
Oil Consumption Political Stability Life Expectancy
Luxury Expenditure Taxation Fertility Rate
Foreign Reserves Infrastructure Education Expenditures
Inflation Rate Oil Production Industrial Production Growth
Overview Correct Change ImplementationCreate
Macro Evaluation Criteria for Hybrid Implementation
Macro Evaluation Criteria for Hybrid ImplementationGDP Per Capita Internet Penetration Rate Import / Export Percentage
Income Per Capita Government Expenditures Price of Crude Oil
GDP Real Growth Rate Cable Penetration Employment RateCentral Bank Discount Rate Discretionary Spending / Capita Literacy Rate
Electricity Production Income Disparity Government Debt
Electricity Consumption Government Influence Heath Insurance Coverage
Oil Consumption Political Stability Life Expectancy
Luxury Expenditure Taxation Fertility Rate
Foreign Reserves Infrastructure Education Expenditures
Inflation Rate Oil Production Industrial Production Growth
Overview Correct Change ImplementationCreate
Final Decision Criteria for Hybrid Implementation
Entertainment Growth Tourism Growth
Market Maturity Prevalence of Arts
Final 4 Factors
Overview Correct Change ImplementationCreate
Phase 1:
Sydney
Hong Kong
London
1
2
3
Many Cultural Activities, Bustling Night Life
Largest Percentage of Tourists 35-44 years old, followed by 45-54 years old
Overnight International Visitor Spends $101/night
Bustling Night Life
Overnight Visitor Spends Approx $700 / Night
Plethora of Cultural Activities
Top 2 Tourist Locations
Limited Space
Overview Correct Change ImplementationCreate
Phase 1:
Sydney
Hong Kong
London
1
2
3
Phase 2:
1
2
3
Paris
Berlin
Amsterdam
Overview Correct Change ImplementationCreate
Phase 1:
Sydney
Hong Kong
London
1
2
3
Phase 2:
1
2
3
Paris
Berlin
1
2
Phase 3:
Rio de Janeiro
Amsterdam
Moscow
Dublin3
Overview Correct Change ImplementationCreate
Phase 1:
Sydney
Hong Kong
London
1
2
3
Phase 2:
1
2
3
Paris
Berlin
1
2
Phase 3:
Rio de Janeiro
Amsterdam
Moscow
Dublin3
Key Takeaway
2 Years of Development
1 to 3 Shows Developed Per Year
Complete Expansion to 9 LocationsIn 3 to 6 Years
Overview Correct Change ImplementationCreate
Correct1. Over-
extension
Generating Increase Returns
Increase Returns
Manage Costs
Drive Revenue
OperationalEfficiency
Show Venue
Other Channels
1. Residency2. Touring
Big Top3. Arena
1. Hotel2. Nightclub3. Spa4. Restaurant
Create3. Hotel
Partnership
Change2. Hybrid
Model
Overview Correct Change ImplementationCreate
4 Types of Expansion
Hotel
Nightclub
Spa
Restaurant
Overview Correct Change ImplementationCreate
Evaluating Expansion Options
Creative Challenge
Long Term Sustainable Partnership
ROI Social Responsibility
Hotel
Nightclub
Spa
Restaurant
Poor Fit Strong Fit
Overview Correct Change ImplementationCreate
Hotels Meet Criteria for New Development
Creative Challenge
Long Term Sustainable Partnership
ROI Social Responsibility
Hotel
Nightclub
Spa
Restaurant
Poor Fit Strong Fit
Overview Correct Change ImplementationCreate
Why Hotels
Hotel
Spa
Sustainable, Long-Term Investment
More Cross-marketing Opportunity
High Risk, but Much Higher Return
High Exposure to Target Demographic
Leverage Established Partnership
Overview Correct Change ImplementationCreate
Why unsuccessful in the past
Why Unsuccessful?
Pre-Mature Market
Brand Equity Was Not as Strong
Wrong Approach
Overview Correct Change ImplementationCreate
How to become successful in the future
Why Unsuccessful?
Pre-Mature Market
Brand Equity Was Not as Strong
Wrong Approach
How to Become Successful?
Staged Entrance
Adhere to Core Competency
Choose Right Partner
Overview Correct Change ImplementationCreate
Details for hotel implementation
Division of Strengths
Cirque du Soleil• Design • Production
Hotel Chain• Construction • Management
Deal Structure
Average Hotel Occupancy: 75%Cirque du Soleil Target: 25%
by
25%75%
Overview Correct Change ImplementationCreate
Implementation
Implementation
• Establish Main Hotel Lobby
• Cirque du Soleil Experience with Separate Entrance
Notable Examples
•Venetian Venezia•Wynn•Mandalay Bay
FrontDesk
Main Lobby
Restaurant
Main Elevators
CirqueDu SoleilElevators
Security
Floor Plan
Overview Correct Change ImplementationCreate
Example of floor plan
Floor Plan
FrontDesk
Main Lobby
Restaurant
Main Elevators
CirqueDu Soleil
Lobby
Check-in
Overview Correct Change ImplementationCreate
Options for strategic partners
4 Criteria For Choosing Partners
Potential Partners
Cultural Similarities Luxury Brand Flexibility in
NegotiationAccess to
Capital
Hotels
PE/VC
Overview Correct Change ImplementationCreate
Seeking partners
Why partner with hotel chain
Provide a Complete Cirque Du Soleil Experience
Leverage Brand Image of Hotel Chain
Increase Accessibility to Audience
Relatively Lower Risk Expansion Strategy
Innovative idea
Over 3MM spectaculars annually
Increased Occupancy Rate via Bundling
Luxury Brand Image
Successful Track Record in Show
Performances
Almost Successful in Entering Market Mature Market with Viable Entertainment OptionsLow Wealth DisparityFocus on Arts and Cultural ExperiencesHigh Flow of Tourism
Why partner with us
Why London
Overview Correct Change ImplementationCreate
Timeline
Secure Leasing AgreementsCorrect: HQ Expansion
Concept DevelopmentLease NegotiationLaunch Show
Change: Hybrid Model
Find PartnersEnter NegotiationsDevelop and PlanFinancingConstructionLaunch
Create: Hotel Concept
Move
2010 2011 2012 2013
Overview Correct Change ImplementationCreate
Timeline
2013
Secure Leasing AgreementsCorrect: HQ Expansion
Concept DevelopmentLease NegotiationLaunch Show
Change: Hybrid Model
Find PartnersEnter NegotiationsDevelop and PlanFinancingConstructionLaunch
Create: Hotel Concept
Move
2014 2015 2016 2017
Break Even Point: 2017
Overview Correct Change ImplementationCreate
Financial AssumptionsAs
sum
ption
s
Create
4 offices surrounding
HQ
Renting
Cost of $4 M
per year
Staged release per
year
Initial Capex of $25 M per
city
Op. Income of $15 M per
year
Joint division of cost at
50/50
Revenue Sharing at
70/30
25% Premium
75% Occupancy
ChangeCorrect
Overview Correct Change ImplementationCreate
NPVAs
sum
ption
s
Correct Change Create
4 offices surrounding
HQ
Renting
Cost of $4 M
per year
Staged release per
year
Initial Capex of $25 M per
city
Op. Income of $15 M per
year
Joint division of cost at
50/50
Revenue Sharing at
70/30
25% Premium
75% Occupancy
Net Present Value with Sensitivity
$234 million $337 million$165 million
Overview Correct Change ImplementationCreate
Value Proposition
Value Added NPV of $234 million
Overextension MarketSaturation
Long Term Growth
Objectives
Critical Issues
Solutions
Maintaining sustainable long term growth by leveraging partnerships and exploring new ventures
Correct(Reorganization)
Change(Hybrid Strategy)
Create(Hotel Market)
Balancing Growth
Implementing the 3 C
Strategy
Shaun SakhraniSahil TankJenny JaoJoshua Wong
Conquest Consulting
Appendix
Outline
Value PropositionTarget CustomerCore CompetenciesBusiness ModelDecision TreeCorrect Strategy
New MarketsBenefits & ResultsTop 50 citiesCriteriaFinal 4 Factors3 Phases
Create StrategyEvaluationWhy hotelsWhy unsuccessfulDetailsImplementation
TimelineFinancials
AssumptionsNPV
AppendixRisk, Mitigation, ContingencyWyndham PartnershipCustom designed eventsNot RestaurantsNot Night ClubNot SpaPlanned Expansion3D Movies?Not Amusement ParksReebokCurrent PartnershipsNot ArenasIdeas for New Shows
Methods of FinancingEntertainment Optionsin LondonNot Cruise ShipsNot emerging marketsin South East AsiaNot Casino’sCompetitive LandscapeNot ParisBerlinSydney
Appendix
2007 Partnership: Official Hospitality Partner for Touring Shows (Saltimbanco, Kooza, Corteo)
Cross MarketingOver 3 million Cirque du Soleil Spectators
Alignment of Brands| Innovation | Flexibility | Dazzling Guest Experience|
Appendix
Displays Word of Mouth
30% Discounted
Show Tickets
15% Discounted
Booking Rates
Current Marketing Mix Additional Marketing Channels
Higher Occupancy Rate
VIP Ticket Packages• Drinks
• Special Entrance• Meet Cast
Access to Unforgettable Custom-Designed Events
Cirque Du Soleil Party• Main Ballroom Transformed to fit
Cirque Du Soleil Theme• Performer Present at Event
Appendix
Why Not Restaurants
Hotel
Nightclub
Spa
Restaurant
Difficult to Incorporate Dinning and Performance Arts Experiences
Expensive to Scale
High Risk
Average Failure Rate: 70% within 10 years
Source: “Why New Restaurants Fail”
Appendix
Why Not Night Clubs
Nightclub
Short-term Success because of Nature of the Industry
Average Lifespan of Nightclub: 2-3 Years
Source: The Journal Record
Appendix
Why Not Spas
HotelSpa
Spa Ambience Conflicts with Energy of Cirque du Soleil
Low ROI
Appendix
Existing Residence Locations
Appendix
Planned Expansion
2010 2011 2012
March 2010Banana ShpeelResidenceBeacon Theater, New York
April 2010Cirque 2010Touring Montreal, Quebec, and Toronto before Heading to Europe
Spring and Summer 2010Seasonal Touring ShowRadio City Music Hall, New Yorkand London or Paris
Appendix
Planned Expansion
2010 2011 2012
Kodak Theatre, Los AngelesResidency ShowScheduled for 10 yearsMovie Theme
Appendix
Planned Expansion
2010 2011 2012
Dubai, UAEResidency Show
Palm Jumeirah. DubaiScheduled 15 Year
Partnership with Nakheel
Appendix
Appendix: Why 3D Movies?
Inconsistent with Focus on Exclusivity
Target Audience Expect Live Entertainment, not Digital Experience
Lack Demand
ConsPros
Low Cost
Build Brand in Cities Without A Show
Embracing New Technology
Unique Premium Experience
Appendix
Appendix: Why not Amusement Parks?
Different Target Market in Income Levels
Dilute High-End Image
No Other Amusement Park With Premium Brand Image Like Disney
Reasoning
Top Theme Park Groups1. Walt Disney Parks 118 MM2. Merlin Entertainment 35MM3. Universal Studio 25.7MM4. Six Flags 25.3MM
Source: TEA/ERA Theme Park Attendance Report 2008
Appendix
Jukari
Partner: ReebokVenture: Innovative Workout with the Music and Colors of Cirque du SoleilImplementation: April 2010 USA and EuropeLate 2010 Asia and Latin America
Appendix
Appendix: Current Partnerships
Global Partnerships
CommercialsAutomotive Provider
Preferred TicketsUpgrade / Discounts
Exclusive Video Content
Operations
Regional Partnerships
France
Japan
Appendix
Appendix: Why Not Arenas?
Arena
Touring
Brand Dilution• Lower Ticket Prices Undercut
Perception Premium Show
Important Part of Current Strategy
Less Central to Brand Identity
Already Aggressively Expanding with New Shows
More Growth Opportunity in Hybrid Model
Diversify Access Points
Appendix
Appendix: Ideas for New Shows
Cultural Themes
Bollywood
Japanese Samurai Era
Mardi GraPop Culture
Appendix
Appendix: Sponsored Events
• Corporate Events• Large Scaled
Parties
Hire Cirque du Soleil performers
Purpose Description
Appendix
Appendix: Methods of Funding
Financing
Equity Debt
Company Unable to Make Interest Payments Cheaper Option
Company has Strong Asset BaseMore Expensive
Able to Make Interest PaymentsCompany Can Issue Shares
Appendix
Appendix: Entertainment Options In London
Evening Entertainment
Theatre
Live Music
Play
Movie Theatre
Appendix
Appendix: Why Not Cruise Ships?
Stage Limitations
Less Marketing Opportunity Limited Audience
Low Return
Appendix
Appendix: Why Not EM SE Asia?
Guangzhou, China | Bangkok, Thailand | Ho Chi Minh, Vietnam
Pros
• High Tourist Growth
•Most Tourist Age Demographic Consistent with Cirque audience
Cons
• Political instability
•Tourists Expect Relaxing, Local Culture Experience Different from Cirque
Experience
• Most Tourists Aare Domestic who Spend Less Than $30/Day
Bangkok, Thailand
Appendix
Appendix: Why Not Casino-Like Areas?
Lack High-End Brand Loyalty
Atlantic City
Lack Large Audience Base 11 Casinos in Total
High-End Shows Perform on
Temporary Basis
Appendix
Why Not Paris, Berlin, Sydney?
Paris Berlin Sydney
Have Touring Shows
Never Entered with Resident Show Before
Not a Major Tourist Attraction
Not a Major Tourist Attraction
Overview Correct Change ImplementationCreate
Competition
Concerts Plays Amusement Parks Live Performances
No Direct Competitors in Acrobatics, but Substitutes in Other Live Forms of Entertainment Exist
Overview Correct Change ImplementationCreate
Risk Mitigation Contingency
Cannot secure office space
W refuses to partner with Cirque
Hybrid model is not profitable
Must look further away from HQ Decrease growth rate
More flexibility in negotation
Scale down production and performances
Revert to touring or arena model
Approach other luxury and contemporary-
themed hotels
Hotel construction delays
Careful planning and execution
Switch construction companies