GROUP-7

SECTION-E
BARCO PROJECTION SYSTEMS

a) Problem Statement: It covers the decision problem which company is

facing. (Not more than 100 words).

Barco Projection System (BPS) is the 2nd largest division of Barco N.V., representing 23% of it’s
annual turnover in 1988. The introduction of 1270 “superdata” projector in Sept, 1989 by their
competitor Sony, has become a threat for Barco as the model is both technically superior as
well as low-priced compared to their flagship graphics model, BG400. BPS management is
fearing their estimated 1990 profits to go down by as much as 75%.
The challenge for Barco is to find an appropriate response to Sony’s new product launch which
creates sustainable profits and aligns with the company objectives.

b) Situation Analysis: It cover both analyses of internal and external

environment (Not more than 200 words)

Internal factors:
1. BPS has a vision of focusing on technology innovation of video projection. BPS supplies
high quality product for niche market
2. Heavy focus on R&D
3. Differentiator is their high scan rate and excellence in electronic components
4. Distribution and dealership network smaller than Sony
5. Projector configuration found to be complex; user-unfriendly
6. Two products: BD600 in Data; BG400 in Graphics
7. Developing BD700 to be launched in October 1989; initial stage in developing BG800 to
be launched in late 1990
8. Employees and Engineers are overworked due to BD700 production

External factors:
1. Sony launching new product 1270, in November 1989 challenging market share and
revenues
2. The Sony 1270 expected to be priced at $15,000-$20,000
 3. The tube supplier of BPS is Sony, as they have a far superior tube that works better with
BPS projectors
4. Sony’s new tube and lens assembly is entirely new and extremely advanced than BPS
5. The only supplier of lens consistent with new superior Sony 1270 Tube is produced by
Fujinon, which might not supply to BPS
6. BPS has to come up with a response to Sony before the InfoComm in January, 1990,
they are under time constraint
7. They have already taken advanced orders for the BD700
8. BPS is facing pressure to reduce costs in face of new Sony Product in Germany and
France

c) Options Available : This section covers the possible options (decisions)

which company can take. (Not more than 100 words)

The immediate options requiring a decision are:

For existing product - BG400 ($24,000):

1. Lower prices, reduce present (~59%) margin and try to retain market share (pre-empt
Sony 1270’s price).
2. Maintain price position and customer reputation, take $3.85MM-$7.69MM hit on profit.

For new product development:

1. Launch BD700 in October, as planned for $16,000.
a. Continue the $16,000 price if S-1270 is priced at $20,000
b. Reduce price for lesser margins, if S-1270 is in our range ($15-20K)
2. Leverage advances in BD700 development for a digital graphics (BG700) projector instead.
3. Divert all resources to the development of BG800 (40% chance of meeting the InfoComm
deadline).

d) Decision Criteria: How you will evaluate the attractiveness of the options
(stated in "c") and Why you have selected those criteria (Not more than 200
words)

The following factors will play a critical role to evaluate the options:
1. Avoiding price war: Barco cannot fight a price war with Sony, which has $11.5B
turnover (only 1% from projectors) and is the most viable tube (input, ~15% cost)
supplier for them. But it stands to lose upto 30% market share in the high growth
graphics segment.
 2. Future Market: At a glance, graphics seems like the segment to target (40.2% annual
growth). However, even after 6 years, Data will have a 41% market share, while most of
Graphic’s growth will come at Video’s expense.

Segment 1988 Share Growth Rate 1994 Share

Video 63% 0.80% 41%

Data 33% 12.30% 41%

Graphics 4% 40.20% 19%

Total 100% 8.45% 100%

3. Company Reputation and Values: Barco specialises in high quality research and
manufacturing, and enjoys a similar reputation from it’s customers. It strives to be among
the top 3 players in every segment it operates in. The response should be directed
towards this overall objective to maintain brand value (Risks of subpar products to be
avoided).
4. Collaborator and employee constraints: Adopting any of the options presents
challenges on part of the other stakeholders in the business- the distributors and
customers. Distributors have advance orders and customer pricing demands to meet,
while employees have high implicit investment in some alternatives (BD700).

e) Your decision: What do you think is the most optimal option for the
company? Why? (based on the criteria mention by you ïn "d") (Not more
than 100 words)

1. BD600 and BG400’s prices kept constant until S-1270 launched (maintain the premium
brand perception)
2. Leverage BD700’s development for BG700. The product will likely be priced above
$24,000 (inferior quality, miss on upgrade in data segment, irk distributors and
employees)
3. Divert resources to development of BG800 to build a product that competes with S-1270;
with a success rate of only 40%. (time consuming; no competitive advantage)

Decision: Choosing BD700’s development allows BDS to cater to the middle segment
(especially if S-1270 is priced $20,000 or above), which has 12.3% growth rate and will be 41%
of the market 6 years later.
f) What are the tradeoffs in your option? (Not more than 100 words)

1. Not being able to compete with the technological superiority of Sony 1270 in the
Graphics Segment at the Infocomm in January, 1990.
2. Losing out on time by immediately not beginning the production of a product competitive
to Sony 1270 in the Graphics segment (BG800).
3. Significant reduction in the market share in the Graphics projector segment.
4. Negative effects on the company’s reputation by not producing the most technologically
advanced product in terms of scan rate (will no longer be market leader in the Graphics
segment).
5. Reduction in revenue projection for 1990.

g) Your backup plan: You have selected an option based on some

assumptions about the future. What if those assumptions don't hold? (Not
more than 200 words)

The basic assumption to go ahead with BD700’s development is that S-1270 will not be priced
very low (near $15,000-17000), in which case the data projector market would be rendered
non-viable at the current prices.
Another assumption is that Barco will prefer to stick to its mission to be a premium
manufacturer, and would operate as that in the Data segment over compromising to offer low
price in the Graphics segment.
The strict segmentation and consistency of growth in each segment is also an assumption here.
Overlaps due to converging pricing (a possibility if S-1270 is priced low) has been ignored to
estimate segment market shares for 2024.

In case these assumptions are not met, Barco will have to look for product differentiation or shift
to being a low price producer, to try and regain the Graphics segment by manufacturing BG700
as a low cost, low performance alternative to Sony 1270 in the Graphics segment.