Began as a producer of radio broadcast receiver
in 1934, Barco N.V built its first television receiver in 1948 which led to
consumer television forming bulk of its sales. It became a successful
competitor by seizing the market based on R&D strength and product quality.
Extensive growth took place for company from 1955-1975 as it expanded into broadcast
monitors and professional equipment for videography. The company faced global
recession in 1970s followed by the oil supply shock in 1977. The company
responded to the it by reformulating from consumer markets to industrial
markets. The company understood that survival wasn’t possible on consumer
market therefore the company had three elements for its strategy throughout the
1980s. Firstly the company wanted to become the leader in array of niche
markets. Secondly the company wanted to have a firm commitment towards research
and development where 8%-10% of the company’s annual turnover and 15% of its
employees were devoted towards R&D throughout the 1980s.Thirdly the company
desired to expand its business internationally in sales, production and product
In 1988 the company launched a mammoth global
expansion for joint ventures and acquisitions which totaled to 110Million dollars
in the first half of 1989 by three major acquisitions. Having only 2400
employee Barco was one of the top three manufacturers in their product lines in
the year 1989. Number of international awards were given to the company for
example Emmy awards for their studio monitors in 1988 which was followed by Hi
Vi Silver award given to BPS in Japan for most electronic visualization
Awaiting the release of their new digitally controlled
projected BD700 a user friendly upgrade to their video projector BD600 in the
data segment, BPS and other industries were astonished by Sony Corporation unveiling
its 1270 superdata projector which priced 20%-40% lower than its market price
for its performance. It was a direct competitive threat to BPS and COO Dejonghe
estimated that BPS could lose up to 75% of its 1990 forecasted profits because
of 1270 offering a combination of high performance and low price.
The following case is a decision case as now BPS has
to decide how and what steps are to be taken to compete with their rival Sony
Corporations new projector 1270 which offers higher performance and is offered
at a lower price than their projector.
Barco Projection Systems marketed, produced and
manufactured refined video projectors which could be connected to TVs, VCRs and
latterly to computers. The product line strategy of Barco Projection System was
to breakdown its projectors into three main product lines. The company differentiated
each product line by scan rate, which was used to measure the speed at which
the projector could read and process incoming electronic signals. The higher
the scan rate, the higher the sophistication for BPS projector. By 1989 the
company had developed three categories of projectors: graphics, data and video.
The video projectors were compatible with basic video sources like TVs and VCRs
and were able to scan at 16 kilohertz(kHz). The data projectors were able to
display input from video sources as well as personal computers at a scan rate
of 16kHz to 45kHz. The most refined projector offered by BPS was their graphics
projector which could scan at a rate of 16kHz to 64kHz and was able to take
inputs from computer aided design and manufacturing(CAD/CAM) along with video
and data sources. The projectors were offered on a different price scale from
video projector being the cheapest because of lowest scan rate to graphics
project being the most expensive due to highest scan rate among all the three
types of projectors.
By offering extensive range of projectors while
focusing on their high quality BPS was able to build a base in different markets
including training, entertainment and presentations. Classrooms, boardrooms,
training centers and betting shops around the globe were equipped with BPS
BPS wanted to lead in every unique niche projector
market. The company only planned to infiltrate the market if they had the in
depth knowledge and technology to remain among the top three manufactures in
the particular market. The company was continuously upgrading and expanding
their technology and scan rates to stay in sync with advances made in computer
technology. Along with advancing in technology the company didn’t want to stay
local they also wanted to grow internationally and pioneer in different areas
to increase their sales.
The company had a two-step distribution in 1989 with
400 dealers and 45 distributors around the globe. Where division owned distributors
made 59% gross margin, other distributors and dealer had a margin of 30% which
lead to them having a good relationship with the company as they were able to
make a good profit by BPS projector in their stores.
When Djonghe comments that “All of our projections,
however, were based on the assumption that Sony would respect our “vision” of
the marketplace” he meant that even though Sony and BPS were competitors their
expertise was in different areas and they specialized in different segment of projectors
they would not sell them down the river and directly try to compete with BPS
head on. He expected Sony to respect a fair play in the marketplace where both
the competitors could lead the market synchronously without one company
introducing a product that surpasses the other company’s product lead to an
unhealthy competition in the market and further leading to the inferior product
losing its market share.
Sony launching their new projector 1270 definitely
lead to BPS realizing that they were delusional with the fact that Sony would support
their vision of the marketplace.
When a competitor understands and respects its
competitor and their area of specialization and wants to maintain a healthy
competition in the market where both the competitors hold onto their customers
without one competitor introducing a product that could sabotage the market
share of the other, that is when a competitor envisions the vision of its
competitor and accepts it.
Sony rejected BPSs vision in August 1989 because Sony
never had the same vision like BPS did. Where BPS was thinking to launch new
products depending on the products launched by Sony and keeping in
consideration the technological upgradation Sony would be making, Sony always
wanted to conquer the whole market for data and graphic projectors. They were
just waiting for the right moment when BPS would be in the most vulnerable
position and would be in no position to compete with Sony Corporations new 1270
projector in price or features. BPS had a blind faith on Sony and relied on
their supply of tubes for their projectors completely which put BPS in a
defenseless position against Sony. BPS should’ve been more cautious of Sony’s
intentions to capture the whole projector market globally and take BPS’s market
share for data and graphics projectors. Sony knew that BPS was completely
depended on them for tubes, its supply being completely in control of Sony and
BPS been only investing in R for their data projectors and hadn’t introduced
any graphic projectors in 2 years. This lead to Sony taking advantage of the
situation and introducing their new projector 1270 which was way better than
BPSs projector and featured a new 8″ tube which Sony did not declare innovating
or working on to BPS while BPS shared their technological developments with
Sony. In high technological competition on global scale blind troth and loyalty
does not exist amongst competitors and you have to always be vigilant.
Strong distribution network with good
standing and position amongst dealers
Strong overall global presence
Perceived as innovator and the leader of
projector technology offering exceptional scan rates
Targets different consumer markets with
different product lines for projectors falling on different price range
Dependent on single supplier Sony for
their main component for projectors i.e. tubes
Delusional and gullible when it comes to
Projectors design aren’t user friendly
Offering higher prices than its
Globalize their market in Asia and Europe
where the growth has been predicted for 18% and 11.5% respectively
Focusing on their main market, Graphic
projector and creating new innovation for the same
Complete BD700 before October 1st
1989 to focus on the production of BG800 which can surpass Sony 1270 at
Sony 1270 is the biggest threat as it
offers a higher performance than BPSs current projector and is offered a lower
Dependability for major component on its
competitor who can control the supply
Technological advancements from
competitors other than Sony
Consumer consideration of quality and
price leading to high rate of substitution
In 1989 there were
handful of firms including Panasonic, Mitsubishi and General Electric competed
with video andlow scanning data segment, these firms weren’t considered a big
threat or competition to BPS. The three main companies that competed against
Barco in their graphics and data projectors were NEC, Electrohome and Sony.
With a turnover of 21.9
Billion dollars in the year 1988 this Japanese producer sold data and video
projectors in the ratio of 52% to 48% respectively. Even though the company
introduced a digital data projector that became a market standard the company didn’t
capture much market share due to its feeble distribution network. The company
only holds 4% of video and 9% of data market globally and isn’t a big threat to
It had a turnover of
139.8 Million Dollars and was a privately held Canadian electronica
manufacturer. Industrial projectors made up for more than 44% of the company’s
turnover. It was BPSs biggest competitor in the graphics projector product line
and held the market of 44% units sold in graphics projector. The company was
able to achieve this due to its highly specialized distribution network with
about 100 dealers in the US itself of which 80% were specialists. The company
also held a strong hand when it came to the market in the far east with
capturing 80% of graphic projectors market.
Headquartered in Tokyo,
Japan Sony Corporation has a turnover of 11.5 Billion Dollars of which only 1%
constituted to the industrial projectors manufactured by Sony. It was the main
player when it came to Video segment with 50% of all units sold and Data
segment where it held 49% of total units sold globally. Until 1989 Sony did not
pose any threat to BPS because the projectors they offered did not match to the
quality being offered by Bps and Sony was always considered lower quality yet
inexpensive when it came to industrial projectors. The company had a strong
upper hand when it came to distribution network as it had 1500 dealers across
the globe of which 500 were in the US. In the year 1989 it was estimated that
about 80%-90% of professional audiovisual dealers carried Sony products.
In August 1989 Sony stunned
the entire industrial projector industry after revealing their new superdata projector
1270 which offered high quality and scanning speed up to 75kHz and on top of
that it was expected to be priced 20%-40% lower than the market price for high
quality graphic projectors. This was the biggest threat to BPS as it targeted
its biggest market share in North America and Europe. BPS stood a chance to
lose 75% of their forecasted profits for 1990, calculated by Dejonghe. Sony’s
objectives were to recapture the market for data and graphics projects and
become the sole leader for the same.
Sony 1270 targeted US and
Europe as their main market which represented 83% of BPS’s graphics and 91% of
BPS’s data revenue respectively. 1270 offered a higher quality projector which
was better than BPS’s which offering it at a way lower price to the market.
Estimating if the price of BG400 is kept the same which is 24,000$, BG400 could
lose 30%(3.85 Million Dollars) of the market share, if 1270 was priced at
20,000$. If 1270 was priced at 15,000$, BG400 could lose up to 60%(7.69 Million
Dollars) of its market share.
German and French
distributors are pressurizing BPS to lower the price of BG400 to remain in the
market but if BPS tries to lower their price for BG400 to compete with 1270 it
may lead to price war which BPS can’t win and it will further lead to BG400
competing with BD600 which is priced at 12,000$ further leading to share
erosion of BPS’s own product BD600. This will lead to company making less
profits even in areas where Sony isn’t directly competing with them.
Bps could stick to their
development plan and release their first digital data projector BD700 which is
ready to be released and shipped on time in October. BD700 is priced at 16,000$
with an improved generator and a scanning frequency of 64kHz. It has already
been pre ordered by BPS’s German distributors and others at 16,000$ and is
expected to have 25% incremental sales over BD600 which is 4.3 Million Dollars.
As an alternate BPS could
use advances made in BD700 to come up with a graphic projector BG700. Though it
was possible to create a graphics projector in 2-3 months with chassis, tubes
and lenses of BD700, it would lead to a delay of BD700 release to December and
it would only be able to match the scanning frequency of 1270 and would still
be inferior in picture quality, resolution and light output.
The third option
available to BPS is the development of BG800 which was planned to be a digital upgrade
to BG400 and was supposed to release later in 1990. Now the BG800 had to be designed
to surpass the features offered by Sony’s 1270 with scanning frequency of at least
90kHz and incorporation of 8″ Sony tubes for best performance. Sony had agreed
to supply with 8″ tubes but the lenses that worked with those were only
supplied by Fujinon and Dejonghe wasn’t sure if he would be able to get them
supplied from Fujinon. Further to develop BG800 development of all other
projects would have to be stopped by October 1st including BD700 and
employee had to work overtime and give up their vacation to develop the product.
After all these considerations Claerbout gave BG800 a 40% chance of making it
to the Infocomm.
BPS has developed a
strong position amongst its distributors and customer along the years. It had
provided customers with high quality products that they can depend upon.For
short term BPS should increase the force on the development of BD700 and
produce it as fast as possible to develop BD700 by October 1st to
meet the demands of pre orders and maintain its company image among its
distributors and customers and not let it impair.
Further BD700 is a new
technological innovation done by BPS and is their first digital data projector
which would lead to user friendly commands which had been a complaint by the
consumers in the past.
BPS should try its best
to deliver BD700 to its pre orders by October 1st. After that they
should stop the development of every other product and focus on BG800 which
would surpass 1270 in its high quality features. Introducing BG800 at Infocomm
would lead to decrease in the price of their old graphics projector BG400 which
would further lead to BPS having a secure hold over the market.
This is because Graphics
Projector is main market that BPS relies on and has the maximum market share
in. If Sony launches a better product in Graphics projector segment before BPS
they have a chance to take the majority of market share which would lead to
Sony recapturing the whole market share of Data and Graphics projects.
The annual growth of
Graphics segment from 1989 -1994 is 40.2%. This opportunity should not be
missed by BPS and the loss of future sales due to 1270 is way higher than loss
of 3 months of sale in 1989.
The company should
intensely invest in R for BG800 and get the necessary equipment required (Lenses
from Fujinon and 8″ tubes from Sony) to develop BG800 because there is no point
for BPS to introduce a product in the market that’s lesser to its competitors.
BPS should keep on
investing into R&D and develop products with highest quality depending on
customer needs and not their competition.
The company should find
new suppliers for equipment used in their projectors as depending on a single
supplier for a major component in projector who is also your biggest competitor
isn’t the safest bet.
Further the company should
stop having bling faith on people and be more cautious in the market as there
are no friendships or loyalties when it comes to global competency in business.
Sony’s 1270 superdata
projector has led to a huge threat for BPS as the projector offered by Sony
provides higher performance and is offered at a lower price. BPS has been the
innovator when it comes to projectors and had been leading the market for
decades. Dropping the price of their current graphics projector BG400 isn’t a
viable option as it would lead to a price war and BPS can’t compete with Sony
in it and it would further lead to losing unnecessary profits and share erosion
of their data projector BD600 priced at 12,000$. The best alternative for BPS
is to follow the product development strategy mentioned above which will help
them compete against Sony, maintain their brand image as an innovator and
maintain their control over the market share.