BARCO PROJECTION SYSTEMS

Group 7, Section CAmitrajit Sett (09P126)Chintan C Singh (09P133)Priyak Purkaystha (09P156)Rudranil Dutta (09P165)Saurabh Agrawal (09P168)Shobhit Pareek (09P171)

Case Background

A division of Barco N. V. 1934 - “Electronic” industry 1948 - Television receiver 1955 to 1975 - Expansion into broadcast monitors and video

equipment. Late 1970’s – Inflection pt - Company redefined itself as a player in

industrial markets.

Barco Projection Systems Strategy High-end products in niche markets BPS is relies on technical leverage in product development R&D is a major strength, requiring 8-10% of revenue and 15% of

employee capital Market expansion is accomplished first through channels of

distribution with a network of 45 distributors and 400 dealers worldwide; in key markets the distributors are “company operations

1989 growth was enhanced through $110M in acquisitions

Case Background

BPS Product Development Product mix is based on equivalent technology in tubes(15%),

lenses(20%) and electronics(50%) in three markets defined by combinations of product performance in brightness, image quality and resolution.

BPS product lines differentiated based on scan rate; variations in scan rate

3 defined lines of projectors - video, data and graphics. Product development was a function of engineering solutions and

not based on a market-driven plan Product differentiation was based on image quality, input flexibility

and “user-friendliness.” Market Structure

Three markets defined by product characteristics BPS and Sony were market leaders Market growth was directly related to performance

Product Market Structure

Video < 16 KHz 19,250/.8% 8%/1.4% 20%

Data To 45KHz 10,139/12.3% 22%/12.3% 51%

Graphics > 45KHz 960/40.2% 55%/25.0% 29%

Industry Sales/ BPS Share/

Application Scan Rate Growth Growth BPS Margin

Case Background Competitive Structure

Market Segmentation Strategy Niche Mass Markets

Distribution System

Selective Distribution100 dealers in US market

Intensive distribution500 dealers in US market

Product Reputation High end Low end but reliable

BPS Sony

Competitive Posture BPS believes Sony will follow the same product development path. “Competitors will respect BPS’s vision of the marketplace In 1986, Sony Componets became the sole supplier of 8” tubes for BPS projectors.

How did Sony Successfully Execute a Bypass Strategy

BPS Product Development MyopiaA belief that technology drives productsA belief that all players had to follow the same

developmental path Technological Breakthrough – 1270 scans at 75

KHz BPS Product Development Process

A move away from development strategy in play from 1982-1987

Resources committed to backfilling prevented rapid reallocation

Why did Sony Successfully Execute a Bypass Strategy

Sony saw a market opportunity based on BPS’s premium at the high end

Sony had a relative advantage economies of scale Market mix – especially distribution Product reputation

16KHz 45KHz 72KHz

PERFORMANCE

PRICE

$24k

$12k

$10k

Performance Price Premium

Sony 1270

BPS MARKET SEGMENTATION BY PERFORMANCE AND PRICE

How Should BPS Respond?

Critical Factors Impacting the Decision Internal Factors

Marketing orientation Resource allocation

External Factors Technology Competitive structure

Decision Options Pricing Response Options

Immediate Price Cut Wait and see

Product Response Options Do nothing Platform up To the Wall

Price Response Options

Immediate Price Cut

Without knowing what Sony Price will be, it is probably premature to consider a price cut on the BD600, let alone consider a strategic price reduction on the BD700

The price cut would have to be substantial for the product line Involve the channel of distribution Preempt Sony introduction; proactive versus reactive

Wait and See

Sony pricing structure is unknown; hard to make a decision A cut now may result in a lower-price for the 1270 from Sony BPS can’t win a price reduction game Pricing reduction is inconsistent with BPS reputation for

technology leadership

Product Response Options

Stay the Course

Continue BD700 upgrade to digital environment BD700 project is well-underway (180 of over 200 man-months) Delivering “on-time” is a message consistent with BPS reputation for market leadership Sony has not SOLD any 1270s; hard to judge market response

Platform Up

Shift BD700 development emphasis to matching KHz performance of 1270 Best case scenario does not guarantee completion by Infocomm date

To The Wall

Shift corporate assets to target 90 KHz by Infocomm BD700 development put on hold BPS management believes it has the capability to meet the challenge Would preserve BPS reputation for technology leadership Management estimates .4 probability to make Infocomm deadline

BPS Response

Pricing

Implement an immediate price reduction of 25% to 33% for BG400 Add 60 day time limits Cut price of BD600 to $10K Involve the channel of distribution

Product

Shift to develop BG800 to introduce at Infocomm

Key learnings

Move to Market orientation from production orientation Even a niche player has to make product development decisions based on market information Develop an environmental scanning function NEVER JUDGE A COMPETITOR BASED ON INTENTIONS, RATHER ON CAPABILITY

Thank You