Barco workers – Reputation for highest quality final image

Barco Projection Systems: Worldwide Niche Marketing Case Analysis Barco is company focusing on the production of radio broadcast receiver, it began in 1934 and is still currently running (1989). Starting as a small company Barco has grown rapidly in this market through displaying great product and differentiating itself from its competitors with great scan rates. Within the growth of Barco started producing radio, data and graphic projectors, specializing in graphic projectors. After precisely analyzing this BPS case study, it allowed for the assessment of threats, product line strategy, the strengths & weaknesses, fixtures, Porter’s 5 forces and more. Due to the recent move of Sony newly releasing product (Sony’s 1270), Barco division’s sales are being threatened. Barco can potential lose 75% of its forecasted profits for 1990 and needs to come up with a counter in order to defend their market share and once again differentiate themselves.  Firstly, as an analyst of this case, we need to create a SWOT analysis to see where Barco lays currently. Seeing its strengths, weaknesses, opportunities, and threats will allow for the later recommendation, based on what we have in the company.  SWOT Analysis  Strengths: – Lead Market for Graphic-Projectors (BG400)- Scan Rate (measures speed at which projector was able to read and process incoming electronic signals) – Suitable for variety of entertaining, training and presentation – Highly qualified workers – Reputation for highest quality final image and excellent reliability once fully installed- Global Footprint (Distributors in Belgium, France, U.K and U.S.A)- Dealers were 20% box dealers and 80% system dealers  Weaknesses: – Machines were reported “unnecessarilly complex” by dealers – Depending on single supplier (that being it’s biggest competitor) – High margins – BD700 (whether to even be released or not)- Stuck with back-up inventory (inventory for 5 months it advanced)- Weak market awareness (didn’t see 1270 coming) Opportunities: – BG800 – BD700Barco was looking to release BG800 an upgraded verison of their most superior product (BG400) in the late 1900s Barco was also looking to release BD700 an upgraded verison of their BD600 in October of 1989  Threats: – Sony 1270 Sony has rumored to be releasing a high performing projector that is suppose to be priced 20-40% lower then BPS projectors. It was estimated if this product does release and for that price, it will take away alot of BPS market share.    Barco’s Different Projectors Table Types of Projectors Scan RatesCompatibility Video Projector 16 kHz (16k lines/second) – Standard Video Sources(Broadcast TV & VCR) Data Projectors 16 kHz to 45 kHz – Personal Computers- Video Sources Graphics Projectors 16 kHz to 64+ kHz- Power Computer-Aided Design & Manufacutring Systems – Video and Data Sources BPS’s Product Line Strategy BPS’s product line was the scan rate, that’s how Barco differentiated themselves from the competitors. The scan rate would measure the speed that projectors could read and process incoming electronic signals. BPS started off with scan rates to be only compatible with standard video sources but as BPS kept growing, they continued upgrading their scan rates to match advances in computer technology. As the market kept getting more sophisticated so did BPS scan rate, their most sophisticated produced scanned from 16kHz to above 64 kHz, having compatibility with video & data sources, and powerful computer-aided design & manufacturing systems. Because of this progressive increase in scan rate, it lead to new categories in their product separating their product into graphic and data. Due to the increase, Barco started releasing different types of projectors, each specializing in specific aspect and scan. Their current leading projector is the BG400 selling for $24,000 leading the market with the highest resolution (# of lines) and most scan rate for the best price (their best selling project). To relate to the BCG Matrix, the BG400 would be their star. The company has been performing very well, Dejondhe quotes “All of our projections, however were based on the assumption that Sony would respect our ‘vision’ of the marketplace.”. What does this mean? When does one competitor accept another’s vision of the market? Barco jumped to the assumption that because of their mutual benefit, Sony would have respect for their vision and wouldn’t try to directly compete with Barco. Barco assumed that Sony wouldn’t release a product that would take away from Barco market share since it’s already win-win situation. Barco would purchase the high performing and low priced projector tubes and it would account for 20% of Sony’s turnover in projector tube projectors. Ultimately, leading Dejondhe to come to the assumption that because both companies (Sony and BPS) are benefiting, and Sony would respect their vision of the marketplace. During the quote Dejondhe said all of their projections were based on assumption that Sony respected their vision, hence why Barco purchased such great amount of tubes from Sony, in-case Sony were to stop funding them or raise their prices. Barco did not expect for Sony to release such a product, because of the mutual benefit both parties were getting. Secondly, BPS coming into this market differentiated themselves through scan rates, their scan rates started off at 16 kHz and would increase gradually through the years. With their improvements they became a big player in this market establishing it’s product through their impressive scan rates, BPS vision was to continue to create their same products and keep gradually growing, and assumed Sony would keep growing at the rate they are also. Throughout this growth BPS positioned themselves with such high scan rates that they were above Sony in terms of products. Leading BPS to the assumption that Sony will respect its vision. Now when Barco heard the rumor about Sony’s release is when Barco realized that assumption was wrong. Sony used the leverage they had: analyzing Barco scan rates and analyzing their vision, and used it to their advantage to release the 1270. Sony did the unbelievable in Barco eye’s.   There would be two reasons for a competitor to accept another’s vision of the market: both of them benefiting or they aren’t direct competitors. Looking at levels of competition of Barco, Sony wasn’t directly competing with Barco as they focus on different aspects of projectors. Sony would focus on data projectors and Barco would focus on graphic projects (as shown in Table E). My first paragraph indicated that Barco assumed that since both parties are benefiting, Sony would respect their vision. My second reasoning as to why you would accept a competitor is due to not being direct competitors. A company would respect another vision if the competitor isn’t taking away from their market share. Barco differentiated itself by creating projectors that would have impressive scan rates and Sony would differentiate itself by not only releasing a user-friendly projector but by supplying other companies with the tubes. They weren’t direct competitors as you can see they had different differentiation methods and both had win-win situations, hence to believe why Sony would accept their vision of the market.   Porter’s Five Forces  Through analyzing the product line strategy, we have an understanding of what Barco sells specifically and what they have done to differentiate themselves. Now that we can see where Barco stands through SWOT analysis, analyzing Porter’s Five Forces will help with analyzing the competition and the market.  Threat of New Entrants: – Industry being highly controlled by Barco, Sony and Electrohome.  Threat of Substitute: – Industry being highly controlled by Barco, Sony and Electrohome. – Sony 1270-Bargaining Power of Suppliers: – Many suppliers: Toshiba, Thomson, Phillips, Sony (Best quality)  – Switching cost are low but high for Barco due to depending on Sony- Barco quality of the projectors is based on the quality of the tubes – Hard for Barco to find substitute to Sony, giving them low negotiating power  Bargaining Power of Buyers: – Not many options of manufactures – Switching cost are low (increases bargaining power of supplier) – Highly competitive market (increase buyers bargaining power) Industry Rivalry: – No individual leader in the market, all competitors offering a close substitution- All competitors are on average making almost the same product, so no one it ahead of the market Competing Offers Manufacturer ModelScan Rate (kHz)Price (in Dollars) BarcoBD60016-4512,000 BG40016-7224,000SonyVPH103116-3510,500ElectrohomeECP200016-368,600 ECP300016-5014,500 ECP400016-7024,000 Why did Sony decide to reject BPS’s vision of the market in 1989? What are their objectives? Sony rejected BPS’s vision due to various reasons. Prior to the release, Sony respected their vision due to the revenue they were receiving as a supplier from Barco. Sony being Barco number one competitor, they need to have a good competitive advantage and execute at the right time in-order to conquer the market (that being Sony’s intention). During my SWOT analysis it was indicated that Barco was the leading market for graphic-projectors, highest scan rates and the highest reputation for highest quality final image, not to mention that Sony was the leading market for data-projectors. It was estimated that Barco would have a 40.2 percent growth in graphic projectors (seen in Table A in the case). Prior to the release, Sony offered Barco the new 8 inch tube, but it required too much change for Barco to incorporate this new sized tube, so they declined the offer. Sony new intention with this new 8 inch tube became to take Barco position in leading market for graphic-projectors. Through analyzing Porter’s 5 Forces, we noticed that the threat for a substitute was low, making the bargaining power of suppliers low, without much option. Sony already having reputation as a credible and reliable company they seen the opportunity to take over the market of graphic-projectors. Sony understood that Barco already purchased a significant amount of inventory (5 months worth in advance), that they couldn’t just get rid of easily, so they took that to their advantage. Sony also took into consideration, is it worth conquering the market? Prior to Sony releasing the 1270 projector, they had to take into consideration is it worth taking over the graphic-projectors or just continuing to sell tubes to Barco as they already made $2.25-2.5 million annually. They lay out these pros and cons and clearly through Sony analyzing this, their decision was to release the 1270 (assuming the rumour is true) Although now that Sony did release the 1270, how serious of a threat is it? With a price of $15,000 – $20,000, 20-40% lower then Barco and 75 kHz, Barco is faced with a serious threat. This new 1270 projector, already leads Barco’s top leading product BG400 in brightness, image quality and resolution. Sony also listed this product for only $15,000 – $20,000, making it the best product for the best price, ultimately ruining the segmentation Barco created. Dejonghe calculated that BPS will could potentially lose up to 75% of its forecast-ed 1990 profit. Sony is looking to capture the market. The release of this product based on the rumors heard about it, will ruin what Barco worked so hard to accomplish. Moving ForwardThis section will include my conclusion with respect to the price and product development plans for Barco.  With respect to product development plan, Barco needs to make a few/tweaks to it’s product in order to keep it’s current position. Looking back at the BCG Matrix, Barco currently has a star (BG400)and cow (BG600), what they need to focus on is the question marks (BG800). Knowing that 50 % of Sony dealers are box dealers, it’s easy to come to the conclusion that it’s a user-friendly product. In the SWOT analysis, one of Barco’s weaknesses is that the product is user-unfriendly. Barco needs to make the change to make it’s product more user friendly,also leading to an increase in box dealers (increasing revenue). The case quoted “In 1989, few dealers could survive without the Sony volume; an estimated 80% to 90% of professional audiovisual dealers worldwide Sony products because of reliability and low price among dealers”. Barco current products aren’t an easy sell-able product in stores due how complex they are, if Barco was to make a user-friendly product it would be able to sell in much more box dealers while keeping the stores it has.  Barco should stop focusing on the BD700 because, why release a product that won’t be better nor cheaper? If Barco was to release the BD700, it will still be a less advanced higher priced projector then the Sony 1270, making it a pointless release unless Barco is willing to accept taking 2nd place to Sony, decreased market share, and loss of reputation. Barco needs to keep a tunnel vision with the release of the BG800, and make sure that the BG800 will be same if not better than the 1270 (in terms of specs). Barco needs to either make a better product and list it for their current projected prices or the same time product for a competitive price. With only 40% of making the Infocomm, if this product was to make it regardless of the fact if Sony releases the 1270, Barco will hold it’s position as the leading company in graphic projectors. Another one of Barco biggest priorities at the moment is to find another supplier for the tubes, even if it means paying more, because supplying with Barco will give them leverage on Barco.  Whether it’s priced at either $20,000 or $15,000, Barco can’t lower the prices of any of it’s products. The 1270 is only rumored and could not have been confirmed. It’s better for Barco to take the profit at the current price rather then having a reduction in your prices. Reducing a price for a “possible” product release will cost more then it will gain anything for Barco. Barco currently is still the leader in the graphic projector model and has been performing extremely well, reducing prices will decrease profits and revenues. If the rumour is true regardless Barco will never be able to compete with Sony based on prices. If Barco was to lower the prices of it’s products it will just lead to a price war between all companies including E.H.  Barco made the mistake of trusting Sony and jumping for a false assumption. One of their weaknesses that was listed in the SWOT analysis was their weak market awareness, which ultimately lead to this problem. Barco made the mistake to believe that Sony would respect their vision, but as soon as Sony seen the opportunity to take over the market, they executed. Barco needs to release products to its full capacity rather than basing it based on how the market is shaped or what the competitors have to offer. Another mistake that Barco made that was talked on Page 5 of his analysis was having one of their biggest competitors as a supplier. Some further recommendation moving forward (things that are about product or price) is that BPS needs to focus on investing more money in research and development. BPS should create a customer feedback survey so they can come to a further understanding of the customers wants and needs. The survey doesn’t have to just focus on the product they’ve purchased it could be on the company as a whole. BPS moving forward needs to more aware of what their competitors are capable of doing rather what their intentions or respect lies. Ultimately, returning to the investing more in the research and development department so they can focus more on the market awareness, so a situation like this doesn’t occur again moving forward.  

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