Barco Projection Systems Analysis 5i2l40

MARKETING-1 Case: Barco’s Projection System

Group 07

Situation analysis: Company: • Barco Projection Systems (BPS) is the second largest division of Barco N.V with 350 employees and a turnover o 1.39 billion Bfr. • Formed to pursue the emerging technology of video projection. • Heavily R&D oriented (up to 8-10% of annual turnover and 15% of the workforce dedicated to R&D) • Focused on the niche market of video projection. Involved in design, manufacturing and marketing of sophisticated video projectors for industrial purposes. • BPS's strength is in electronics and it used this to achieve better performance in its projectors compared to other projectors of similar technical configuration. • The company segmented the market with respect to the scan rate of the projector, the 3 defined categories were- video, data and graphics. • Market leaders in the High end graphic projector segment and significant market share in data projector segment. • Technological market leaders. • International presence in , United States of America and United Kingdom other than Belgium Customer: • • • •

A varied customer base consisting of the following: Entertainment industry: resorts, discotheques, airplanes Training markets: IBM and Groupe Bull, a French company installed the projectors for training centers Presentation Markets: used in corporate presentations in board rooms, classrooms, betting shops

Competitors: 3 major competitors in the market for industrial projection: 1. Sony: Headquartered in Tokyo. • Major Player in the video projector segment with 50% of the units sold. • Second largest market share in the data projector segment. • Positioned lower than BPS in of performance and is priced lower. • Dealers did higher volume sales with Sony than with BPS, as it had a reputation for reliability and low price. • Larger distribution network than BPS 2. Electrohome: privately held Canadian electronics manufacturer • Operated in data and graphics segments of the market only and is BPS's largest competitor in graphics. • Third largest player in unit sales behind Sony and BPS. • Viewed as having higher quality than Sony but not BPS. • Distribution network comparable to that of BPS. 3. NEC: Japanese Electronics Manufacturer • Operated in video and data projectors. • Pioneered the digital data projector which is now a market standard. • Could not capture much market share due to inefficient distribution network. Other competing firms include Panasonic, Mitsubishi, and General Electric, competed in video and low data segments and were not much of a threat to BPS. Collaborators: BPS relied solely on Sony Components to provide them with the superior projector tubes. BPS could achieve greater performance through sonny components tubes than Sony itself. Since only Sony components

Problem Identification Barco is a small company which gives stress on superior quality products and R&D. It’s because of the product’s superior technology and differentiating scan rate that Barco was a market leader. However, Sony’s new model-the 1270 is a major threat to Barco. Projector 1270 leads the existing Barco’s BD and BG series projectors in of brightness, image quality, resolution and a superior scan rate of 75 kHz. Also the price at which 1270 is expected to be sold is quite low as compared to the current market. These two things posses a major challenge for Barco: 1. 2. 3. 4.

It might have a significant impact on the sales of Barco’s projectors because of its lower price. Sony is trying to conquer both the data and projectors segment, which threatens Barco’s Market share and its traditional strategy of market segmentation Till now Barco was known for its superior quality products. This image might be damaged with the introduction of Sony’s 1270 Barco’s reputation is at stake, it is estimated that it would lose around 70% of its forecasted 1990 profits to the Sony 1270.

Problem now for Barco is to maintain its image as technology leader and also to give competition to Sony’s supreme product so as to maintain its profit and market share. It might have to lower the price of its existing products or it has to come out with product as advanced as or superior to Sony’s 1270. One weak point for Barco because of which it is facing such problems is the lack of market sensing ability. It underestimated its competitors, Barco was expecting Sony to launch a similar quality product as their BD600 and then later upgrade them. This is not the first time that Barco’s competitor has introduced a higher quality product: 1. 2. 3.

Sony’s 1020 launched in 1985 had better quality tube and hence sharper focus than Barco’s projector. In 1987 Barco used the tube which Sony first used in its video projector In 1989, Sony came up with a new 8” tube, which Barco didn’t use as it would then have to redesign its projector. Apparently this 8” tube is now the differentiating factor Sony’s 1270 projector.

This can be one of the major problem / challenge for Barco in long run. In order to maintain the image of technology leader, Barco would have to continuously come up with innovative technologies. Alternatives Pricing BPS can review the price of BG400 so that it does not lose market share when Sony’s 1270 is launched. Price difference between Sony’s 1270 and BG400 (in case of Sony’s 1270 is cheaper) can lead to significant revenue loss for B. Moreover B is already being pressurized from German and French distributor for reducing the price of BG400 due to Sony 1270’s advance orders and apprehensions in market. Product Development: BPS can go as per its pre-decided strategy of launching BD700 by October 1989, which is currently on board, and then development of digital BG800 for late 1990 introduction which is digital up gradation of BG400. BPS can use the additions made in BD700 for a new product BG700. BG700 will use the chassis, lenses and tube of BD700 projectors. In addition to that it will be having higher scanning frequency comparable to 1270. Overall this will not be as efficient as 1270 but scanning frequency will be around same. BPS can go for development of a new product BG800 to sur the capacity of 1270. For the development of a new product BPS will have to hold the development of BD700 and divert resources for the development of BG800.

B need to finish the development of this product before Infocomm trade show to position it strongly before Sony’s 1270. Evaluating different alternatives present: •

Option 1 – Continue working on product development and waiting for actual release of Sony 1270, depending on its price offer discount on BG400 and BD600, such that price is less than Sony 1270. – Price is lowered in form of discount for the time superior product is not launched, because Barco cannot win the price war against Sony. Lowering BG and BD’s price might drive Sony to lower their further and Barco wouldn’t be able to keep up – Profit will be significantly reduced

Current retail prices being 24000(BPS margin= $6973 & Distributor Margin = $ 3545) and 12000(BPS margin = $3487 & Distributor’s margin = $1772.7). Discount has to come from reduction in distributor and BPS margin as maximum sales is happening through company owned distribution centres hence company will be affected where as if we try to reduce dealer’s margin that will lead to dealer not favouring BPS product as currently they are getting better margins as compared to any other brand. •

Option 2 – Scrapping the plan of introducing the BD700 in October and developing graphics projector BG700 using framework of BD700 by adding extra part for higher scanning frequency, hoping that it will be launched on time to compete with Sony’s 1270 in November while postponing BD700 until December – Barco should not introduce the BD700 as it will be still be Inferior to Sony 1270 and if price of 1270 is towards lower end of $15000, then we will be delivering inferior value to our customers, who have already made advance bookings – BG700 cannot outperform Sony 1270 in of the performance in that case we have to price it lower than Sony1270 which will again lead to significant reduction in profits

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Option 3 – Put all developments on hold and turn immediately towards development of BG800 until completion. – Try hard to meet Infocomm deadline keeping in mind that compression of its development should not have any negative effect on product quality – If the Infocomm deadline is not met we can offer future localized trade shows to promote and take orders for the BG800 on a bigger scale than what Sony is currently doing – Mean while giving discount prices on existing higher line until the development is complete and communicating to customers who have already paid advance the superior value proposition which will come with a trade-off to time loss

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Option 4 – Allowing market share erosion in existing markets, while compensating for the same by – Entering emerging markets like Asia, Australia etc. – Worst case being Barco loosing 30% to 60% of market share of BG400 in U.S. and European markets (12% of units sold are of BG400 and 23% revenues comes from it) – Increasing Market penetration by owning more Distribution and expanding dealer network which will result in low street price

Propositions In short term we would like to propose option 3 as most feasible choice, while in long run we would propose that Barco should: • Continue to pursue high end products for niche market and also continue to devote commitment to research and development to retain top quality products • Gradually decrease dependence on outside sources for raw materials but instead invest more in R&D to develop high quality and cheap raw materials in-house • Diversify its portfolio with another subsidiary brands selling similar products but of slightly lower quality and lower price • Diversify on market segmentations and becoming leader in both traditional and niche market • Find more providers of tubes, not just Sony, so as to avoid any future • Be at least 50% ahead in of technology advances so as to absorb these shocks from the competitors • Perform efficient environment and competitor scanning; invest more in research to stay ahead in the race. • Increase Market reach and penetration by owning more Distribution centers and expanding dealer network which will result in low street price