Marketing-1

Case Analysis
Barco Projection Systems (A): Worldwide
Niche Marketing

Submitted By:
Aarti Dhavale 2019PGP00
5
Manashi Chandak 2019PGP23
4
Savalia Himalaya 2019PGP37
0
Sumanta Kumar Koley 2019PGP42
5
Yadav Arpita Saran 2019PGP47
7

Under the guidance of

Prof. S Bhavani Shankar

 In Partial Fulfillment of the Requirements for qualifying
a Pass in Marketing-1

At

Indian Institute of Management Indore, Rau-Pithampur Road,

Indore, Madhya Pradesh, India.
2019
I. Statement of Problem

Barco N.V. ventured into the manufacturing of video projection systems in the year 1981. Its
division Barco Projection Systems has established 3 segments of projectors: video, data and
graphics having market share by units of 8%, 23% and 55% respectively.

It’s competitor, Sony is about to launch a “superdata” projector: 1270, which is superior to
Barco’s best graphics projector BG400. Moreover, it was rumoured to be 20-40% below the
established market price in its performance class. The data and graphics projectors of BPS
together makes up 77% of its revenues. This will have a huge impact on market share and
revenue of BPS, second largest division of Barco N.V. Barco has to devise a strategy to
compete with Sony within short duration of time.

Problems facing the manager/key person:

 Long term
o Brand Image: Currently, BPS have the reputation for the highest quality final
image and excellent reliability. But after the introduction of Sony 1270, BPS is
likely to lose this brand image among distributors and consumers.
o Loss of market share: BPS is the market leader in graphics projector
segment. However, Sony 1270 is threatening to capture 30-60% of the
BG400’s market share.

 Short term
o Decreasing Profit: BPS stands to lose as much as 75% of its forecasted profits
for 1990 if the rumoured price is true.
o Time constraint: BPS needs to take immediate action to counter the launch of
1270 at Infocomm, the industry’s most important trade show scheduled in 3
months.
o Human Resource constraint: Existing manpower is preoccupied with the
development of upcoming product BD700 and four other projects.

Decisions facing manager/key persons:

 Whether to decrease the prices of BG400 and BD600 in response to Sony 1270
rumoured low prices and due to pressure from distributor?
 Whether the development of BD700 (with scanning frequency of 64 kHz) should be
continued as per the current plan with delivery scheduled in October?

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  Should the advances made in the development of BD700 be used to develop BG700
with scanning frequency almost matching that of Sony 1270?
 Whether to turn to the development of BG800, postponing BD700 project
indefinitely.

II Causes of the Problem

The situation of BPS and the main causes of the problem plaguing BPS can be analysed using
the 5Cs Model –

 Company: BPS, the strongest player in the projector business and emerging market
leader in graphic projectors was threatened by Sony’s recent move to enter into
graphics segment as a competitor. BPS should have anticipated this move of Sony as
–

○ Margin per unit sold is maximum for Graphics projector (As per attached
sheet)
○ The projected annual growth rate was also highest for Graphics segment
(25%)

Had this analysis been done by BPS, it would have developed an upgraded graphics
projector instead of the upcoming data projector.

 Competitor: BPS underestimated its competitor when it expected Sony’s next

product introduction to have a scanning limit between 46 kHz and 50 kHz. In
anticipation of this launch, BPS were developing BD700 (a 64 kHz digital upgrade of
BD600. However, Sony’s newly launched data projector 1270 had superior features
with 75 kHz frequency of scan rate with better technology 8” tubes. This new product
of Sony bypassed even the most premium projector offered by BPS (BG400) in terms
of scanning rate. BPS managers knew they could not win a price war with Sony.

 Context: Sony brought in Technological innovation by using the 8” tube in its 1270
projector. This improved the product in terms of brightness, image quality and
resolution. BPS did not commit enough to Research and Development.

 Collaborator:
○ Sony Components was Barco’s sole supplier of tubes and the latter depended
entirely on the former for any innovation in tubes.
○ The Distribution channel of Sony (with over 1500 dealers) was far more
widespread than that of BPS (with approximately 400 dealers)
○ After launch of 1270 by Sony, Germany’s distributors were feeling the market
pressure and calling for significant price decrease in BG400 to protect their
market share

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  Customer:
○ BPS claimed that it was constantly evolving its product by increasing user
friendliness. On the contrary, end users often found BPS’s control panels and
instructions too complex.
○ Several customers had already pre-booked BD700 projectors and not
delivering the orders would hamper company’s image

III. Decision Criteria

The following are the criteria against which alternative solutions have been evaluated -

 Competitor’s pricing
 Duration and feasibility (ex. ease of raw material acquisition)
 Maintaining brand image and market share
 Meeting projected profits
 Increasing customer satisfaction

Alternative Solutions

1. Continue BD700 production as per the schedule: BPS has invested 180 person-
months in BD700 and requires 27 more. BPS can launch BD700 in October itself and already
has advance orders. As Sony may not launch 1270 before Infocomm trade show, BPS can
market BD700 as a digital projector and get more revenue.

Pros:
 As a digital model. BD700 will be more convenient and easier to use. Price is most
likely to be lesser than that of 1270. Hence, we may be able to capture some market
share for short duration despite lower quality.
 We expect a 25% increase in sales over the forecast revenue of BD600 and also have
advance orders from several distributors including Germany. So, we have assured
profit till at least next 2 months.
 We can earn high profit margin compared to other products amid the uncertainty of
release date and price of 1270.

Cons:
 Product quality will remain much inferior to 1270. So, the damage to the reputation of
being the best high-end technology still remains a big problem.
 Will not be able to produce BG800, the product which can beat 1270, earlier than
scheduled. This will result in huge decrease in market share of BPS in long term.

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2. Shift into Development of BG700: Barco could use the advancements made in
product development of BD700 and improvise the BD 700 to digital graphics projector BG
700. In this product, they could enhance the scanning rate that will match that of Sony 1270.

Pros:
 The improvisation to BG700 can be completed within two to three months. Thus, this
product will be launched before Infocomm which will happen is January.
 With the modified version of BD700 customer satisfaction may increase that will help
BPS to retain its customers due to higher scanning frequency compared to BD700
matching that of 1270. Thus, loss of market share due to lower scanning rate can be
avoided.

Cons
 Modification of BD700 to BG700 will force BPS to postpone the delivery to advance-
order customers. Delay in delivery would affect the customer trust and BPS’ brand
image.
 Despite meeting the scanning frequency with 1270, it will be inferior to 1270 in terms
of light output, the picture quality and resolution.
 It was difficult to match the price of BG700 with Sony 1270. Thus, BPS would still
lose its market share and projected profits.

3. Introduce new product BG800: Another solution for Barco can be to develop an
entirely new and improvised product that will have higher performance in every aspect
compared to Sony 1270. In this context, Barco may proceed to develop BG800 which will
have a higher scanning rate of at least 90 kHz along with the same quality of graphics of
Sony 1270.

Pros:
 The BG800 has higher scanning frequency (at least 90 kz) than that of 1270
 BG800 will have 8” tube that will enhance the light output, picture quality and
resolution to match the 1270.
 8” tube supply was available and could be initiated immediately. Thus, one raw
material was readily available

Cons:
 BPS has to postpone all the projects along with the development of BD700
indefinitely to develop the product BG800 before Infocomm, due to which employees
will face a morale dip as they had invested 180 man-hours in BD700 development.
 Engineers will have to work overtime to complete this project. It may result in a
negative psychological impact which will affect the quality of deliverables.
 Only 40% chances of completing the development of the product before Infocomm.
 BPS does not have lens supplier for acquiring lens compatible with 8’’ tube.
 Inability to deliver pre-ordered items will create a negative brand image of BPS
amongst the customer.

4. Pricing Strategy: We can develop a new pricing strategy keeping in mind the
product, market and time frame. One such scenario is given in the attached datasheet based
on the below mentioned reasoning points -

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  Decrease in Price and Discount- Distributors from Europe were calling for immediate
price reduction, but US market distributor was against lowering price as it may
damage BPS’ reputation. Asian market must be highly price sensitive owing to
comparatively low income. Europe has low price and no discount so that customer
sees lower street price.
 Time Frame- The actual price and launch dates of Sony 1270 are not clear yet. So, the
prices of our products are decreased only to intermediate level and further decisions
will be taken when Sony’s strategy is confirmed. However, prices are decreased more
in European markets compared to the US market as Sony has started taking pre-orders
in Europe but not in the US.
 New Pricing Index- Sony already has distribution network of 1500 dealers which is
three times that of BPS. So, we cannot reduce our prices by cutting their share and
have to reduce our profit margin drastically.

Pros:
 Barco can retain a large part of customer base due to lower price
 Flexibility in time constraint as negative impact of 1270 on our market share is lower.
So, we can continue as per our planned schedule
Cons:
 Profit margin will reduce to a great extent and BPS may not be able to up the price
and recover the profit margin in the future.
 Seeing the financial strength, Barco cannot beat Sony in a price war. Sony can further
reduce the prices and squeeze out the resources of Barco. This may make it more
difficult for Barco to invest in BG800 development.
 Will damage the reputation of being the best high-end technology provider in the
Graphics Projectors segment

IV. Recommended Solutions

 In view of the current context, Barco should continue with the development of BD700
as planned. Data projector represents the heart of BPS in terms of both revenues and
unit sales. Barco should not go for developing BG 800 as losing customer faith and
their image of being a reliable supplier is not something Barco can afford right now;
when it already stands to lose its market share due to Sony 1270 launch. Moreover,
Barco can’t provide picture quality, light output and resolution comparable to that of
Sony 1270 in BG700. Development of BG800 with 8’’ tube is also a big risk as there
is only 40% chance of completing it before Infocomm and Barco doesn’t yet have a
lens supplier to meet the requirement of BG800. Thus the most feasible option seems
to continue with the development of BD700.

 BPS should not decrease its price as of now. Sony has not declared their prices yet
and it was just a rumour that their price will be 20-40% lower than the market price.
However, if Barco decreases its prices right now, it will definitely lead to Sony
reducing its prices further. This will lead to a price war with Sony that Barco most
definitely cannot win. Thus, its best to wait for Sony to declare its price. However, if
the rumours are true, prices will need to be reduced as Barco doesn’t have a
comparable product of Sony 1270 in terms of quality. To protect its market share,
price reduction will then be must.

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 BPS can offer free after sales services as an incentive to protect to attract customers to
protect its market share

 BPS should increase user-friendliness to maintain the customer base in the long run.
The products were considered unnecessarily complex by the consumers. Thus, BPS
should target consumer satisfaction by making the products more user-friendly

 In the long run, BPS can try to penetrate in the Asian market as its market segment is
only 12% in Asia compared to 50% in the US and 36% in Western Europe.

 Barco can also consider tapping into new markets like retail, tube and lens
manufacturing etc so that they are not depend on other suppliers completely in future.
Also, if they succeed in those markets, they will be in a position to win a price war
like this in future.

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