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This case study focuses on the issue of niche marketing by companies in the international setting. Barco Projection Systems (BPS) produces video, data, and graphics projectors for years and has been considered as a performance leader. Sometime in mid-1989, Sony Corp. developed a higher-performance graphics projector for a much lower cost than that offered by BPS. BPS is faced with the challenge of keeping up with the competition in the global market.
Harvard Business Review (591133-PDF-ENG)
June 10, 1991
Case questions answered:
- Describe the product line strategy of the Barco Projection Systems Division.
- On p.12 of the Barco case, Dejonghe comments that “All of our projections, however, were based on the assumption that Sony would respect our ‘vision’ of the marketplace.” What does this mean? When does one competitor accept another’s “vision” of the market?
- Why did Sony decide to reject BPS’s vision of the market in August 1989?
- How serious a threat is Sony 1270? What are Sony’s objectives?
- Did Barco make a mistake somewhere along the way—or do things like this “just happen” when competing in high technology businesses on a global scale?
- What should Barco do now with respect to price?
- What should Barco do now with respect to its product development plans?
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Case answers for Barco Projection Systems (A): Worldwide Niche Marketing
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Introduction – Barco Projection Systems (BPS):
Barco Projection Systems (BPS) was the second-largest division of Barco N.V., which was one of the top three global manufacturers of automated production control systems, graphic arts, computer-aided design, and industrial projection for the year 1989.
Throughout the 1980s, BPS played an essential role in the development of niche market applications. BPS’s projectors had better performance in terms of brightness, image quality, and resolution compared to its competitors until Sony launched its 1270 projector, which shook the market of projectors.
The 1270 projector had better functions and also rumored to be cheaper than the projectors of BPS. It was the highest performing projector in the market and can change the market share of BPS in the projection systems industry. This made Barco not only worried about its price competitiveness but also advancement in technology.
To be still competitive in the market and sustain its market share, Barco Projection Systems has to take immediate action to compete with the advancements of 1270. The Barco Projection Systems is a decision case, and this case analysis would unveil how BPS should react to its competitor’s latest stunt to thrive in its industry.
BPS’s Product Line Strategy:
BPS’s product line consisted of three types of projectors: video, data, and graphics. Barco Projection Systems differentiated its products by having the highest scan rate in the market. Scan rates measured the speed at which a projector was able to read and process incoming electronic signals. BPS had the best brightness, image quality, and resolution in the market. This quality allows BPS to charge a premium price over its competitors. BPS was continually upgrading the scan rates to match the advances in computer technology.
According to Table A, Video projectors were 63% of projectors produced by BPS, but it had the lowest growth rate of only 0.8%. Moreover, Sony owns 50% of the market of video projectors, but still, BPS is one of the top three companies competing for the projector market. Barco Projection Systems should invest in products that have better growth potential like Graphic projectors.
If we look into Table A again, we can see that Data projectors of BPS capture 33% of its units and has a growth potential of 12.3%, and Sony dominates 49% of its market. Graphic Projectors offers only 4% revenue for BPS, and the company owns 55% of the market share. However, graphic projectors have the highest growth potential. Thus, BPS needs to figure out how to increase the number of products developed for graphic projectors.
Analyzing Sony’s Market Competition:
Sony: Sony held the highest percentage of market share for data projection and sold 49% of total units. For the video segment of the projection marketplace, Sony sold 50% of all its units. Until the launch of 1270, Sony’s most powerful projector in 1989 was 1031, which scanned only 35 kHz.
Initially, Sony was known as the low-end product producer for charging a price 15% cheaper than average projectors and lower- performance provider in the industry. Thus, dealers sold a higher volume of Sony. Sony had more than 1500 dealers across the world. 50% of Sony’s dealers were box dealers. It seemed to remain focused on the production of data and video projectors. Moreover, according to Table E, they didn’t even offer graphic projectors in 1988.
When Sony launched 1020, it had a sharper focus for a better-quality tube used in the production. Barco Projection Systems tried to find similar tubes in the market but couldn’t find anything that was better or even the same as the quality of Sony. Barco and Electrochome bought its tubes for the production of its projectors from Sony, but at a higher price, .35% of Sony Component’s business was noncaptive.
To obtain tubes from Sony, Barco Projection Systems had to share a certain amount of technical and developmental information with Sony Components. This gives Sony access to its inside information and technical expertise that Sony may not have had before. This was a great mistake from the side of BPS. If Sony stops supplying tubes, BPS’s performance will fall.
Moreover, if Sony increases the price of the tubes, the cost structure of BPS would…
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