Barco Case Study

 Barco Case Write-up

Barco N.V, a company headquartered in California, is known as a top performer in production control systems, graphic and computer aided design, and industrial projection industries. Barco Projection Systems (BPS), the second largest subsidiary of Barco N.V., is a small batch manufacturer with a reputation for high performing video projectors for industrial settings. In 1988, BPS held 55% of the market share in the graphics projector segment, 23% in the data projector segment, and 8% in the video projector segment with price points for each product ranging between $7,000-24,000. In August of 1989, Barco learned at a tradeshow that their competitor and in-house tube supplier, Sony, planned to unveil a superdata 1270 projector model, at a substantially lower price with higher performance than any of Barco’s current product offerings. While Sony’s product was suited for the graphics segment, it would likely gain market share in the data segment due to its low price point, threatening an estimated 75% BPS’ profits. With Infocomm, the industry’s most crucial tradeshow less than five months away, Barco has to decide which of three product development options they will proceed with.

Barco’s management has the option of choosing one of the following three product development plans: continue development as planned introducing the BD700 digital model in October, develop the BG700 digital graphics projector in 2-3 months causing a delay in BD700 production, or develop the BG800 projector with industry leading performance. The most effective strategy Barco can choose is to continue development of the BD700 model as planned with an October launch, followed by immediately devoting all resources toward a pre-launch prototype model of the BD800 in time for Infocomm. Releasing the BD700 as planned gives Barco the competitive advantage of having the highest performing product for one month prior to the 1270 release, the revenue from fulfilling distributor orders for the product, and protection of their industry reputation for high quality customer service and reliability. Focusing all efforts on releasing a pre-launch prototype model by Infocomm after the BD700 release, provides Barco with a competitive flagship product that will help to continue their market differentiating^[a] advantage, which they are known for in the industry. Releasing a prototype in time for Infocomm, gives Barco the visibility with customers, industry analysts, and dealers needed to remain competitive against the 1270 for the upcoming year. Choosing this productive^[b] development plan has the lowest risk and highest potential gain for Barco.

This product development plan does carry risks. A month after its release, the BD700 will be considered an inferior product, likely necessitating a price drop by Barco. Development of both units is costly, and there is no research that indicates the industry needs a unit with a scan rate of 90kHz. Risk management and purchasing issues surrounding using Sony Components and Fujinon as suppliers for the BG800 product need to be addressed. In the past, Barco made the strategically poor decision of doing business with their competitor by sharing “trade secrets” by purchasing tubes from Sony.  They did attempt to mitigate the risk by keeping a three month supply of tubes in stock, and two months of orders in transit from Sony^[c]. From a supply management perspective, this was a strategically beneficial move. However, they did not initially attempt to look into other suppliers after signing ^[d]on with Sony Components. While Barco does not have the resources to develop tubes, Barco needs to mitigate this risk by actively seeking an alternative supplier outside of Sony Components, even if it were to cost more.