Overview industrial market. Case Overview In August 1989,

OverviewBegan in 1934, BarcoN.V was a producer of radio broadcast receivers.

The company quickly developedand grew into producing broadcast monitors and professional video equipment,which targets the industrial market instead of the consumer market. Barco iscommitted to be a leader in various types of distinct, but necessary niche markets.They only enter markets if they are convinced that they can be one of the topmanufacturers.

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The company is also very dedicated to its R&D and they wantto constantly finetune their products and technology so that they offer thebest quality. With global expansion on their minds combined with the abovecharacteristics, Barco N.V became one of the top three manufacturers worldwidefor each of its division (automated production control systems, graphic arts,computer-aided design, and industrial production), with a 50% turnover. Barco ProjectionSystems (BPS) was formed in the 1980s to chase the evolution of videoprojection. BPS grew rapidly and was the second largest division within BarcoN.V with a turnover that represents 23% of the whole company. The divisiondesigned, manufactured, and marketed video projectors for the industrialmarket.

Case OverviewIn August 1989, BPSwas taken by surprise when their supplier and competitor Sony Corporations announcedan industry-changing projector called 1270 to be introduced at the upcomingInfocomm, which is the industry’s most important trade show. The product willseize first place from BPS’ BG400 as the highest-performing projector in theindustry, and it will be priced 20% – 40% lower than the market price. Thisthreat will very likely disturb BPS’ traditional market segmentation, and forceindustry prices to drop to indefensible levels. Barco’s senior vice presidentDejonghe predicts that BPS would lose as much as 75% in revenue from itsprevious projected 1990 earning. To respond to this situation, the company mustdecide what to do with the pricing of their current projectors.

They also mustchoose between three options regarding the development of new projectors:Continue development and introduce the BD700 on time in October; use advances in the research of BD700 to develop digitalgraphics projector BG700; or abandon the researchof BD700 and turn attention to upgrade BG400 into BG800. The presented isclearly a decision case where the threat of 1270 is the problem and there arelimited solutions to choose from. I will analyze BPS’ product line, SWOT,relationship with Sony, and the three options, to provide a clear, strategicallysound solution.  Product Line AnalysisBarcodifferentiated its product line of projectors based on scan rates, which is thespeed at which projectors can process electronic signals. BPS had three majorproduct lines of projectors (video, data, graphics), which played a key role inits technological niche market. It was separated into video projectors for TVand VCR use, data projectors for computer images use, and graphics projectors foradvanced computer-aided design and CAD/CAM systems. The three productlines represented different scan rates of projectors, which were designed forspecific use:·       Videoprojectors had scan rate of 16 kHz, intended for ordinary use, such as in TVsand VCRs. ·       Dataprojectors had a scan rate of 16 to 45 kHz, intended for displaying data frompersonal computer to video sources.

·       Graphicsprojectors had a scan rate of 16 to above 64 kHz, intended for processinginputs from advanced computer design systems and video and data sources. By producingproduct lines with different suited uses, BPS projectors can be more suited tovarious consumer needs. BPS’ strategy to search for the best possible image,flexibility towards inputs, and increase the user friendliness of itsprojectors shows commitment to specialize and tackle the projector nichemarket. They constantly make advances in their technology, which showscommitment to the industry and their customers. It intends to reach a levelwhere it can dominate and keep large firms out of the market.

BPS quicklybecame a market leader in a variety of training, entertaining, and presentationmarket, with classrooms, boardrooms, airplanes, etc. all installed with Barcoprojectors.BPS’ StrengthsBPS is awell-developed high-quality producer in the projectors industry. Its majorstrengths come from its reputation and exceptional R, which helps thedivision produce high performing and specialized projectors while using thesame lens and tube. The projectors’ ability to perform various scan rates helpsBPS create differentiation. This is directly related to the strong financialsof BPS, in which”·      Turnover from 1988 to1989 increase from $34.7 million to $49.6 million.

·      Net income increased 103%from $7.7 million to $15.6 million. This shows thatthe company is showing success and growth in their sales. In terms of productsales:·      Video projectors make up20% of BPS’ gross margin·      Data projectors make up51% of BPS’ gross margin·      Graphics projectors makeup 29% of BPS’ gross margin This means that the BPS is most profitable inthe data product line. However, graphics projectors have the biggest marketshare for BPS (55%). In terms of expected growth, data projectors have a highgrowth of 12.3%, and graphics projectors 25%.

BPS also has the ambition to growglobally, which is shown by 3 international acquisitions. Finally, the companyhas exceptional service with 80% system dealers. This proves that the companystands a significant ground in the projectors market worldwide.BPS’ Weaknesses·       Amajor weakness of BPS is its dependency on a single supplier, which is Sony. Itdepends on Sony to supply its tubes.

·       Complicationof the projectors for users. The projectors are complicated to install, andprovides inconvenience for users. ·       R&Dstaffs are tied up with the development of BD700, making options for thedevelopment of other projects very difficult. BPS’ OpportunitiesA majoropportunity for BPS would be to remove the dependency of Sony as a solesupplier. Barco can start exploring various alternative options of suppliersfor both of their tubes and lenses. This could also be an opportunity to pushBPS to advance their technology in their projectors.

For example, BPS couldspeed up the production and introduction of the BG800. BPS could also turn itsattention to develop a projector of similar class as 1270 for the graphicsmarket. Since 1270 is only targeting the data projectors market. In addition,BPS could focus more on services and after-sales services, to compete with thetechnologically advanced, and lower priced Sony 1270. BPS’ ThreatsThe introductionof Sony’s 1270 proves to be a serious threat to BPS’ market position in theprojector industry. It is predicted that it would lower 75% of BPS’ predictedrevenue in 1990.

BPS thought that Sony would “respect our vision of themarketplace”. This meant that they thought Sony would not try to overtake andphase out the market share position of BPS. They thought that Sony wouldrespect the company’s vision the be a market leader and not try to disturb itsposition. However, the introduction of 1270 proved them wrong and couldpotentially do serious damage the sales and ultimately the market position ofBPS.

Sony would get rid of its low-end mass producer image, and transform into highquality and fair priced producer. This could throw Barco off its “qualityleader” image in the industry. Relationship with SonyBarco establisheda rivalry and partner relationship with Sony. When Dejonghe said that Sonywould “respect our vision of the marketplace”, he believed that Sony would nottry to overtake BPS’ market position, and disturb the whole industry. Hethought that Sony would respect the fact the BPS is the projectors marketleader and would not try to overtake their position. In addition, BPS did notthink that Sony had the technology to produce a product that would surpass BPS,and therefore, did not regard Sony as a market leader. A company will acceptthe “vision” of another company when it acknowledges the other company’sposition and respect it enough to not try to overtake its position.

However,Sony is not a market follower, but an obvious market challenger that is tryingto take charge of the market. The company aims to transform their image from amass producer of cheap projectors to high quality fair priced producers. Therefore,it is reasonable for Sony to not accept BPS’ vision.

It is BPS’ faultfor the surprise attack of Sony. Barco was too innocent in a competitivebusiness world. The company has a weak market intelligence and marketing planthat fails to react to strategically emergency situations such as theintroduction of 1270.

In addition, BPS’ tubes were solely supplied by Sony, andthey should have known that Sony has the technology to produce advancedtechnology. Especially after knowing about the 8″ tubes. The company shouldhave done better in developing a plan beforehand that deals with predicting andreacting to potential competitor threats instead of trusting Sony (who is acompetitor) to “respect their vision of the marketplace.” Instead of beingproactive in looking for constant threats and improving to deal with thethreats, they were reactive and faced consequences. Evaluation of Option 1: Continue development andintroduce the BD700 on timeThe BD700 is new dataprojector that has a higher scanning frequency and generator. This projectorwould be preferred over current data projectors and is expected to be introducedby October. The product’s projected sales are supposed to increase 25% comparedto BD600.

German distributors have already placed orders for the product. Byintroducing BD700 on time (before Infocomm), it would give the company a timeframe edge of capturing market share before the release of Sony’s 1270. Sincenew products tend to excite consumers, the early introduction of BD700 wouldpotentially be sought after. However, the BD700 does not contain majorimprovements and 1270 will be significantly better (price and product), whichmight phase out BD700 and its previous development efforts and expenses. Evaluation of Option 2: Use advances inthe research of BD700 to develop digital graphics projector BG700BPS could use theprogress from BD700 and develop BG700, which is a graphics projector. Byfocusing on a completely different product line, BPS would not have to competehead to head with Sony’s 1270. BPS could capture sales from the graphicsproduct line to compensate for the loss of the data product line.

However, thedelay of BD700 would mean that the orders from the German distributors wouldnot be fulfilled. The change of path would also affect the morale of theR&D team. In addition, without the 8″ tube, the product would still beinferior to Sony’s 1270.Evaluation of Option 3:  Abandon the research of BD700 and turn attention toupgrade BG400 into BG800Using Sony 1270’s8″ tube, the BG400 could be upgraded to BG800, which would surpass 1270.However, this is not a logical idea because there are too many risks involved.New lenses would have to be sourced from Fujinon, without guaranteeing thatthey would supply.

There is only a 40% chance of introducing the product beforeInfocomm date. It would require 80 person months to complete the upgrade,putting all emphasis on the product and halting other projects. This woulddamage employee morale, and have to require employees to work overtime with novacation breaks. In addition, orders for the BD700 would have to be canceledwhich would damage the relationship between Barco and the distributors.RecommendationAfteranalyzing the three options, I believe that the first option of continuing thedevelopment of BD700 is the soundest.

This is because introducing the BD700before the Infocomm date and the introduction of 1270 allows BPS to capturemarket share for the data projectors segment. Consumers are generally excitedabout new products, and the new BD700 would most likely be popular in thebeginning. Since the performance and price of any projector won’t match 1270’s,it would be smart to “steal” sales from Sony first, by introducing a newproduct.

By capturing as many sales as possible, it would also damage 1270’smarket share because the projectors are a relatively expensive product thatwould not be purchased too often. Once consumers buy the new BD700, the chancesof them disposing the BD700 and buying 1270 would be a slim one, even if it isbetter and cheaper. In addition, this option would satisfy the distributors whohave ordered the BD700, and protect the morale of the employees.

To gain a furtheradvantage of the situation, BPS should try to improve after-sales servicehaving a longer warranty, so the gap between the BD700 and 1270 could becloser. By releasing the BD700 on time, Barco fulfills the present salesobjective. However, it should immediately turn its attention towards the BG800.Having superior technology against 1270 is the long-term solution to capturecustomer value and gain market position. In addition, the graphics segment hasthe highest potential growth in the projectors industry. Therefore, byreleasing the BD700 on time, Barco can fulfill its short-term goals and focuson being a niche specialist in the long-term, more profitable, graphics segment.

PricingSolutionThe company had todecide on the pricing options of it current projectors BG400 and BD600. Manydistributors from around the world are calling to have prices lowered tocompete with the potential low price of 1270. However:·       Loweringprices might cause a price-war, which BPS would not be able to sustain.

·       Barcohas a reputation for providing high-quality products, and that reflects intheir prices. If BPS lowers the price to match 1270’s, consumers might thinkthat the quality of BPS is not as good, and the differentiation of BPS woulddisappear. ·       Lowprice of 1270 is only a rumour but not a confirmed fact. Therefore, thereis no need to panic and lower prices. However, on top of keeping prices thesame, Barco should be ready to provide additional and improved after-salesservices in case the low price of 1270 is true. By providing exceptionalafter-sales services, Barco could further differentiate itself in the high-endcategory and capitalize on the weakness of Sony’s poor service.

  Conclusion·       Customersvalue the products of Barco, so keeping prices the same would be the bestoption for Barco right now·       Firstoption of continuing the development of BD700 is the soundest because it allowsthe early disbursement of BD700 to capture market share, and allow BPS to focuson BG800 right afterward. ·       Barcoshould look for alternative suppliers and perhaps supply their own tubes andlenses·       Barcoshould focus on improving market intelligence, and obtain competitorinformation, so they can develop a strategy for competitive threats.·       Continueinnovation and targeting the graphics projector segment, will allow BPS to growand surpass Sony·       BPSshould add additional after-sales services to further differentiate and capturecustomer value


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