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Case Analysis of Barco Projection System

Barco Projection Systems (BPS) was the market leader in high-end graphic projectors but faced new competition from Sony's 1270 projector, which showed superiority in brightness, image quality, and resolution. As a niche player relying on Sony for key components, BPS was unprepared for this competitive threat. To regain its advantage, BPS's managers considered lowering prices or accelerating product development. They decided accelerating development of the more advanced BG800 projector was the better option, as it would allow BPS to compete in large markets like the US and sustain its reputation for innovation.

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Abhijeet Mahapure
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913 views

Case Analysis of Barco Projection System

Barco Projection Systems (BPS) was the market leader in high-end graphic projectors but faced new competition from Sony's 1270 projector, which showed superiority in brightness, image quality, and resolution. As a niche player relying on Sony for key components, BPS was unprepared for this competitive threat. To regain its advantage, BPS's managers considered lowering prices or accelerating product development. They decided accelerating development of the more advanced BG800 projector was the better option, as it would allow BPS to compete in large markets like the US and sustain its reputation for innovation.

Uploaded by

Abhijeet Mahapure
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Case summery of Barco Projection System

Introduction
Barco N.V. was established in 1934 as a producer of radio broadcast receivers.
Barcos focus was on the high resolution graphic projectors and was market leader
in industrial niche market. This decision was based on firm and clear vision that
Barco knew which market it had to serve. Pursuing top-of-the-line in the high-end
niche market, Barco focused on R&D to retain the top quality and launched series of
international expansion activities.
The strategy of the most advanced player in the niche market resulted in years of
its market leadership in graphic projector sector of high-end industrial market. Barco
Projection System (BPS) virtually enjoyed the fruit of its dedication on
technologically superior projectors, however, the projector market encountered an
unexpected (in light of BPS) new product 1270 "SUPERDATA" projector from Sony.
Introduced at trade show in 3rd quarter of 1989, 1270 showed its superiority in
brightness, image quality, and resolution to the counter product of BPS.
Since BPS couldn't expect a competing product like 1270, both the company and
the distributor were shocked and stirred. Considering Barco's scale in the market,
even though BPS was in the position of industry leader, it couldn't defend itself from
the attack of the giant like Sony. At this point, to keep the market position and share
BPS should take an immediate action against Sony's market conquering movement
with the high-quality but low-priced projector 1270. At this time, the managers of
Barco were considering basically two options: pricing option and product
development option, but both options had some defects.
Strange relationship with the Giant
BPS was known its high quality to distributors and end users. Based on its strategy
of being ranked in top 3 in the designated market segment high-end projectors, BPS
had achieved the no. 1 in graphic projector and managed to be top 3 in data and
video projector sectors. BPS had intentionally set the bar by making its product
"Unnecessarily Complex" to prevent the entrance of other competitors. Dealers and
end-users complained about it but BPS held this strategy since it was regarded as a
necessary differentiating way among competitors. Sony was the strongest
competitor and had a unique relationship with Barco. Competing in the market of
industry projector with Barco, it provided the core component of the projector to
Barco tubes. As Sony was the best producer of quality tubes that were essential
to BPS high quality projector, BPS had been trying to diversify its supply of tubes but
until that time, BPS couldn't help relying on Sony.
Even though Sony was the strongest competitor to Barco, its strategic movement
with 1270 had not been expected. Sony was known more for consumer market
player and its product mix of projector market was more skewed to video side,
which was less dedicated by BPS, and Sony was often considered to have less
interest in investing R&D of projector-related technologies. However, these
assumptions were turned out to be wrong in the end and the product development

plan of Barco based on market expectation based on these assumptions brought


significant crisis.

Relationship with dealers


BPS had a two-step distribution system, which was composed of 45 distributors and
about 400 dealers globally. The ratio of fully owned distributors was about 11%, but
they made up 61% of BPS's total unit sales and 59% of its margin. The reason that a
few fully owned distributors were in charge of more than half of unit sales,
revenues, and margins was partially attributed to the "complexity" of the projectors.
To market its projectors well, BPS needed to have system dealers that had the
know-how of integrate and install equipment packages. Because of high margin, the
existing dealers liked to sell BPS's projects but the intentional product complexity
prohibited the expansion of distribution channel. In terms of volume, dealers did
higher volume with Sony 80% to 90% of professional audiovisual dealers worldwide
Sony products because of reliability and low price among dealers.
How to win back the competitive edgy
BPS lost its competitive advantage because it relied on the competitor i.e. Sony for
the supply of key component and it misjudged the market change based on the
wrong assumptions including Sony's product development plan. Its strategy heavily
relied on its advancement of product quality, but with the advent of Sony's 1270,
the map of the high-end projector market had to be redrawn. BPS should have more
focused on developing innovative products outperforming competitors' products.
At this stage, the managers of BPS had to decide which way to go to survive in the
market and to win back the market leadership. Lowering prices of existing are not
an option to consider. It would cause price war and eventually BPS would be
disappeared in the market because BPS, a niche player is not strong enough to fight
with the giant. In addition, the customer of BPS might relate the cost reduction to
the inferior quality. Once the product quality reputation starts declining it wont be
easy for Barco to regain it again being a player in niche market segment.
The product development option seems to be more desirable to BPS, even though
there were several restraints. Since customers tended to purchase more
performance in a projector than they need, the demand for more sophisticated
products would be anticipated to grow up. As a niche market player, BPS should
think of its target consumer group they want more advanced and innovative product
and afford to pay the premium price. The managers of BPS might dedicate to finish
the development of BG800 before meet the deadline of Infocomm. By adopting this
strategy, BPS could be prepared for the competition of the one of largest markets
i.e. US with BG800. Upgrading BG700 option would rather not be considered as it
could cause the delay in its delivery to advance-order customers who already
acknowledge the quality and function of this model and made a decision.
While pursuing product innovation, still BPS can cut down some cost. Less
complicated technology will reduce costs (explicit and implicit) for customers,
dealers and BPS increasing value for all, hence strengthening the its position in the
market even more.
Conclusion

Keeping the competitive advantage alive in niche market segment in the


competitive environment is not easy. Barco had redefined its target market from
consumer to high-end industry to avoid unnecessary competition and reap more
profit by raising profitability. A major characteristic of the market is its high velocity
of innovation, but with misjudgment on competitors' move in the market, it
encountered a crisis of losing its competitive advantage. This shows the importance
of being consistent in developing the most innovative product that competitors
cannot react immediately. For BPS, it's the most urgent assignment is to win back
the advantage again while minimizing loss as far as possible. Using less complicated
technology, BPS could get more power for price competition and advantageous
platform to develop new innovative products. For the Infocomm, although it seems
to be risky but BPS is recommend to focus on the most advanced product, BG800
not to lose US market to Sony and to sustain its reputation on innovation and
quality.

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