Barco dedicated to the research and development program. Distribution

Barco Projection Systems

Decision
case

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Company
Background:

Barco Projection systems is the second
largest division of Barco N.V Headquartered in Belgium. This specific division
was formed to pursue the technology of video projection. It designed
manufactured and sold sophisticated video projectors for industrial use and
applications. Those projectors can be used to project images and information on
to large screen. What makes BPS stands out is their scan rate, which measure
the speed at a projector was able to process electronic signal. BY 1989, BPS
has 3 lines of projectors: Video, data and graphics, projector and they are the
leaders in the entertainment, training and presentation market. Capturing 55
percent of the graphic projector market share with 2 percent annual growth
rate.

 

Case Overview:

As the COO
of Barco N.V , Dejonghe, he must respond to a competitor recent move by Sony,
one month ago the Sony corporation surprised BPS by unveiling it’s 1270 type
projector this projector has a big competitive advantage over the in terms of
video image and resolution and is rumoured priced 20-40 percent below the
established market price in its performing class.

 

Strength: and strategy of the company ,

Emphasis
and commitment on research and development, between 1980-1990 10 percent of the
company turnover dedicated to the research and development program. Distribution
advantage as Barco’s projector has a dealer reputation for its high quality and
reliability. All those are a great sign of customer loyalty.

 

Just as
stated in the article what makes them stand out is the scan rate, with three
different types of projector, not only give different user different pricing
level option but also the level of combability is different. The low-end Video
projectors was designed for combability with standard video sources, scan at
16KHZ the data project. The data projector scan 16 to 45 KHZ, and most high-end
product the graphic projector scanning from 16 to 72 kHz. It is not hard to see
in Exhibit 6, in comparison to the competitor
of Sony Elecrohome and NEC that both Barco’s model are way ahead of its
competitive when it comes Scan rate and resolution. The wide scan rate range
allows the projector to be compatible with many different devices and therefore
increase the flexibility for the users.

The high
number in resolution promise a better quality of final image. The company is
also actively upgrading their system and matching their scanning frequency
along with the most recent technology or devices.

According
to table c: BPS takes on more than 55% of the market share for the highly sophisticated
video projector, this is a very great sign as we can see that they have built
the customer loyalty and reputation

 

Weaknesses:

Consumer
friendly: it is known that BPS has good reputation among the dealers however
they lack customer friendliness, it has been complaint by the end users that
sometimes BPS projectors are very complex to use and understand. Those kinds of
complexity slow inefficiency and at the same time can potential hurt its sales.

 

Mistakes:

The reliance
on the Sony’s component,
it is very scary that BPS is replying on Sony as their source of the part tube.

Tube is
very important part of the projector, as it takes around 15 percent of the cost
structure. In the late 1985 Sony has became their sole supplier and the company
terminated their relationship with Clinton. This is the one of the worst move a
company can make, buying parts from the competitor, not only will Sony know all
the potential moves, demand, inventory capacity and many important information.
They will also have a huge leverage when competing against BPS. Just like what
the operation manager said in the case “Anytime Sony wants to squeeze us out
they can just raise the price of their tubes” In the case study one manager even stated that ” we share a certain
amount of technical and development information with Sony , while they keep us
abreast of their latest development” Obtaining tubes from outside suppliers
might be more expensive but compare to the risk of leaking important R&D
secrets or Sony cutting off the supply, the little increase in cost is minimal.
 BPS must actively seek independent tube
supplier as soon as possible, although it might cost more in the short run, but
it is nothing compare to the potential risk and cost of Sony terminating the
contract for tube supply.

 

The
Competition

In august 1989,
at the Siggraph trade show, Sony previewed a projector the 1270 which has the
ability to scan 75kHz that is 3kHz more than BPS’s recent model along with that
also has better image quality and resolution. It is rumoured that the price of
unit will be 20 percent lower to the standard.

 

Eltrohome:
is a private held native Canadian company, it is third in unit sales behind Sony
and BPS, However they only operate in the field of dara and graphic projectors.
On the other hand NEC is the other main cpmpeitior , however this Japanese electronics
manufacturer is not performing too well as they lack effective distribution
channels.  

 

Opportunity:

The
Opportunity of the BPS lies in the niche market of high end graphic projector,
it is more expensive and is in a niche market. BPS has an amazing reputation
with the customers and are preferred by the dealers whom would usually prefer to
carry their products. BPS must take advantage of those strength and expand
their product in the high-end market.  According
to table A, among all the projectors graphic projectors has the highest
predicted annual growth of 40.2% for the next 5 years. Sony’s new project’s
targeting market is north America and Europe, however according to Table B, Asia
has the highest predicted annual growth, between 1980s and 1990s Asian economy
booming rapidly and therefore the demand for industrial used projector will
only rise. Therefore, the opportunity they should focus on is the graphic
projector and target the booming Asian market.

 

 

Evaluation: The vision Dejoghe talked about is that both
those company will stay at their own market, agreeing upon to the established
market price and gain profit from that. Where Sony would get some information
about BPS and in return they will supply the tubes for the BPS. Sony’s
projector performance and price are typically lower than BPS as they are more
consumers focused. The reason Sony reject that vision is because they are no
longer satisfied with their current market, market image and their market share.
The want to change the company reputation makes customers believe that they are
not just a low-end cheap products producer, but they want to reconquer the
graphic and data markets a much larger market share.

Three options

Lowering the price

The price
changing strategy is simply not going to work, especially when you are facing a
much bigger company- the consumer electronics giant Sony. BPS is the last
company in the world that can win a price war against Sony, as Sony is there
sole supplier of tube, where Sony not only is a bigger company with stronger
financial capability but also enjoy the benefits of low supply costs. In
addition, Sony has 500 dealers in the US market, five times more than BPS, this
makes the street price of the Sony projectors even cheaper.

Sony enter
the market for graphic and data projector in 1985, yet BPS enter the market a
lot earlier, they have a better reputation and has been recognized for its quality
and reliability. Yes, cutting the price might be able to sole v the problem
now, but BPS is not going to be successful by simply cutting the price, the
company is built on its commitment to quality, reducing the price will hurt the
recent customers and those are potential future customers, and would also send
a message to all the loyal customer, hurts the market image of the company. Those
customers might assume the quality has been compromised or they might also
assume the price will keep on dropping and reluctant to make prompt purchase.  The one of the most important aspect of point
is that we have not even seen the Sony product yet, all those speculation are rumours,
BPS does not know what price it will be for the 1270, and how they will be
accepted by the customers. Cutting the price when situation is not clear is a
bad move.

Start a brand new project

The other
option they have is urn immediately to the development of BG800, this project’s
goal is to design a projector far superior than Sony’s 1270. But it requires
the stop of all the current project and spend another 80-person month. To
finish the project not only they have to terminate existing projects but also
rush the deadline before the trade show, there are also different uncertainty
if Barco will find suppliers to supply the lens. When the BG800 has only a 40
percent chance of making deadline. By doing this, BPS would waste the resources
they spent on all the previous project, ruining some of the reputation because
they won’t be able to fulfil all the pre-orders of other models and with 40
percent chance of making deadline to the trade show, the rush for deadline
might also hurt the quality of the product. With all those reasons combined,
immediately starting the developnmemntal of BG800 is also not a very good
choice

Continue the development

This leaves
to the last option we have. Continue the development and introduce BD700 on
time, let everything go with the schedule. The engineer must keep on working on
all those projects and release them on time. Although the new released product
is still inferior than the Sony 1270, BPS can show that they have commitment
for the customers and delivered the promise of the pre-orders. It will boost up
the morale of the dealers, the company and the with the new released product,

Even if
changes are needed we still need to wait until the official launch of Sony’s product,
changing price first need to wait until the official launch of Sony’s product.
Depending on their pricing strategies and consumer reactions to make adjustment
accordingly. In the competitive industry of projectors, and electronics there
is no surprise that your competitor might create a product better than yours.
The last thing BPS needs to do is to allow itself to be misled by the rumours,
changing pricing or product strategy abruptly.

 

In
conclusion: The prioristy of the company is not reducing the price start something
uncertain and new, instead of adjusting to the competitors, force the
competitors to adjust to BPS.  The company
should stick with their on-going project and adjust their product development
plans only after they finished their old projects and delivered their promises
to the customers. In the short run, they should not change price at all, and must
find alternative suppliers to supply its key parts even if that means the increase
of costs but in the long run they will adjust pricing and product lines according
to the market trends and competitors. 

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