Barco Case (Hbs 591-133)
Which of the three product development options should BARCO pursue and why?
I think BARCO (BPS) should for the third option, i.e., to turn to immediate development of the BG800. Following considerations justify this decision: * BPS had a reputation for the highest quality final image and excellent reliability once fully installed. This was the reason why BPS could charge a premium on its products and keep the distributors and dealers satisfied. Sony’s 1270 posed big threat to BPS’ market position. The niche target segment of BPS was industrial market which required the three qualities on an industrial projector, viz., brightness, image quality, and resolution. Sony’s 1270 achieved superiority in all these regards with 8” tube and scan rate of 90kHz. Also, it was to be priced 20% to 40% below BPS’ best product. This means BPS would all it competitive advantage to Sony. Customers along with Dealers and distributers whose sale could plunge down would be dissatisfied with BPS. Market share would fall. Estimated loss of profits in subsequent year (1990) was 75%. Hence, BPS must go an aggressive strategy and come up with a product superior in all regards. * BPS had 55% market share in Graphics category where Sony had no presence at all. Sony’s superior and cheaper 1270 could sweep this market share from BPS. Once this niche is lost by the small player BPS to Sony which has huge brand equity in market, a comeback would be very difficult. * Also, the predicted growth rate of Graphics category for 1989-1994 was 40.2%. BPS could not afford to lose its niche to Sony. * Other products (BD700 and BG700) were inferior in quality and performance to Sony’s 1270 and the only way to compete was to lower prices. This would drastically cut company’s margins necessary to sustain competitively in future. * BPS was a small player (Barco N.V. Turnover: $150mn in 1988) could not afford a price war with Sony which has abundant financial resources (Sony Corp
I think BARCO (BPS) should for the third option, i.e., to turn to immediate development of the BG800. Following considerations justify this decision: * BPS had a reputation for the highest quality final image and excellent reliability once fully installed. This was the reason why BPS could charge a premium on its products and keep the distributors and dealers satisfied. Sony’s 1270 posed big threat to BPS’ market position. The niche target segment of BPS was industrial market which required the three qualities on an industrial projector, viz., brightness, image quality, and resolution. Sony’s 1270 achieved superiority in all these regards with 8” tube and scan rate of 90kHz. Also, it was to be priced 20% to 40% below BPS’ best product. This means BPS would all it competitive advantage to Sony. Customers along with Dealers and distributers whose sale could plunge down would be dissatisfied with BPS. Market share would fall. Estimated loss of profits in subsequent year (1990) was 75%. Hence, BPS must go an aggressive strategy and come up with a product superior in all regards. * BPS had 55% market share in Graphics category where Sony had no presence at all. Sony’s superior and cheaper 1270 could sweep this market share from BPS. Once this niche is lost by the small player BPS to Sony which has huge brand equity in market, a comeback would be very difficult. * Also, the predicted growth rate of Graphics category for 1989-1994 was 40.2%. BPS could not afford to lose its niche to Sony. * Other products (BD700 and BG700) were inferior in quality and performance to Sony’s 1270 and the only way to compete was to lower prices. This would drastically cut company’s margins necessary to sustain competitively in future. * BPS was a small player (Barco N.V. Turnover: $150mn in 1988) could not afford a price war with Sony which has abundant financial resources (Sony Corp