Barco BPS by unveiling it’s 1270 type projector this

Barco
Projection Systems

Decision case

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Company Background:

Barco
Projection systems is the second largest division of Barco N.V Headquartered in
Belgium. This specific division was formed to pursue the technology of video
projection. It designed manufactured and sold sophisticated video projectors
for industrial use and applications. Those projectors can be used to project
images and information on to large screen. What makes BPS stands out is their
scan rate, which measure the speed at a projector was able to process
electronic signal. BY 1989, BPS has 3 lines of projectors: those are  Video, data and graphics, projector and they
are the leaders in the entertainment, training and presentation market. The
company is currently obtaining 55 percent of the graphic projector market share
with 2 percent annual growth potential

Case Overview:

One month ago the Sony corporation surprised BPS by
unveiling it’s 1270 type projector this projector has a big competitive
advantage over the in terms of video image and resolution and is rumoured
priced 20-40 percent below the established market price in its relative performing
class. 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, in
the last 10 years the company committed  10 percent of the company turnover dedicated
to the research and development program. Distribution advantage as Barco’s
projector has a dealer reputation for its high quality and reliability. All
those are a great sign of customer loyalty.

 

Just as stated in the article what makes them stand
out is the scan rate, with three different types of projector, not only give
different user different pricing level option but also the level of combability
is different. The low-end Video projectors was designed for combability with
standard video sources, scan at 16KHZ the data project. The data projector scan
16 to 45 KHZ, and most high-end product the graphic projector scanning from 16
to 72 kHz. It is not hard to see in
Exhibit 6, in comparison to the competitor of Sony Elecrohome and NEC that
both Barco’s model are way ahead of its competitive when it comes Scan rate and
resolution. The wide scan rate range allows the projector to be compatible with
many different devices and therefore increase the flexibility for the users.

The high number in resolution promise a better quality
of final image. The company is also actively upgrading their system and
matching their scanning frequency along with the most recent technology or
devices.

According to table c: BPS takes on more than 55% of
the market share for the highly sophisticated video projector, this is a very
great sign as we can see that they have built the customer loyalty and
reputation

 

Weaknesses:

Consumer friendly: it is known that BPS has good
reputation among the dealers however they lack customer friendliness, it has
been complaint by the end users that sometimes BPS projectors are very complex
to use and understand. Those kinds of complexity slow inefficiency and at the
same 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 their
source of the part tube.

Tube is very important part of the projector, as it
takes around 15 percent of the cost structure. In the late 1985 Sony has became
their 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 the
competitor, not only will Sony know all the potential moves, demand, inventory capacity
and many important information. They will also have a huge leverage when
competing 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 their
tubes” In the case study
one manager even stated that ” we share a certain amount of technical and
development information with Sony , while they keep us abreast of their latest
development” Obtaining tubes from outside suppliers might be more expensive but
compare to the risk of leaking important R&D secrets or Sony cutting off
the supply, the little increase in cost is minimal.  BPS must actively seek
independent tube supplier as soon as possible, although it might cost more in
the short run, but it is nothing compare to the potential risk and cost of Sony
terminating the contract for tube supply.

 

The Competition

In august 1989, at the Siggraph trade show, Sony
previewed a projector the 1270 which can scan 75kHz that is 3kHz more than
BPS’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 the
field of dara and graphic projectors. On the other hand NEC is the other main
cpmpeitior , however this Japanese electronics manufacturer is not performing
too well as they lack effective distribution channels.  

 

Opportunity:

The Opportunity of the BPS lies in the niche market of
high end graphic projector, it is more expensive and is in a niche market. BPS
has an amazing reputation with the customers and are preferred by the dealers
whom would usually prefer to carry their products. BPS must take advantage of
those strength and expand their product in the high-end market.  According to table A, among all the projectors
graphic projectors has the highest predicted annual growth of 40.2% for the
next 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, between
1980s and 1990s Asian economy booming rapidly and therefore the demand for industrial
used projector will only rise. Therefore, the opportunity they should focus on
is the graphic projector and target the booming Asian market.

Evaluation: The vision
Dejoghe 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. Where
Sony would get some information about BPS and in return they will supply the
tubes for the BPS. Sony’s projector performance and price are typically lower
than BPS as they are more consumers focused. The reason Sony reject that vision
is because they are no longer satisfied with their current market, market image
and their market share. The want to change the company reputation makes
customers believe that they are not just a low-end cheap products producer, but
they want to reconquer the graphic and data markets a much larger market share.

Three options

Lowering the price

The price changing strategy is simply not going to
work, especially when you are facing a much bigger company- the consumer
electronics giant Sony. BPS is the last company in the world that can win a
price war against Sony, as Sony is there sole supplier of tube, where Sony not
only is a bigger company with stronger financial capability but also enjoy the
benefits of low supply costs. In addition, Sony has 500 dealers in the US
market, five times more than BPS, this makes the street price of the Sony projectors
even cheaper.

Sony enter the market for graphic and data projector
in 1985, yet BPS enter the market a lot earlier, they have a better reputation
and has been recognized for its quality and reliability. Yes, cutting the price
might be able to sole v the problem now, but BPS is not going to be successful
by simply cutting the price, the company is built on its commitment to quality,
reducing the price will hurt the recent customers and those are potential
future customers, and would also send a message to all the loyal customer,
hurts the market image of the company. Those customers might assume the quality
has been compromised or they might also assume the price will keep on dropping
and reluctant to make prompt purchase.  The
one of the most important aspect of point is that we have not even seen the
Sony product yet, all those speculation are rumours, BPS does not know what
price 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 project

The other option they have is urn immediately to the
development of BG800, this project’s goal is to design a projector far superior
than Sony’s 1270. But it requires the stop of all the current project and spend
another 80-person month. To finish the project not only they have to terminate
existing projects but also rush the deadline before the trade show, there are
also different uncertainty if Barco will find suppliers to supply the lens. When
the BG800 has only a 40 percent chance of making deadline. By doing this, BPS
would waste the resources they spent on all the previous projects, ruining some
of the reputation because they won’t be able to fulfil all the pre-orders of
other 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 all
those reasons combined, and not having a clear picture of sony”s product,  immediately starting the developnmemntal of
BG800 is also not a very good choice

Continue the development

This leaves to the last option we have. Continue the
development and introduce BD700 on time, let everything go with the schedule.
The engineer must keep on working on all those projects and release them on
time. Although the new released product is still inferior than the Sony 1270,
BPS can show that they have commitment for the customers and delivered the
promise of the pre-orders. It will boost up the morale of the dealers, the
company and the with the new released product,

Even if changes are needed we still need to wait until
the official launch of Sony’s product, changing price first need to wait until
the official launch of Sony’s product. Depending on their pricing strategies
and consumer reactions to make adjustment accordingly. In the competitive
industry of projectors, and electronics there is no surprise that your
competitor might create a product better than yours. The last thing BPS needs
to do is to allow itself to be misled by the rumours, changing pricing or product
strategy abruptly.

 

In
conclusion: Sony is not a huge threat for the company, they might have developed
a better product for now, but they still are relatively new to the market and
does not have as good reputation as BSP. The priority of the company is not reducing
the price start something uncertain and new, instead of adjusting to the
competitors, force the competitors to adjust to BPS.  The company should stick with their on-going
project and adjust their product development plans only after they finished
their 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 to
supply its key parts even if that means the increase of costs but in the long run
they will adjust pricing and product lines according to the market trends and competitors

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