Barco Projections System

Barco Projection Systems Case

The new BPS graphics projector is inferior to the new Sony graphics projector, and the graphics projector segment has been held by BPS (BG 400) with 55% of the market share, contributing to 23% of its revenues. Also the company has typically aimed to provide top-of-the-line products to niche markets, leading those niche markets, carried out through advantageous investments in R&D and international expansion.

BARCO'S STRENGTHS VS. SONY

BPS has a strong relationship with its distributers and dealers, having a reputation for highest final quality image and excellent reliability. Also, BPS's promotion strategy of price protection is definitely a positive for dealers. Also, BPS projectors are able to command a premium price compared to Sony's projectors as they are positioned as a higher quality product. Dealers prefer to sell BPS projectors, as they are sold at only 10% discount compared to Sony's projectors, which are sold at 15% discount. Due to this fact, dealers are able to get not only a higher price, but also a higher percentage of that price for projector sale.

BPS has a dominant market share in the fastest growing segment of projectors, which is graphics projector. It is expected to grow by 40% annually for next 5 years, increasing its size to $133 million (Exhibit 2). Sony, however, has no presence in the graphics projector segment yet.

BARCO's WEAKNESSES VS. SONY

Sony has in-house access to better tubes which results in sharper image. BPS entered into an agreement with Sony Components in 1985 to buy their tubes for its projectors, leading to dependency on a Sony subsidiary that could be harmful if Sony suddenly withdraws or changes the supply agreement.

BPS has access to 400 dealers compared to Sony who has access to 1,500 dealers worldwide. This provides Sony with a much wider reach than BPS for its products.

Sony was leader in data projectors with 49% of the market, but BPS only had 23% share in 1988. This might exhibit a trend that Sony tends to win dominant market share in whichever segment it enters.

SONY'S INTENT ON INTRODUCING 1270

Graphics segment growth on unit basis is projected at 40.2% from 1989-1994. Despite lower growth in US and European markets compared to Asian markets from 1989 to 1994, combined market would still hold 84% of the total projector sale (Exhibit 1). The total market size for data projectors is estimated to be $143m, growing to $256m by 1994 (12% growth), and graphics projector to be $25m, growing to be $133m in 1994 (40% growth). Since, Sony had 49% share in data projector segment ($70m), but no presence in graphics projector segment in 1988, there is a combined opportunity of $124m, even if Sony just has 50% share in data and graphics projector market by 1994. (Exhibit 2)

HOW SHOULD BARCO RESPOND

Based on BPS's strengths and weaknesses vs. Sony, BPS has positioned its projectors as having higher quality than Sony and thus selling them at a premium. 1270 would probably help Sony not only take the graphics projector segment, but also widen the segment with lower prices. Without proper reaction, BPS stands to lose its lead share in the graphics projector segment, allowing Sony the option to combine smaller segments into one