Barco case study team a final

CASE
STUDY
IIM-INDORE
PGPMX-MUMBAI
TEAM A
MANDAR RISBUD
SANMEET DHOKAY
MICHELLE D’SOUZA
VINOD MALIYEKAL
AMIT JAITLY

Barco Projection Systems
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26 Nov 2015 BARCO PROJECTION SYSTEMS
Barco Projection Systems (BPS/Barco), a strong player in
the Projection Systems business and the market leader
in graphic projectors, were taken by surprise by
competitor Sony.
Turn the pages to read more about Team A’s vision to
maintain Barco’s reputation and market share.

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T H E I S S U E
Barco Projection Systems (BPS/Barco), a strong player in the Projection Systems business and
the market leader in graphic projectors, were taken by surprise by competitor Sony’s offering
of a superior graphics projector likely to be launched at a lower price.
Barco needs to counter the new model by launching new and superior models quickly and re-
pricing existing models.
Team A’s rationale takes shape over the following pages.
T H E M A I N P L A Y E R S
 Barco Projector Systems
 Sony
5 ’ C ’ S A N AL YSIS :
A N A L Y Z I N G C U S T O M E R S
Customer for projection systems ranged across industry. Projection systems were used in
training rooms and boards, in entertainment centres, in the gaming industry, and in airplanes
and flight simulation rooms. Customers were sourced from a wide cross-section of
industries. So the customer pool was huge, but also demanding. The products needed to
keep up with constant improvements in computer and video technology.
Customers typically bought a new projector every5 years, and purchased more performance
than needed because of the ever increasing computer scan rates.

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Focus needed to be on delighting customers and providing good after sales support because
the repeat customers were important – for replacements every 5 years but more importantly
as these customers expanded their business their demand for projectors also increased.
A N A L Y Z I N G T H E C O N T E X T
Market opportunity
In the 1980’s with the advancement of computers in every sphere of life, and in every market,
new uses for projectors were being discovered. The market for video projectors (63% of all
projector units sold) was very large but had already hit its peak and was growing very slowly
at 0.8% predicted growth rate. Data projectors which were a big segment (33% of the
projector market)were growing at a healthy 12.3%. Graphic projectors were the big
opportunity with predicted growth rates of 40.2% but on a small base of 4% of the industry.
The United States was the biggest geographic market (50%) followed by Western Europe (36%)
and then Asia at only 12% but with the highest growth opportunityat 18%.
Technological environment
BPS main differentiator between usage of products was their scan rate.
BPS had 3 lines of projectors – 1) Video 2) Data 3) Graphics
1) Video (TV & VCR compatible) – Scan rate 16 kHz or 16,000/- lines per second
2) Data (PC & video sources) – Scan rate 16 to 45 kHz
3) Graphic (CAD/CAM Sources, PC & video sources) – 16 to 64 kHz
BPS projectors were currently not compatible with computers scanning over 65 kHz.
1987 BG 400 introduced – scan rate up to 72 kHz
Sept 1989 – BD700 (first digitally controlled Projector field test) – slated for launch in Oct
1989
A N A L Y S I S O F T H E C O M P A N Y : Barco Projection Systems (BPS)

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With 350 Employees and a turnover of $35 million BPS is well established in the projector
industry.
BPS’s strength in electronics is able to deliver measurably better performance than its
competition for the same lens and tube combination.
Higher Scan Rate gave it an edge over competitors
BPS is well established in a variety of entertainment, training and presentation markets. And
is also pursuing specialized markets such as process control and simulation.
BPS Situation as September1989:
 BD600 is the principal data projector priced at $12000
 Sony had demonstrated its superior 1270 projector in August 1989
 Infocomm show was upcoming in January 1990
 Sony’s market share (49%) in “data” segment was more than double that of BPS (23%)
globally
 Sony has no market share in Graphics segment; Barco has 55% share globally
 BPS is almost ready with a digital upgrade of the current BD600 i.e. the BD700, a
planned to be introduced by October 1989
 Price of BD700 - $16,000, Scanning frequencyto be 64 kHz
 180 person months of efforts have already gone in production of BD700; 27 person
months more efforts require. Assuming that only 1 month of time remaining for the
launch date, it will need 27 engineers to work on it & take BD700 to completion
 4 other projector related projects already in progress
A N A L Y Z I N G C O L L A B O R A T O R S A N D C O M P L E M E N T E R S
The main collaborators are the distributors of the projectors. Barco was at an advantage
because 80% of its distributors were systems distributors who had the knowledge to integrate
and install equipment packages tailored to end-user needs.

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Dealers processed information from manufacturers, held vendor fairs and training sessions,
and recruited customers. Barco’s dealers were well trained and attended sales and technical
courses.
They also received price protection for unsold units when prices dropped and stable pricing
between first customer quote to final order.
However, Sony had captive commercial video distributors and sold through 1500 deals.
Because of the higher volumes of Sony products they sold, the dealers could not do without
Sony’s volumes.
A N A L Y Z I N G C O M P E T I T I O N
AT –A- GLANCE COMPETITIVE TABLE
Barco Sony
Mother
company
One of the top 3 global manufacturers
of automated production control
systems, graphic arts, CAD, industrial
projection
Expected 50% turnover growth that year
2400 employees, Based in Europe
Several awards, R&D strength, High
quality,
focused on top of the line products in
niche markets, industrial market focus
Global Manufacturer of
consumer electronics, Based in
Japan
Barco Strategy 1) To become a leader in a variety of
distinct, but complementary, niche
To move away from its
reputation as mass
manufacturer of low-end

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markets
Entered only if it had indepth
knowledge of the mkt and tech, and if
it could be top 3
2) Committed to R&D
Spent 8-10% of turnover
15% of employees
products and move to an image
of a high quality, superior
technological company while
keeping its prices moderate.
Barco Projector Systems Sony Projectors Division
Pioneer in projection Late entry 1985
Turnover 1.39 bn brf
23% of Barco turnover
4.6bn bfr
1% of Sony corp turnover
Market
position
Leader in graphics (55%)
Data 23%
Leader in video 50%
Leader in data 49%
Distribution 45 distributors (4 owned did 61% of
sales, rev, 59% margin;
57% vid-61% data-75%graphics
41 barco exclusive); 400 dealers (20%
box, 80% systems)
Preferred by dealers who received a
higher price, higher % of that price
100 dealers
Captive commercial video
distributors
1500 dealers (50% box dealers,
50% system) hence low street
price
Higher volumes. Dealers
couldn’t do with these volumes
500 dealers
Pricing 15% more than Barco 15% less than Barco
Discounts 10% disc by dealer 15% disc by dealer
Reputation Highest quality final image, excellent Lower than Barco and EHM

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among dealers reliability once installed
Machines unnecessarily complex, not
user friendly
Complications when installing
performance, lower price
Reliable
Tubes Currently using 7” tube
8” tube significantly costlier; Square
lens required. Projector chassis shape
to change
Advantage of home
manufacturer
Used in 1270 and gained
significant quality advantage
Service Superior service with 80% system
dealers
50% box dealers without the
expertise of systems dealers
PLANNED Digital/remote controlled in DATA
projectors
BD700 $16k ready for delivery in 1 mth
Oct89 @ same $24k
Late 1990 digital BG800
SONY 1270
Better than BG400 in
performanceScan 75khz, 8 inch
tube
Rumoured price of $15k-20k
The main competitors of Barco in data and graphic segments are Sony, ElectroHome and NEC
In 1988, Sony held 45% of the total global projector market, with Barco at 35%, followed by
E.H 14%, NEC 8% and others at 8%
In Data Projection Sony (45%) is the leader followed by Barco (25%), Electro home(14%) and
NEC (8%)
Sony Projectors Division

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 Sony products were not in the same range in terms of performance with Barco’s
projectors and were 15% cheaper (Though performance will now change with the launch
of Sony 1270 with a scan rate of 75 kHz).
 Global Market leader in Video projectors - 50% of devices sold and in Data projectors
49%.
 Most powerful scanner in 1988 was model 1031 which had a scan rate of 35 kHz
 Sony has wider 1500+ dealer network with 50% of these box dealer. (80% to 90% of
audiovisual dealers globally stock Sony products)
 Sony has better penetration in US market than Barco thus resulting in low street price
also Sony products get better discounts than Barco
 Sony Components manufactures the superior tube, and supplies the same to Barco. Also
this is the only source for supply to Barco
 Sony has been a pioneer in producing the tubes in terms of quality which is better than
the one manufactured by Hitachi,Toshiba,Thomson and Philips .
 All the main competitors i.e Sony, Barco, Electro-Home source the tubes from sony
Components
 Sony using 8” tube which was offered to Barco for BD700 but didn’t opt for it
Electrohome
 Electrohome (E.H) - biggest competitor for Barco in the graphic projector market (44%
of the global projector market in 1988)
 E.H was the 3rd biggest player in the market after Barco & Sony. ( 1585 units sold – 73%
data & 27% graphics)
 Dealership comparable with Barco’s (100 dealers in the USA , 80% of dealers were
system specialists)
 1988 turnover of $139.8 mn. Industrial projectors turnover being $62.5 million
 Third largest player in units behind Sony and Barco sold 1585 units out of which 73%
were data.
 Distribution network is comparable with Barco and 80% of dealer were system
specialist
 Very rarely Electrohome distributors stocked Barco projectors
 Price just below Barco and were considered higher quality than Sony
NEC

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 NEC pioneered digital convergence technology in the market. It sells video & data
projectors with a product mix divided between 48% & 52% between the two.
 Turnover of $ 21.9 billion
 Pioneered digital convergence technology in market place and introduced digital
projector in 1987 that became market standard
 Due to inefficient distribution network , company couldn’t capture the market share
 Were sold on OEM agreement with GE and were able to sell 1200 units and has 9% of
data market.
PORTER’S 5 FORCES:
I N D U S T R Y C O M P E T I T O R A N A L Y S I S
 Main competitor for Barco in data and graphic segment are Sony, Electro-home and NEC
 In 1988, Sony held 45% of the total global projector market, with Barco at 35%, followed
by E.H 14%, NEC 8% and others at 8%
 In Data Projection Sony (45%) is the leader followed by Barco (25%), Electro home(14%)
and NEC (8%)
 The competition is restricted to these 4 players because these projectors require
specialized technologyand knowhow. It requires big investments in R&D, and specialist
R&D personnel.
 The technology also gets outdated quite quickly because of rapid strides in computer
technology.
 The market is split between Barco, Sony and Electrohome . NEC is a much smaller
player.
 The market is not very price sensitive because the buyers are primarily governments and
large corporates. This means that Barco is able to maintain its 15% price premium to
date.
 Distributors earn a good 30% margin. There is more competition at the dealer level who
often offer big discounts.

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 There is also competition on the features of the product. With constant advancement in
computer technology, the projectors also need to upgrade their scan frequency rates.
P O T E N T I A L E N T R A N T S
 Apart from the existing players that dominate the global projector (Barco, Sony, E.H &
NEC) – the share of other players are insignificant.
 Projector space is technologyintensive, 15% of Barco (Barco N.V) staff are engaged in
R&D and 8% to 10% of its annual turnover.
 Due to the high cost barrier & technology involved there no potential entrants to
challenge the market share on the dominant players like Barco, Sony, EH etc.
A V A I L A B I L I T Y O F S U B S T I T U T E S
 Low availability of substitutes outside of established competitors due to technological
barriers
 Barco BG400 was the most advanced graphic projector in the market (till August 1989)
with a scan rate up to 72 kHz.
 Sony now reveals its 1270 “super-data” projector (Siggraph trade show) with a superior
scan of 75kHz (reportedly 15%-20% cheaper than BG400) and is projected to affect
Barco’s profits for 1990.
 In Europe and North America, for Graphics, apart from Barco & Sony, customers had
Electro Home as another substitute. For Data, there was NEC as well as Electro Home.
B U Y E R P O W E R
 Barco customers were mostly Corporates or Govt organizations, were not very price
sensitive
 Barco customers were also not organized into collective buying units
 Barco projectors commanded a premium in the market because of their high image
quality and reliability
 Buyers of Barco products needed to buy from Barco’s systems dealers because they
had the training and offer much required installation, and after sales support.

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 Barco has a 2 step distribution process – 45 distributors and approximately 400
dealers worldwide. 4 company controlled (61% of Barco revenues, 61% of total unit
sales and 59% of its margins) and 41 independent distributors.
 With ever increasing scan rates – customers tended to purchase more performance in a
projector than they needed. – Barco was the industry leader in high performance
projectors.
 Until the announcement of Sony 1270 was introduced, Barco customers did not have
many substitutes available. Thus, overall, the Buying Power was quite low.
 But with Sony 1270, Barco feared that its customers would get a superior quality
substitute, possibly at a much cheaper price, and hus a low switching cost. Thus, Barco
realized that in order to retain their customers and attract new ones they need to
provide more value to its buyers at a more competitive price.
S U P P L I E R P O W E R
A big component of the projectors is the tube. Sony Components is one of the best
producers of tubes. Sony Components is the sole supplier of tubes to all the projector
companies including Barco. While Sony Components is a separate division from Sony
Projectors division and is run independently, it is still part of the bigger Sony entity. And thus
this is a sword hanging over Barco’s head.
 Barco sourced its tubes from Sony Components although it is a sister concern of their
competitor Sony Projection Systems because they superior in quality and less
expensive that other suppliers. Many firms manufactured tubes suited to consumer
video applications, including Hitachi, Toshiba, Thomson and Philips, but only Sony
Components has the high quality tubes required by Barco
 The quality of the output of Barco’s projectors was dependent on the quality of the
tubes.
 In short, Barco had no easy substitute to SC. This developed a high dependency on SC
which was high risk, with low negotiating ability. Thus, Barco faced a high cost of
switching supplier. Because of this, when Sony introduced 1270, Barco found that it
had no negotiating ability. Relying on Sony Components for an important part of their
scanner makes Barco vulnerable.
 Secondly, to obtain tubes to suit Barco’s requirements, they had to divulge certain
amount of technical and developmental information to SC. Again, a risky proposition.
 On the other hand, Barco is a valuable customer for SC who valued their business as it
helped to reduce their manufacturing costs.

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 However, Barco ran the risk of SC either stopping supply to them or raising their
prices.
 Sony’s new 1020 video projector contains the superior 8” tube with superior
performance than Clinton which was BPS’s US based supplier
Relationship Benefits
Sony Components BPS
 Gets certain technical and
developmental information from
BPS
 Relationship with Barco brings
the manufacturing costs down.
 Gets updates about the latest
developments
 Gets a source of superior tubes
which improves the quality of its
products
 In 1987,Sony introduces BD600 with a tube that Barco had not seen
 In 1989, BPS seeks other suppliers  Hitachi,Toshiba,Thomson,Philips . But quality of
tubes is inferior to Sony. Barco is 100% dependent on Sony Components for Supply of
Tubes.
 BPS Strategy to protect from sudden supply freeze  3 Month supply of tubes in-
house and 2 months of orders in transit from Sony.
 BPS expenditure for Tubes:- $2.25 To $2.5 Million  1/5th of Sony Component’s
Projector Tube Business
 In February 1989, Sony informs Barco about new 8” tube but it would involve too many
changes for Barco to incorporate the new tube
 The new 8” tube required special lens which Sony sourced from Fujinon. Earlier Sony
and Barco sourced lenses from the same supplier USPL. But now Barco was not sure
about supply from Fujinon.
Leader of the industry, 55% Graphic
share, 23% Data share
Strong R&D, Wide customer base,
Strong financials, 59% gross margin
Global footprint, 3 international
acquisitions, expanded their presence in
sales, product dev, and production.
Particularly in high-growth markets of
Asia.
Product is user-unfriendly
Dependencyon single supplier
Locked inventoryof 2 months
Teams currently fully stretched with
BD700 pressure, cant shift workforce
for BG800
Weak market intelligence (did not get
early warning of competitor’s launch)
Strengths Weaknesses

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T H E O P T I O N S F O R B A R C O T O R E T A I N T H E I R
M A R K E T P O S I T I O N
O P T I O N 1 : C O N T I N U I N G D E V E L O P M E N T O F B D 7 0 0
Good opportunity to do accelerated
product development of latest Graphic
product BG800
Can use this opportunity to find
substitute Tubes supplier & eliminate
dependency
Post BD 700 launch as per plan, dedicate
the complete R&D team to BG 800 and
disseminate the news of a superior
projector by disclosing the details during
Infocomm so as to have new customers
wait for their product to be launched.
Launch of Sony 1270, a superior product,
rumored to be cheaper by 20-38% is thus
affecting sale of BG 400 , affecting profit
margins by 75%.
1270 would likely transform competitor
Sony’s market image from a mass producer
of low-end products into a producer of
high-quality, competitively priced
products. Sony’s ultimate game was not
the smaller graphics market, but the huge
data market.
Barco may lose its “Leader” image and will
end up “catching up” with Sony
At Infocomm in Jan’90 – BPS would be
outshone by Sony in the presence of
customers, industry analysts and dealers,
affecting sales for the rest of the year, and
dent their reputation.
Sony Components could stop supply of
tubes to BPS
Opportunities Threats

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Opportunity for BD700:
- A digital projector like BD700 would score over current manual projector.
- Forecast revenue in 1990 would be $17.2 mn (BD700 is supposed to make incremental
revenue of 25% which is equivalent to $4.3 mn, hence total revenue would be $17.2
mn)
- By September 1989, German distributors had booked orders @ $16,000
Risks in suspending plans of BD700:
- Completing BD700 on time was important for Engineers’ morale as well as Customers’
morale. Suspending BD700 project carried a risk of demoralized workforce and
disappointed customers
- It was clear that BD700 would not beat Sony 1270’s performance during Infocomm
show. Hence discontinuing BD700 production plans for BG700 or 800 would not meet
the objectives
Conclusion: Barco should continue with its original plans of producing BD700 by committed
date of October 1989.
Reasons:
1. Revenue-wise as well as margin-wise, “data” segment contributed much more to Barco
than Graphics segment. Hence it makes sense staying on track with pre-decided
BD700 production plan
[Revenue: Data = 54%, Graphic = 23%. Margins: Data = 51%, Graphic = 29%]
2. Barco holds 2nd position, globally as well as within each region, in “data” segment (first
being Sony). And it is predicted that from 1989 to 1994, maximum growth is going to
be in “data” segment.
[Note: Growth prediction for Graphics segment is 40.2% while that of “data” segment is
only 12.3%. However, in general as well as for Barco, total sale of “data” segment is
more than that of Graphics. Resultantly, in absolute terms, growth for “data” segment
would be more than that of Graphics]. Hence it makes sense continuing with BD700
production, as planned
3. The concerns raised about the success of Sony 1270 as well 1270’s price concerns
were more from Distributors, than anybody else. But since 61% of Barco’s sale &
revenue was through it’s own, fully owned Distributors, Barco need not come under
pressure generated by other Distributors. [61% of data and 75% of Graphics sale of
Barco was via their fully-owned Distributors]

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4. Even if BD700’s production plans were suspended for the sake of proposed BG700
production, BG700 would not match the performance of Sony 1270
5. Sony’s declaration of launching 1270 by November 1989 was only an announcement
with no surety them would launch on time. Hence, it was not appropriate for Barco to
suspend its plans of BD700 when 86% of production was over and when Barco was only
1 calendar month away from its completion.
6. Suspending BD700 plans for the sake of BG700 or BG800 was risking commitments
made to customers. It also meant risking distributor relations.
O P T I O N 2 – B G 7 0 0 ( 2 3 R D S E P T 1 9 8 9 )
BPS has an option of developing BG700 Graphics Projector as a stop-gap product to compete
with Sony’s 1270.
Pros
1. BPS could develop the product in 2 to 3 months as they could use their advances in the
BD700 to develop this product by December 1989 – just in time for Infocomm 1990.
2. They could use the same chassis, lens and tubes as intended for the BD 700, thus
reducing additional input costs.
3. BG700 can be a strategically priced product which minimizes the impact of Sony 1270
launch.
4. BG700 will give BPS management time to analyse the market reaction to Sony 1270
against a competitively priced BG700 with performance almost within the range of
Sony 1270 (although inferior).
5. Ample time to fine tune and launch BG 800 as a superior product in late 1990 as
originally planned.
Cons
1. BPS would be launch an inferior product into the market and would have to compete on
price rather than performance – not great for brand reputation.
2. BPS development team would have to divert their focus from BD700
3. Orders for BD700 had already been placed by major distributions – any change would
hit both employee and customer morale.
4. Pricing for BG 700 not factored into company revenue projection for 1989 & 1990.

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O P T I O N 3 - B G 8 0 0 ( I N T R O D U C T I O N I N L A T E 1 9 9 0 )
Details about the proposed BG800 Projector
 Graphics Projector
 Lens to be sourced from Fujinon who is not regular supplier. No Surety about supply.
 Only 40% chance of making the Infocomm deadline
 Planned to be a digital upgrade of BG400
 Scanning Frequency – 90 Khz ; Usage of Sony 8” tube
 Would require 80 person months. All focus should be put on BG800 which endangers
the other products. Indefinite postponement of BD700 project which is a big risk
 Overtime needs to be given to employees and the also need to give up their vacation
days
 Also the entire product development lifecycle would not be followed which will end up
compromising the product quality.
Existing BG400 projector:-
BG400 was priced at $24000. Resolution unmatched by any of the three competitors viz.
Sony,Electrohome,NEC
1270 was expected to be priced between $15000 and $20000
If launched at $15000 – Would eat up 30% of BG400’s market share
Given the fact that BG400 was sold at $24000 it would be obvious that BG800 could not be
competitively priced with Sony’s 1270
Conclusion:-
It would a high risk strategy if BG800 would have to launch by Infocommdeadline. It would
also jeopardize the existing products. So best decision would be to continue research and
development on BG800 and follow the entire product development lifecycle to deliver a
quality product even though it is a bit late. In the meantime company can try to sustain in the
market using the other products BD700 and BG700 .
T H E D I L E M M A A N D E V A L U A T I N G T H E O P T I O N S :

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BPS’s development plans had been prepared in early 1989 based on the expectations that
data segment market will become more competitive. Hence digital version of data projector
(BD700) was planned to be introduced in October 1989 and by September, 85% development
of BD700 was already complete. A graphic projector BG800 was planned to be introduced in
late 1990.
However, in August 1989, Sony previewed a graphic projector 1270 that was far superior in
performance than any of Barco’s projectors and rumors were that 1270 was priced the lowest
(for that performance).
The launch of 1270 challenged the very position of Barco as a leader in Graphics segment and
this challenge was thrown by Sony who was already a leader, globally, in Data segment.
The dilemma before Barco was:
1. Whether to continue with BD700 production (as it was 85% complete and pre-orders
already booked)
2. Suspend developments of BD700 for time being and make full attempts to introduce
new graphics projector BG800 as early as possible, hoping that it will surpass quality
and price levels of Sony 1270
One option can be selected over another by carefully analyzing options and available
information, as follows:
Year 1988
BPS Units
sold
% Units Actual
Units
%
Revenue
Revenue
Figures ($)
Projected
Annual
Growth
1989
Units
1989
Revenue
1990
Units
Video 35% 1540 23% $8,050,000 1.40% 1562 $8,162,700 1583
Data 53% 2332 54% $18,900,000 12.30% 2619 $21,224,700 618
% BD600 of
total Data
79% 1842 67% $12,663,000 2069 $14,220,549 2586
Graphics 12% 528 23% $8,050,000 25% 660 $10,670,000 825
% BG400 of
total
Graphics
85% 449 80% $6,440,000 561 $8,050,000 701

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Total 264% 4400 $35,000,000 $40,057,400 6313
Now, after establishing 1989 revenue & deriving prices of BD600, BD700, BG400, BG800 and
video projectors from the revenue and # of units sold, we can calculate projected figures of
1990 for Option 1 (BD700 development)against Option 2 (BG800 development):
Option 1 - Continuing with
BD700
1990 Revenue Projection Units Price Revenue
Video 1583 $5,227 $8,276,978
Data
Data - BD600 2069 $6,874 $14,220,549
Data - BD700 (projection) 581 $10,063 $5,844,913
Data - other than BD600 or
700
687 $12,736 $8,755,189
Graphics
BG400 701 $14,349 $10,062,500
Other 124 $20,328 $2,515,625
Total $49,675,753
Opportunity loss @30% $3,850,000
Total Revenue for 1990 $45,825,753
Opportunity loss @60% $7,690,000

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Option 2 - Producing BG800
1990 Revenue Projection Units Price Revenue
Video 1583 $5,227 $8,276,978
Data
Data - BD600 2323 $6,874 $15,969,677
Data - BD700 (projected) 232 $10,063 $2,337,965
Data - other than BD700 687 $12,736 $8,755,189
Graphics
BG400 (Reduced price
after launch of BG800)
175 $10,063 $1,764,151
BG800 526 $12,579 $6,615,566.04
Other 124 $20,328 $2,515,625

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P G P M X T E A M A ’ S S U G G ES T ED W A Y F O R W A R D F O R
B A R C O :
P R O D U C T
1. Barco should continue with BD700 production (as it was 85% complete and pre-orders
already booked) and grab some market share since it is the first ‘digital’ model.
2. Speed up the delivery and launch of BG700 by leveraging their big R&D teams, by
paying out overtime and incentives at this critical time
3. Speed up the launch of BG 800. However, even they do not get it ready for Infocomm,
they should target the next trade fair instead.
P R I C I N G
Sony had exhibited it's projector 1270 in Siggraph and 1270 was superior in quality than
Barco's projectors and rumours were that it would be priced much lesser than that of
Barco projectors. The dilemma before Barco was whether or not to drop their prices to
retain the market share.
$0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000
Option 2
Option 1 - Opportunity loss @60%
Option 1 - Opportunity loss @30%
Option 1
$8,276,978
$41,985,753
$45,825,753
$8,276,978
$27,062,831
$28,820,651
$10,895,342
$12,578,125
Video Data Graphics

Page 21
Recommendation:
The fear of Sony reducing their prices was more based on perception than any
quantitative data. Further, reducing prices would triger a price-war which Barco would
find difficult to sustain.
Pricing also determines the positioning and the perception of a product and the
company. Customers often perceive a higher priced product to be of higher quality.
Barco already enjoyed this reputation and was able to command a price premium of 15%
To lower their prices to match Sony’s would reduce this reputation. More so, when the
product is of a niche segment like a Graphics Projector. Hence this group feels that Barco
should always keep a price band, higher by about 15%, than that of Sony's. Because that
will help maintain Barco's market image as niche manufacturer.
Barco should not believe rumours of Sony’s low price which could be Sony’s strategy.
It is more realistic to expect Sony to launch the 1270 at $20,000. Thus, the
recommendation for Barco is to wait till Sony declares its price. And Barco should
maintain their price position of 15% premium and gross margin without unduly dropping
its prices. They should leverage their reputation and their systems dealers abilities to
provide stronger after sales service to advantagae.
Barco should continue with its original plans of producing BD700 by committed date of
October 1989 and launch at its intended price of $16,000/- It would allow it to stay
competitive with Sony’s 1270 potentially priced at $20000.
However, Barco should reduce the price of its older product BG400. The BG400 is currently
sold at $24,000 whereas its cost price is about $17000. Hence the price of the BG400 should
be lowered to $18500 to remain competitive (8% margin).
O T H E R S
Barco should step up their marketing and promotional tactics to fiercely retain their
customers.
They should also tap into growing markets in Asia and around the world to take advantage of
their recent acquisitions.

Page 22
T H A N K Y O U

Barco case study team a final

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