Case Overview:One month ago the Sony corporation surprised BPS by unveiling it’s 1270 type projector this projector has a big competitive advantage over the in terms of video image and resolution and is rumoured priced 20-40 percent below the established market price in its relative performing class.
Now the company must respond to it and come up with solutions. Strength: and strategy of the company ,Emphasis and commitment on research and development, in the last 10 years the companyde votes 10 percent of the company turnover dedicated to the research and development program. Distribution advantage as Barco’s projector has a dealer reputation for its high quality and reliability. All those are a great sign of customer loyalty. Just as stated in the article what makes them stand out is the scan rate, with three different types of projector, not only give different user different pricing level option but also the level of combability is different.
The low-end Video projectors was designed for compatibility with which, scan at 16KHZ The data projector scan 16 to 45 KHZ, and most high-end product the graphic projector scanning from 16 to 72 kHz. It is not hard to see in Exhibit 6, in comparison to the competitor of Sony Elecrohome and NEC that both Barco’s model are way ahead of its competitive when it comes to Scan rate and resolution. The wide scan rate range allows the projector to be compatible with many different devices and therefore increase the flexibility for the users.The high number in resolution promise a better quality of final image.
The company is also actively upgrading their system and matching their scanning frequency along with the most recent technology or devices. According to table c: BPS takes on more than 55% of the market share for the highly sophisticated video projector, this is a very great sign as we can see that they have built the customer loyalty and reputation Weaknesses: Consumer friendly: it is known that BPS has good reputation among the dealers however they lack customer friendliness, it has been complaint by the end users that sometimes BPS projectors are very complex to use and understand. Those kinds of complexity slows inefficiency and usually not necessary and at the same time can potential hurt its sales. Mistakes: The reliance on the Sony’s component, it is very scary that BPS is replying on Sony as their source of the part tube. Tube is very important part of the projector, as it takes around 15 percent of the cost structure. In the late 1985 Sony has became their only supplier and the company terminated their relationship with their other suppliers. This is the one of the worst move a company can make, buying parts from their competitor, not only will Sony know all the potential moves, demand, inventory capacity and many important information. They will also have a huge leverage when competing against BPS.
Just like what the operation manager said in the case “Anytime Sony wants to squeeze us out they can just raise the price of their tubes” In the case study one manager even stated that ” we share a certain amount of technical and development information with Sony , while they keep us abreast of their latest development” Obtaining tubes from outside suppliers might be more expensive but compare to the risk of leaking important R&D secrets or Sony cutting off the supply, the little increase in cost is minimal. BPS must actively seek independent tube supplier as soon as possible, although it might cost more in the short run, but it is nothing compare to the potential risk and cost of Sony terminating the contract for tube supply. The Competition In august 1989, at the Siggraph trade show, Sony previewed a projector the 1270 which can scan 75kHz that is 3kHz more than BPS’s recent model along with that also has better image quality and resolution. It is rumoured that the price of unit will be 20 percent lower to the standard. Eltrohome: is a private held native Canadian company, it is third in unit sales behind Sony and BPS, However they only operate in the field of dara and graphic projectors. On the other hand NEC is the other main cpmpeitior , however this Japanese electronics manufacturer is not performing too well as they lack effective distribution channels.
Opportunity: The Opportunity of the BPS lies in the niche market of high end graphic projector, it is more expensive and is in a niche market. BPS has an amazing reputation with the customers and are preferred by the dealers whom would usually prefer to carry their products. BPS must take advantage of those strength and expand their product in the high-end market. According to table A, among all the projectors graphic projectors has the highest predicted annual growth of 40.2% for the next 5 years. Sony’s new project’s targeting market is north America and Europe, however according to Table B, Asia has the highest predicted annual growth, between 1980s and 1990s Asian economy booming rapidly and therefore the demand for industrial used projector will only rise. Therefore, the opportunity they should focus on is the graphic projector and target the booming Asian market. Evaluation: The vision Dejoghe talked about is that both those company will stay at their own market, agreeing upon to the established market price and gain profit from that.
Where Sony would get some information about BPS and in return they will supply the tubes for the BPS. Sony’s projector performance and price are typically lower than BPS as they are more consumers focused. The reason Sony reject that vision is because they are no longer satisfied with their current market, market image and their market share. The want to change the company reputation makes customers believe that they are not just a low-end cheap products producer, but they want to reconquer the graphic and data markets a much larger market share. Three optionsLowering the price The price changing strategy is simply not going to work, especially when you are facing a much bigger company- the consumer electronics giant Sony.
BPS is the last company in the world that can win a price war against Sony, as Sony is there sole supplier of tube, where Sony not only is a bigger company with stronger financial capability but also enjoy the benefits of low supply costs. In addition, Sony has 500 dealers in the US market, five times more than BPS, this makes the street price of the Sony projectors even cheaper. Sony enter the market for graphic and data projector in 1985, yet BPS enter the market a lot earlier, they have a better reputation and has been recognized for its quality and reliability. Yes, cutting the price might be able to sole v the problem now, but BPS is not going to be successful by simply cutting the price, the company is built on its commitment to quality, reducing the price will hurt the recent customers and those are potential future customers, and would also send a message to all the loyal customer, hurts the market image of the company. Those customers might assume the quality has been compromised or they might also assume the price will keep on dropping and reluctant to make prompt purchase. The one of the most important aspect of point is that we have not even seen the Sony product yet, all those speculation are rumours, BPS does not know what price it will be for the 1270, and how they will be accepted by the customers.
Cutting the price when situation is not clear is a bad move.Start a brand-new projectThe other option they have is urn immediately to the development of BG800, this project’s goal is to design a projector far superior than Sony’s 1270. But it requires the stop of all the current project and spend another 80-person month. To finish the project not only they have to terminate existing projects but also rush the deadline before the trade show, there are also different uncertainty if Barco will find suppliers to supply the lens.
When the BG800 has only a 40 percent chance of making deadline. By doing this, BPS would waste the resources they spent on all the previous projects, ruining some of the reputation because they won’t be able to fulfil all the pre-orders of other models and with 40 percent chance of making deadline to the trade show, the rush for deadline might also hurt the quality of the product. With all those reasons combined, and not having a clear picture of sony”s product, immediately starting the developnmemntal of BG800 is also not a very good choice Continue the development This leaves to the last option we have. Continue the development and introduce BD700 on time, let everything go with the time table . The engineer must keep on working on all those projects and release them on time.
Although the new released product is still inferior than the Sony 1270, BPS can show that they have commitment for the customers and delivered the promise of the pre-orders. It will boost up the morale of the dealers, the company. Even if changes are needed we still need to wait until the official launch of Sony’s product, changing price first need to wait until the official launch of Sony’s product. Depending on their pricing strategies and consumer reactions to make adjustment accordingly. In the competitive industry of projectors, and electronics there is no surprise that your competitor might create a product better than yours. The last thing BPS needs to do is to allow itself to be misled by the rumours, changing pricing or product strategy abruptly.
In conclusion: Sony is not a huge threat for the company, they might have developed a better product for now, but they still are relatively new to the market and does not have as good reputation as BSP. The priority of the company is not reducing the price start something uncertain and new, instead of adjusting to the competitors, force the competitors to adjust to BPS. The company should stick with their on-going projects and adjust their product development plans only after they finished their old projects and delivered their promises to the customers. In the short run, they should not change price at all, and must find alternative suppliers to supply its key parts even if that means the increase of costs but in the long run they will adjust pricing and product lines according to the market trends and competitors.