Barco-case

Barco Background and Strategy

Barco Projections Systems (BPS) was the second biggest division of Barco N.V.. The division employed 350 employees and accounted for 23% of Barco N.V.’s total revenue in 1988, which grossed $35 million. The BPS division was formed due to the large growth momentum during the 1980’s in order to pursue the highly opportunistic technology of video projection.

Originally, Barco N.V. began as a producer of radio broadcast receivers and over the years the company expanded its product line into broadcast monitors and professional video equipment. It was not until the global recession after the 1977 oil supply crisis, demand and sales for Barco’s consumer products diminished greatly.

At this time, the Barco company repositioned its firm during the 1980’s with three clear cut elements that was to shape its vision and strategy. The visions were three fold: Barco committed itself to become an industry leader in distinct, but complementary niche markets; it would create a strong commitment to research and development; and lastly Barco sought to expand its international presence in sales, product development, and production.

On the one hand while Barco was establishing its strategic vision for the projection industry, on the other hand the company was redefining its industry as a whole and setting the bar of high end quality projectors.

The product line that rolled out from the Barco Projection Systems division were all based on the same design. The BPS’s projectors comprised of three major elements---tubes, lenses, and electronics. The division’s products were relatively focused around a 7” tube. The niche among BPS’s product line was the scan rate. The more sophisticated its market, the higher the scan rate of the projector. The following table demonstrates BPS’s product line prior to the competitors release of the Sony 1270 super-data projector.

Manufacturer & Model |Scan Rate/Light Output/Resolution |Retail Price | |BARCO: BD600 BD400 |16-45 600 1,600
16-72 400 2,000 |$12,000
$24,000 | |SONY: VPH1031 |16-35 300 1,100 |$10, 500 | |

The BPS division focused on three types of projectors: video, data and graphics. The evolution of its product line was centrally focused around digital projectors in 1989. BPS was the accepted technological leader in the high end projector market until Sony strategically unveiled its 1270 super-data projector and threatened to steal BPS market share.

Sony Corporation

The Sony Corporation had a very strong and reputable name to back its projectors in the market and thus resulted in Sony holding approximately 49% of total projector units sold. Nevertheless, Sony projectors were far inferior of quality when compared to those projectors manufactured by Barco. The selling price was normally about 15% less than Barco’s and in 1989 Sony projectors could be found in an estimated 80-90% of audiovisual dealer stores worldwide. It was not a secret that Sony had a reputation of reliability and low prices among dealers and few dealers could not stay open for business without the Sony projector sales.

Sony entered the projection market with its flagship 1020 video projector. Again true to its reputation, the 1020 was slower than Barco’s video projectors but interestingly enough this time the projector had a sharper focus which indicated in a better quality projector tube. Upon further research and closer examination by BPS executives, it was decided to maintain its projector quality and market share BPS forged a threatening relationship with Sony. BPS entered into a contract with Sony Components to become the sole supplier of tubes, which is ultimately why Sony didn’t respect Barco’s vision in the market any longer.

By creating the supply contract with BPS, Sony was able to maintain its strategic vision and strategy by always knowing the capability and quality of the tubes in BPS projectors. BPS made a terrible mistake as only keeping a 3-month supply of tubes on hand and 2-months of orders in transit. The mistake was as clear as day, that was made by BPS General manager Frans Claerbout. He assumed that because BPS lowered Sony’s manufacturing costs down and Sony made an attempt to always keep BPS in-touch with its latest developments, that the relationship would be profitable for both companies. Nothing could have been further from the truth.

The old saying, “keep your friends close, and your enemies closer...” was real life for Sony. By supplying BPS tubes for its projectors it had vital technological and development knowledge of BPS products and thus would be able to use that information to the companies advantage by developing its own high end projector that would not just compete with Barco but Sony’s goal was to reacquire market share and reposition its projectors away from the mass producer of low-end products.

In a strategic move at the Siggraph trade show in Boston, Sony unveiled its 1270 projector and was trade-show stealer. For the industry and more importantly BPS-the 1270 ability to scan at 75 khz in addition the 1270 featured the new 8” Sony tube, placing the projector in the market for high-performance graphics applications that BPS could not enter. It was also rumored to be priced at $15,000-$20,000. If this was true, this high of performance had not been seen before in the market for that low of a price.

Conclusion and Recommendations

From the case study, it is obvious that BPS general manager made it very clear by saying, “Barco can not win a price war against Sony.....In addition, a drastic price drop would damage our reputation among recent, and hopefully repeat, BPS customers.” With this in mind my recommendations to BPS is to re-iterate its already strong relationships with its many dealers across the globe.

For example, if Barco reinforces the fact that BPS products are competitively more advantageous than Sony’s newest projector because BPS is more hands on with the sale by the dealer than this would give peace of mind to the dealers that are experiencing market pressure to decrease the price of BPS’s BG400.

Barco projectors had a dealer reputation for the highest quality and excellent reliability once fully installed. Furthermore, Barco dealers were required to attend sales and technical courses and to hire certain number of Barco-approved technicians. This streamline body of resources is second to none when it comes to technology and Barco needs to reinforce these benefits to the market. At this point, the only thing Sony has in its favor is a known projector with higher quality from its predecessor products with an unknown rumored lower price point. Nowhere at the trade show did Sony roll out a post purchasing dealer resourcefulness or reliable service channel for end users to depend on like BPS has already offered with its projectors.

Lastly, it is my ultimate recommendation that BPS immediately buy the 8” tube from Sony components and conduct its own research and development upon the device. By doing so, this will allow BPS to cut its ties to Sony and delete the information knowledge about the next line of projectors that BPS could ultimately produce in response to Sony’s 1270 super-data projector. By researching the 8” tube BPS could then subcontract the manufacturing of the device internally if the funding allows for it or BPS could find an external supplier that could match the quality of Sony Components.