Barco Projection System

Barco Projection System

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Case Analysis of Barco Projection System: Worldwide Niche Marketing

Introduction
Barco N.V. was established in 1934 as a producer of radio broadcast receivers. At the end of 1970's, facing the economic recession owing to oil supply shock, the company altered its market strategy from consumer market to industrial niche market of projectors. This decision was based on firm and clear vision that Barco knew which market it had to serve. Pursuing top-of-the-line in the high-end niche market, Barco focused on R&D to retain the top quality and launched series of international expansion activities.
The strategy of the most advanced player in the niche market resulted in years of its market leadership in graphic projector sector of high-end industrial market. Barco Projection System (BPS) virtually enjoyed the fruit of its dedication on technologically superior projectors, however, the projector market encountered an unexpected (in light of BPS) new product – 1270 "superdata" projector (1270) from Sony. Introduced at Siggraph trade show in 3rd quarter of 1989, 1270 showed its superiority in brightness, image quality, and resolution to the counter product of BPS.
Since BPS couldn't expect a competing product like 1270, both the company and the distributor were shocked and stirred. Considering Barco's scale in the market, even though BPS was in the position of industry leader, it couldn't defend itself from the attack of the giant like Sony. At this point, to keep the market position and share BPS should take an immediate action against Sony's market conquering movement with the high-quality but low-priced projector 1270. At this time, the managers of Barco were considering basically two options: pricing option and product development option, but both options had some defects.

Strange relationship with the Giant
BPS was known its high quality to distributors and end users. Based on its strategy of being ranked in top 3 in the designated market segment – high-end projectors, BPS had achieved the no. 1 in graphic projector and managed to be top 3 in data and video projector sectors. BPS had intentionally set the bar by making its product "unnecessarily complex" to prevent the entrance of other competitors. Dealers and end-users complained about it but BPS held this strategy since it was regarded as a necessary differentiating way among competitors: Sony, Electrohome, and NEC. Sony was the strongest competitor and had a unique relationship with Barco. Competing in the market of industry projector with Barco, it provided the core component of the projector to Barco - tubes.

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As Sony was the best producer of quality tubes that were essential to BPS high quality projector, BPS had been trying to diversify its supply of tubes but until that time, BPS couldn't help relying on Sony.

Even though Sony was the strongest competitor to Barco, its strategic movement with 1270 had not been expected. Sony was known more for consumer market player and its product mix of projector market was more skewed to video side, which was less dedicated by BPS, and Sony was often considered to have less interest in investing R&D of projector-related technologies. However, these assumptions were turned out to be wrong in the end and the product development plan of Barco based on market expectation based on these assumptions brought significant crisis.

Relationship with dealers
BPS had a two-step distribution system, which was composed of 45 distributors and about 400 dealers globally. The ratio of fully owned distributors was about 11%, but they made up 61% of BPS's total unit sales and 59% of its margin. The reason that a few fully owned distributors were in charge of more than half of unit sales, revenues, and margins was partially attributed to the "complexity" of the projectors. To market its projectors well, BPS needed to have system dealers that had the know-how of integrate and install equipment packages. Because of high margin, the existing dealers liked to sell BPS's projects but the intentional product complexity prohibited the expansion of distribution channel. In terms of volume, dealers did higher volume with Sony – 80% to 90% of professional audiovisual dealers worldwide Sony products because of reliability and low price among dealers.

How to win back the competitive edgy
BPS lost its competitive edgy because it relied on the enemy – supplied by Sony – although these situations had been happening to other companies and it misjudged the market change based on the wrong assumptions including Sony's product development plan. Its strategy heavily relied on its advancement of product quality, but with the advent of Sony's 1270, the map of the high-end projector market had to be redrawn. BPS should have more focused on developing innovative products outperforming competitors' products.
At this stage, the managers of BPS had to decide which way to go to survive in the market and to win back the market leadership. Lowering prices of existing are not an option to consider. It would cause price war and eventually BPS would be disappeared in the market because BPS, a niche player is not strong enough to fight with the giant. In addition, the customer of BPS might relate the markdown to the inferior quality. The product quality is the raison d'être to BPS and once its reputation starts to be ruined, it won't be easy to build it back.
The product development option seems to be more desirable to BPS, even though there were several restraints. Since customers tended to purchase more performance in a projector than they need, the demand for more sophisticated products would be anticipated to grow up. As a niche market player, BPS should think of its target consumer group – they want more advanced and innovative product and afford to pay the premium price. The managers of BPS might dedicate to finish the development of BG800 before meet the deadline of Infocomm. By adopting this strategy, BPS could be prepared for the competition of the one of largest markets – U.S. with BG800. Upgrading BG700 option would rather not be considered as it could cause the delay in its delivery to advance-order customers who already acknowledge the quality and function of this model and made a decision.
While pursuing product innovation, still BPS can cut down some cost. Less complicated technology will reduce costs (explicit and implicit) for customers, dealers and BPS increasing value for all, hence strengthening the its position in the market even more.

Conclusion
As we all know, surviving in the competitive market is not easy. Actually only the best can survive. Barco had redefined its target market from consumer to high-end industry to avoid unnecessary competition and reap more profit by raising profitability. A major characteristic of the market is its high velocity of innovation, but with misjudgment on competitors' move in the market, it encountered a crisis of losing its competitive edgy. This shows the importance of being awakened to develop the most innovative product that competitors cannot react immediately. From BPS' perspective, it's the most urgent assignment is to win back it again while minimizing loss as far as it could. Using less complicated technology, BPS could get more power for price competition and advantageous platform to develop new innovative products. For the Infocomm, although it seems to be risky but BPS is recommend to focus on the most advanced product, BG800 not to lose U.S. market to Sony and to sustain its reputation on innovation and quality.
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