Barco obtaining 55 percent of the graphic projector

BarcoProjection SystemsDecision case Company Background:BarcoProjection systems is the second largest division of Barco N.V Headquartered inBelgium. This specific division was formed to pursue the technology of videoprojection. It designed manufactured and sold sophisticated video projectorsfor industrial use and applications. Those projectors can be used to projectimages and information on to large screen.

What makes BPS stands out is theirscan rate, which measure the speed at a projector was able to processelectronic signal. BY 1989, BPS has 3 lines of projectors: those are  Video, data and graphics, projector and theyare the leaders in the entertainment, training and presentation market. Thecompany is currently obtaining 55 percent of the graphic projector market sharewith 2 percent annual growth potential Case Overview:One month ago the Sony corporation surprised BPS byunveiling it’s 1270 type projector this projector has a big competitiveadvantage over the in terms of video image and resolution and is rumouredpriced 20-40 percent below the established market price in its relative performingclass. Now the company must respond to it and come up with solutions.  Strength: and strategy of the company ,Emphasis and commitment on research and development, inthe last 10 years the company committed  10 percent of the company turnover dedicatedto the research and development program. Distribution advantage as Barco’sprojector has a dealer reputation for its high quality and reliability. Allthose are a great sign of customer loyalty.

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 Just as stated in the article what makes them standout is the scan rate, with three different types of projector, not only givedifferent user different pricing level option but also the level of combabilityis different. The low-end Video projectors was designed for combability withstandard video sources, scan at 16KHZ the data project. The data projector scan16 to 45 KHZ, and most high-end product the graphic projector scanning from 16to 72 kHz. It is not hard to see inExhibit 6, in comparison to the competitor of Sony Elecrohome and NEC thatboth Barco’s model are way ahead of its competitive when it comes Scan rate andresolution. The wide scan rate range allows the projector to be compatible withmany different devices and therefore increase the flexibility for the users.The high number in resolution promise a better qualityof final image. The company is also actively upgrading their system andmatching their scanning frequency along with the most recent technology ordevices.

According to table c: BPS takes on more than 55% ofthe market share for the highly sophisticated video projector, this is a verygreat sign as we can see that they have built the customer loyalty andreputation  Weaknesses: Consumer friendly: it is known that BPS has goodreputation among the dealers however they lack customer friendliness, it hasbeen complaint by the end users that sometimes BPS projectors are very complexto use and understand. Those kinds of complexity slow inefficiency and at thesame 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 theirsource of the part tube. Tube is very important part of the projector, as ittakes around 15 percent of the cost structure. In the late 1985 Sony has becametheir 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 thecompetitor, not only will Sony know all the potential moves, demand, inventory capacityand many important information. They will also have a huge leverage whencompeting 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 theirtubes” In the case studyone manager even stated that ” we share a certain amount of technical anddevelopment information with Sony , while they keep us abreast of their latestdevelopment” Obtaining tubes from outside suppliers might be more expensive butcompare to the risk of leaking important R&D secrets or Sony cutting offthe supply, the little increase in cost is minimal.  BPS must actively seekindependent tube supplier as soon as possible, although it might cost more inthe short run, but it is nothing compare to the potential risk and cost of Sonyterminating the contract for tube supply.  The Competition In august 1989, at the Siggraph trade show, Sonypreviewed a projector the 1270 which can scan 75kHz that is 3kHz more thanBPS’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 thefield of dara and graphic projectors.

On the other hand NEC is the other maincpmpeitior , however this Japanese electronics manufacturer is not performingtoo well as they lack effective distribution channels.   Opportunity: The Opportunity of the BPS lies in the niche market ofhigh end graphic projector, it is more expensive and is in a niche market. BPShas an amazing reputation with the customers and are preferred by the dealerswhom would usually prefer to carry their products. BPS must take advantage ofthose strength and expand their product in the high-end market.  According to table A, among all the projectorsgraphic projectors has the highest predicted annual growth of 40.2% for thenext 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, between1980s and 1990s Asian economy booming rapidly and therefore the demand for industrialused projector will only rise. Therefore, the opportunity they should focus onis the graphic projector and target the booming Asian market. Evaluation: The visionDejoghe 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. WhereSony would get some information about BPS and in return they will supply thetubes for the BPS. Sony’s projector performance and price are typically lowerthan BPS as they are more consumers focused. The reason Sony reject that visionis because they are no longer satisfied with their current market, market imageand their market share.

The want to change the company reputation makescustomers believe that they are not just a low-end cheap products producer, butthey want to reconquer the graphic and data markets a much larger market share.Three optionsLowering the price The price changing strategy is simply not going towork, especially when you are facing a much bigger company- the consumerelectronics giant Sony. BPS is the last company in the world that can win aprice war against Sony, as Sony is there sole supplier of tube, where Sony notonly is a bigger company with stronger financial capability but also enjoy thebenefits of low supply costs.

In addition, Sony has 500 dealers in the USmarket, five times more than BPS, this makes the street price of the Sony projectorseven cheaper. Sony enter the market for graphic and data projectorin 1985, yet BPS enter the market a lot earlier, they have a better reputationand has been recognized for its quality and reliability. Yes, cutting the pricemight be able to sole v the problem now, but BPS is not going to be successfulby simply cutting the price, the company is built on its commitment to quality,reducing the price will hurt the recent customers and those are potentialfuture customers, and would also send a message to all the loyal customer,hurts the market image of the company. Those customers might assume the qualityhas been compromised or they might also assume the price will keep on droppingand reluctant to make prompt purchase.  Theone of the most important aspect of point is that we have not even seen theSony product yet, all those speculation are rumours, BPS does not know whatprice 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 projectThe other option they have is urn immediately to thedevelopment of BG800, this project’s goal is to design a projector far superiorthan Sony’s 1270.

But it requires the stop of all the current project and spendanother 80-person month. To finish the project not only they have to terminateexisting projects but also rush the deadline before the trade show, there arealso different uncertainty if Barco will find suppliers to supply the lens. Whenthe BG800 has only a 40 percent chance of making deadline. By doing this, BPSwould waste the resources they spent on all the previous projects, ruining someof the reputation because they won’t be able to fulfil all the pre-orders ofother 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 allthose reasons combined, and not having a clear picture of sony”s product,  immediately starting the developnmemntal ofBG800 is also not a very good choice Continue the development This leaves to the last option we have. Continue thedevelopment and introduce BD700 on time, let everything go with the schedule.

The engineer must keep on working on all those projects and release them ontime. Although the new released product is still inferior than the Sony 1270,BPS can show that they have commitment for the customers and delivered thepromise of the pre-orders. It will boost up the morale of the dealers, thecompany and the with the new released product, Even if changes are needed we still need to wait untilthe official launch of Sony’s product, changing price first need to wait untilthe official launch of Sony’s product. Depending on their pricing strategiesand consumer reactions to make adjustment accordingly. In the competitiveindustry of projectors, and electronics there is no surprise that yourcompetitor might create a product better than yours. The last thing BPS needsto do is to allow itself to be misled by the rumours, changing pricing or productstrategy abruptly.

 Inconclusion: Sony is not a huge threat for the company, they might have developeda better product for now, but they still are relatively new to the market anddoes not have as good reputation as BSP. The priority of the company is not reducingthe price start something uncertain and new, instead of adjusting to thecompetitors, force the competitors to adjust to BPS.  The company should stick with their on-goingproject and adjust their product development plans only after they finishedtheir 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 tosupply its key parts even if that means the increase of costs but in the long runthey will adjust pricing and product lines according to the market trends and competitors