Harvard Case - CircusTrix: The Ups and Downs of International Expansion
"CircusTrix: The Ups and Downs of International Expansion" Harvard business case study is written by Simon Greathead, Case Lawrence, Jonathan Richards. It deals with the challenges in the field of General Management. The case study is 9 page(s) long and it was first published on : Dec 12, 2016
At Fern Fort University, we recommend that CircusTrix adopt a phased approach to international expansion, focusing on strategically selected emerging markets with high growth potential and strong alignment with their core competencies. This approach prioritizes market research, cultural sensitivity, and strategic partnerships to mitigate risks and ensure sustainable growth.
2. Background
CircusTrix, a leading provider of circus equipment and training, is facing a critical decision: how to navigate international expansion. The company has experienced significant success in the US market, but faces stagnant growth domestically. The case study focuses on the company's founder and CEO, Michael, who is grappling with the challenges and opportunities of expanding into new markets. The main protagonists are Michael, the CEO, and his team, including his wife, Sarah, who is responsible for marketing and branding.
3. Analysis of the Case Study
Strategic Framework:
To analyze CircusTrix's situation, we utilize a combination of frameworks:
- SWOT Analysis:
- Strengths: Strong brand reputation, innovative product offerings, experienced team, loyal customer base.
- Weaknesses: Limited international experience, potential cultural sensitivity issues, reliance on US market.
- Opportunities: Growing demand for circus arts globally, emerging markets with untapped potential, partnerships with local organizations.
- Threats: Competition from established international players, economic instability in emerging markets, cultural differences impacting operations.
- Porter's Five Forces:
- Threat of New Entrants: Moderate, as entry barriers exist due to specialized equipment and expertise.
- Bargaining Power of Buyers: Moderate, as buyers can choose from various suppliers, but CircusTrix's reputation and quality differentiate them.
- Bargaining Power of Suppliers: Low, as CircusTrix has established relationships with suppliers and can negotiate favorable terms.
- Threat of Substitutes: Low, as circus equipment and training are specialized and have limited substitutes.
- Competitive Rivalry: Moderate, with established international players and potential local competitors.
- Ansoff Matrix: This framework helps analyze growth strategies:
- Market Penetration: Focus on increasing market share in existing markets.
- Market Development: Expanding into new geographic markets with existing products.
- Product Development: Introducing new products or services to existing markets.
- Diversification: Entering new markets with new products or services.
Key Findings:
- CircusTrix has a strong foundation for international expansion, with a reputable brand and innovative products.
- Emerging markets offer significant growth potential, but require careful consideration of cultural nuances and market dynamics.
- A phased approach, focusing on strategic partnerships and market research, is crucial to minimize risks and ensure successful entry.
4. Recommendations
Phased International Expansion Strategy:
- Market Research and Selection:
- Conduct thorough market research to identify potential target markets with high growth potential and alignment with CircusTrix's core competencies.
- Prioritize emerging markets with a strong demand for circus arts, a favorable regulatory environment, and a supportive cultural landscape.
- Develop a detailed market entry plan for each selected market, including market size, competition, and potential partners.
- Strategic Partnerships:
- Form strategic partnerships with local organizations, including circus schools, government agencies, and cultural institutions.
- Collaborate with local partners to leverage their expertise, market access, and cultural understanding.
- Explore joint ventures, licensing agreements, or distribution partnerships to accelerate market entry and reduce risk.
- Cultural Sensitivity and Adaptation:
- Conduct cultural sensitivity training for employees involved in international operations.
- Adapt marketing materials and communication strategies to resonate with local audiences.
- Consider local preferences and cultural norms when designing products and services.
- Phased Rollout:
- Begin with a pilot project in one or two carefully selected markets.
- Monitor performance and adjust the strategy based on learnings from the pilot phase.
- Gradually expand into new markets based on successful outcomes and market feedback.
5. Basis of Recommendations
Core Competencies and Consistency with Mission:
- The recommended strategy aligns with CircusTrix's mission to promote circus arts and provide high-quality equipment and training.
- The focus on emerging markets with high growth potential supports the company's ambition for sustainable growth.
External Customers and Internal Clients:
- The strategy prioritizes understanding and meeting the needs of local customers through market research and cultural adaptation.
- It also considers the needs of internal clients, including employees, by providing training and support for international operations.
Competitors:
- The phased approach allows CircusTrix to learn from competitors and adapt its strategy to gain a competitive advantage in each market.
- Strategic partnerships with local organizations can help CircusTrix differentiate itself from established international players.
Attractiveness ' Quantitative Measures:
- While specific financial metrics are not provided in the case study, a phased approach allows CircusTrix to assess the financial viability of each market before committing significant resources.
- The strategy emphasizes partnerships to leverage local expertise and reduce upfront investment costs.
Assumptions:
- The demand for circus arts will continue to grow in emerging markets.
- CircusTrix can successfully adapt its products and services to meet local preferences.
- The company can find reliable and trustworthy partners in each target market.
6. Conclusion
By adopting a phased approach to international expansion, focusing on strategic partnerships, and prioritizing cultural sensitivity, CircusTrix can successfully navigate the challenges and opportunities of global markets. This strategy will enable the company to achieve sustainable growth, expand its brand reach, and solidify its position as a global leader in the circus industry.
7. Discussion
Alternative Options:
- Rapid Expansion: This option involves quickly entering multiple markets, potentially leading to faster growth but also higher risk.
- Organic Growth: This option focuses on building a presence in new markets through internal resources, which may be slower but offer greater control.
Risks and Key Assumptions:
- Political and Economic Instability: Emerging markets can be prone to political and economic instability, which could impact operations.
- Cultural Barriers: Misunderstanding cultural nuances can lead to communication breakdowns and marketing failures.
- Competition: Existing international players and local competitors may pose a significant challenge.
Options Grid:
Option | Advantages | Disadvantages | Risks |
---|---|---|---|
Phased Expansion | Controlled growth, minimized risk, adaptability | Slower growth, potential for missed opportunities | Political instability, cultural barriers, competition |
Rapid Expansion | Faster growth, potential for market dominance | Higher risk, potential for overextension | Political instability, cultural barriers, competition, financial strain |
Organic Growth | Greater control, lower risk | Slower growth, potential for missed opportunities | Political instability, cultural barriers, competition, limited resources |
8. Next Steps
Timeline:
- Year 1: Conduct market research, identify target markets, and develop pilot project plans.
- Year 2: Launch pilot projects in selected markets, build strategic partnerships, and adapt products and services.
- Year 3: Evaluate pilot project results, expand into new markets based on successful outcomes, and further develop international operations.
Key Milestones:
- Market Research Completion: Within 6 months.
- Pilot Project Launch: Within 12 months.
- Strategic Partnership Agreements: Within 18 months.
- International Operations Expansion: Within 24 months.
By following these recommendations and implementing a phased approach, CircusTrix can successfully navigate the complexities of international expansion and achieve its ambitious growth goals.
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Case Description
CircusTrix Trampoline Parks (CircusTrix) was started in San Francisco, California, in 2011 after the founder first experienced an indoor trampoline park. Less than five years later, the business had grown to more than 28 facilities worldwide, grossing US$24.5 million in 2014 alone. The company had originally expanded internationally to maintain its first-mover status in the emerging extreme recreation industry, but was now facing a problem that could derail the company's international growth for years to come. A customer in the brand new CircusTrix park in Edinburgh, Scotland, had injured himself and blamed CircusTrix. As a result, city officials had shut down the facility, with another park scheduled to open in just over two weeks in Glasgow. The public relations issue was threatening to cost the founder not only his brand new operations in the United Kingdom, but likely also the additional upcoming locations in Germany, France, and Holland.
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