Barco Projection System Case Analysis

Michael Wang

MGMB01H3

Professor Dewan

Sept 26th, 2018

          Case Analysis on Barco Projection System

Barco Projection System, headquartered in Belgium, is one of the top three manufacturers in the Projection Systems business and the market leader in graphics projectors. Established in 1934 as a producer for radio receivers, they quickly built their reputation among customers due to the effort spent on R&D and the product quality. (Barco Projection System (A): Worldwide Marketing, 2002)

With the strategy focusing on expensive, high-quality products in various niche markets, committing to research and development, and expanding internationally, Barco not only survived but also thrived despite being a relatively small, batch manufacturer in this extremely competitive industry.

First, let's look at Barco's SWOT Analysis:

In terms of strength, Barco has:

Strong knowledge of projection system

Strong commitment in R&D

Global expansion campaign

Good market reputation

Dedicated distribution network

Barco's weaknesses are:

Only focuses on niche markets with limited customers

Lack the ability for mass production

Dependence on Sony (a major competitor) for product components (tubes)

Profits dependent on product differentiation

Unavailability of the digital graphic in its projectors

Opportunities for Barco are:

The Asia market is expected to have a growth rate of 18% for the next 5 years

Sony's 1270 model isn't going to launch in Asia

Room for price reduction while staying profitable for current products due to high margin

Time slot available for the engineering team to develop BG800

Threats for Barco are:

Sony's new product with better performance and cheaper price

The collapse of market segmentation

Tight deadline of Infocomm (January)

The uncertainty of supplier (Fujinon) for the required component

Cost leadership strategy from Sony

Customer Analysis:

Potential customers for projectors come from a variety of industries. Projectors can be used from boardrooms, entertainment facilities, movie theaters, all the way to flight simulation rooms. At the same time, they are demanding, which means the products must improve and update constantly

to stay competitive. The customers usually buy a new projector every 5 years on average, due to the increasing demand for projectors with better computer scan rates, the expansion of their business, etc.

 Competition Analysis (Sony):

Headquartered in Tokyo, Japan, was a diverse manufacturer of consumer electronics with a turnover of 460 billion Bfr ($11.5 billion). Sony was the main player in the video segment, with 50% of all units sold. (Barco Projection System (A): Worldwide Marketing, 2002)

Sony is Barco's biggest competitor in the projector business, however, they don't compete for head to head since Sony focuses more on quantity (mass production) while Barco focuses more on quality (niche markets). More importantly, they share a mutually beneficial relationship in the industry. Being a supplier for Barco in tubes, Barco not only is a competitor but also a huge customer for Sony as well (their orders was 20% of Sony's turnover in projector tube products).

In Barco's eyes, this cooperation was stable, and they assumed that Sony will cherish this relationship and the opportunity to profit together and won't compete with Barco in the graphics projector businesses directly. Therefore, Barco's future development plan was all built on this assumption.

Typically, Sony projectors are worse in performance and 15% cheaper in terms of price, comparing to Barco's projectors.

However, they have a strong network of distributors, with more than 1500 dealers worldwide.

It was estimated that 50% of Sony's dealers were box dealers. It has 500 dealers in the U.S versus BPS's 100, resulting in a lower selling price.

They also have a greater discount of 15% (comparing to Barco's 10%) for the final sale.

They built a reputation for reliability and low price among the dealers.

(Barco Projection System (A): Worldwide Marketing, 2002)

It's newest 1270 model targets the U.S and European markets specifically-markets which represented 83% of BPS graphics revenue and 91% of its data revenues.

(Barco Projection System (A): Worldwide Marketing, 2002)

The issue:

Everything changed when Sony decided to launch its own model 1270 in August 1989.

They were surprised by Sony's offering of a superior graphics projector likely to be launched at such a low price (estimated between $15,000 to $20,000).

According to Barco, "All of our projections, however, were based on the assumption that Sony would respect our ‘vision' of the marketplace." (Barco Projection System (A): Worldwide Marketing, 2002)

This shows the lack of urgency inside Barco's management team, they should've seen it coming when Sony debuted a video projector with components not available for Barco.

The reason why Sony respected BPS's vision before 1989 was because they made a huge revenue as BPS's supplier and they are not interested in competing against a company which focused only on the niche markets of the data and graphics segment.

They rejected BPS's vision of the market this time is because after many years of competition and collaboration, now they believe that they have gained a competitive advantage to massively produce and take over the data and graphics markets by launching a product with the combination of greater performance and better price.

Usually, whenever a company accepts its competitor's vision of the market is because they don't treat them as a direct threat in the market, or they have a mutually beneficial relationship which is crucial to the business. Companies are constantly weighing the pros and cons of whether expanding the market by kicking out its competitors or maintaining the current situation. If the latter leads to a higher profit and higher market share, in that case, the company would respect the competitor's vision of the market.