MARKETING-1

Case: Barcos 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 France, 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 terms 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. Its because of the products
superior technology and differentiating scan rate that Barco was a market leader. However, Sonys new model-the
1270 is a major threat to Barco. Projector 1270 leads the existing Barcos BD and BG series projectors in terms 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. It might have a significant impact on the sales of Barcos projectors because of its lower price.
2. Sony is trying to conquer both the data and projectors segment, which threatens Barcos Market share
and its traditional strategy of market segmentation
3. Till now Barco was known for its superior quality products. This image might be damaged with the
introduction of Sonys 1270
4. Barcos 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 Sonys 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 Sonys 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 Barcos competitor has introduced a higher quality product:

1. Sonys 1020 launched in 1985 had better quality tube and hence sharper focus than Barcos projector.
2. In 1987 Barco used the tube which Sony first used in its video projector
3. In 1989, Sony came up with a new 8 tube, which Barco didnt use as it would then have to redesign its
projector. Apparently this 8 tube is now the differentiating factor Sonys 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 Sonys 1270 is launched. Price
difference between Sonys 1270 and BG400 (in case of Sonys 1270 is cheaper) can lead to significant revenue loss
for BCP. Moreover BCP is already being pressurized from German and French distributor for reducing the price of
BG400 due to Sony 1270s 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 surpass 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.
BCP need to finish the development of this product before Infocomm trade show to position it strongly before
Sonys 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 BDs price might drive Sony to lower their further and
Barco wouldnt 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 & Distributors 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 dealers 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 Sonys 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 terms of the performance in that case we have to price it lower
than Sony1270 which will again lead to significant reduction in profits

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

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 terms 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