Barco Projection Systems(A): Worldwide Niche Marketing

MAK-II Group AssignmentSession 14

Submitted on 30 th November 2010

Submitted by Group 9 (Section D)

Abhishek Verma (2010PGP010)Amit Kumar Shaw (2010PGP032)Ankit Bansal (2010PGP046)M R Rohit (2010PGP171)Nupur Gupta (2010PGP232)Sravanti Krishna (2010PGP379)Vaibhav Sarode (2010PGP410)

PROTAGONIST:

Erik Dejonghe, the Senior Vice-President and chief operating officer of Barco Projection Systems. He was worried about the new product launched by Sony that can harm the performance and the price of BPS’s product. This new product was high in quality and was expected to be priced 20 %-30% lower than the established market price of the comparable product.

Competition Scenario:

Sony along with Electrohome and NEC were the three major competitors in the Data and graphics segment. As shown in the exhibits, the share of BPS is 25% compared to Sony’s 45%. The Sony projectors were about 15% lower in price and comparatively lower in performance rated by scan rate, brightness, image quality and resolution.

Electrohome was another competitor which was third-largest player in unit sales after Sony and BPS. It also had a stronger distribution network as compared to BPS to its advantage.

Since Sony poses to be the major competitor, a comparison of the positioning of the products is done:

Barco SonyMarket Segmentation Niche Markets Mass MarketsDistribution System Selective Distribution

(Less distributors, 100 in US)

Intensive distribution(500 distributors in US)

Product Reputation High End and high quality

Low end but reliable

Distribution Network:

Dealers carrying BPS projectors included both box dealers and system dealers. The box dealers would simply sell the products and not provide any service or expertise post purchase. System dealers on the other hand would help the user in installation and integration of equipment depending on their needs. The typical customers purchased a new projector every 5 years and tended to purchase more

performance in a projector than they needed keeping in mind the constantly increasing scan rates.

Problem Analysis and Suggestions:

BPS is facing tough competition from 1270 projector from Sony. It could be possible that BPS might lose 75% of the forecasted profits in 1990.

It is important for BPS to come up with a better alternative before Infocomm, the trade show happens else it shall lose majority of its market share to Sony since most of the customers have shown as interest in the Sony’s product.

A lot of pricing options are available to Erik from which he has to decide which one will assist him in not losing the comptetion market to Sony.

Pricing Options:

1. Reduce the cost of BD700 to make it more viable option2. Do nothing

Product Response Options

1. Do nothing and proceed on with the development of BD700 as decided earlier

2. Use the technological developments of BD700 and utilize it to make BG700

3. Stop all work and focus on the production of BG800

Analysis of the Options above:

Pricing Options:

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 so as to make it more attractive than 1270

Any cut in the price might result into a price reduction game with Sony with is inconsistent with the BPS reputation for technology. Besides, with the data provided to us, it seems that BPS will not be able to win a price-reduction strategy

Product Options

Option 1:i. Continue BD700 upgrade to digital environmentii. Project is already under way with already 180 person-month

utilizediii. Delivering “on-time” is a message consistent with BPS

reputation for marketiv. Since Sony has just introduced 1270 and has not made any

sales, it is tough to foresee the market response Option 2:

i. Shift BD700 development emphasis to matching KHz performance of 1270 by making BG700 that will take another 2-3 months

ii. This will postpone the delivery of BD700 that will cause delay in its delivery to advance-order customers

iii.It does not guarantee completion by Infocomm dateiv.The quality of the projector in terms of light output, picture

quality and resolution shall still be inferior to 1270. Option 3:

i. Focus all energy to make BG800 of 90Khz performance before Infocomm

ii. BD700 development to be put on holdiii.Management believes that it has capability to meet the

challengeiv.This will preserve BPS reputation and leadershipv. Management believes that there is 40% probability to make

the Infocomm deadlinevi.Employees are already over-worked and thereby do not have

any enthusiasm to change strategy. If implemented, it might demoralise them more since the holiday season was fast approaching.

vii. Compression might result into low quality product

viii. There isn’t any surety on the procurement of the lens from Fujinon, which is of superior quality.

Suggestions:

1. From Product perspective, BPS should start the development of BG800 and launch it by Infocomm deadline. This will help BPS regain the lost market share and shall provide them with competitive edge. It is also important to launch BG800 irrespective of the competition or delay since the predicted annual growth rate in the graphics section is supposed to be 40.2% which is promising.

2. Since BG400 gets a direct competition from the launch of 1270, we propose a phased reduction in the price of BG400 and BD600 such that perception of high quality is not compromised and BPS is effectively able to monitor its market share. This decision is imperative as they represented 83% of BPS graphics revenues and 91% of its data revenues. Sony has started taking advance orders in Germany and given the fact that it is the second largest market for BG400, price reduction should be immediate.

3. BPS has very few suppliers and shares information on technology with Sony Components. For better market development and share, BPS should strive to look for other suppliers and not be dependent on one.

4. BD700 might be easily replaced by the graphics version BG700 given the existing chassis, tubes and lens of BD700. But its tube size and features like light output, picture quality and resolution may still not match 1270. There is also speculation that it might not be completed before Infocomm which defeats the entire purpose of choosing this alternative in the first place.