1. Introduction Barcos Projection Systems (BPS) was the worlds leading supplier of projection systems.

BPS was the second largest division of Barco N.V. Headquartered in Belgium, it had a total employee strength of 350 and recorded a turnover of 1.39 billion Bfr in 1988. As of 1989, Hugo Vandamme was the CEO of the company. 2. Evolution of BPS division Barco N.V. started in 1934 as a producer of radio broadcast receivers. The company then went into producing broadcast monitors and professional video equipments. Later, when there was a decline in demand during the recession period of the late 1970s, Barco shifted its focus from consumer to Industrial markets. It developed a 3 point strategy which was as follows: Positioning the company as a leader in a variety of distinct, yet complimentary, niche markets. Strong commitment to R&D Expanding international presence in sales, product development, and production. The strategy ultimately helped the company establish itself among the top three manufacturers in all of its product lines. BPS initially manufactured and marketed sophisticated video

projection systems for industrial applications. Its first projector, BarcoVision 1 was priced at 450000Bfr and was quite successful in the US and European markets. It later diversified its portfolio by introducing data and graphics projectors. The projectors were differentiated on the basis of scan rate, ranging from 16 kHz standard video projectors to sophisticated 64 Hz projectors suitable with CAD/CAM applications. Later, the management agreed on developing

the projectors to match the rapidly evolving computer application market. It was targeted to reverse the current split (80%/20%) of the sales of TV and projectors. By 1983, BPS successfully introduced the first computer compatible projector BurcoData 1 which was followed up by new improved products. In 1986, BPS began working on developing graphics projectors for CAD/CAM applications. This required the improvement in the scan rate of the projector from 64 kHz. The first graphics projector, BarcoGraphics 400 was launched at a price of 1 million Bfr and was the industrys most sophisticated software at that time, with a maximum scan rate of 72 kHz. By September 1989, BPS started focusing on digitally controlled projectors. They had tested the first digital data projector and once the modifications were done, the company planned to launch the product in October 1989. As of 1988, the share of video, data and graphics projectors in terms of sales volume was 63%, 33% and 4% respectively. The predicted annual growth rates for these segments over the next 5 years were 0.8%, 12.3%, and 40.2% in the same order. In September 1989, BPS was the acknowledged technological leader in the high end. It was gradually reducing its concentration in the video segment. Also, in a major policy change, BPS had decided to source the tubes that were used in projectors from Sony, which incidentally was also its major competitor in the data and graphics segment. As Sony gradually became the sole supplier of tubes to the entire industry, BPS resorted to maintaining a 3 month stock and 2 month order-in-transit.
3. Problems faced by Barco

As observed from above, Barco s projection systems had established itself as a major player in the international projector market. Even with competition from companies like Sony, Electrohome and NEC, the company was experiencing significant growth and was able to cater to its customers through its diverse product offering. However, the projector market was shaken up by an announcement from Sony in August 1989 about the introduction of a new projector with

performance much above the current industry leader (BG400) and at a lower price. The company that was affected the most by this announcement was Barco. It was at the risk of losing as much as 75% of its sales forecasted for the next FY. It was necessary for Barcos management to come up with a strategy to counter this threat. A major issue was the difference in the type of lens used in the projectors of Barco and Sony. Sony had procured these lenses from a Japanese manufacturer and Barco was not sure if it will supply the lenses to them as well. It was also agreed within Barco that entering into a price war with Sony would be detrimental to their brand and so was not a feasible option. There was also a growing anxiety among the dealers and distributors post the announcement from Sony.
4. Reasons for Barcos failure in anticipating the Sony threat

and Sonys rejection of BPSs vision Barco underestimated the R&D capabilities of Sony. They thought that Sony had fewer engineers on projection. Barco assumed that Sony did not aspire to be the market leader and to beat Barco in projection. Depending solely on Sony components to supply a critical

component (tube). Sony might have had access to the new 8 tube well before Barco heard about it which is why they had time to develop a new product based on it barely 2-3 months after Barco received the first sample of the tube Even when the new 8 tube was given to Barco, they failed to realize its potential. They chose not to incorporate it in their BD700 data projector because they were reluctant to redesign the chassis and to source a new, compatible lens Barcos data about competition was inaccurate. They expected Sony to come up with a data projector with speed in the 46-50 kHz range. A graphics projector from Sony with 75 kHz was expected to be

launched only in late 1990. Barcos launch plans were based on these data. They made the mistake of evaluating the market growth based on their own capabilities and visions. Barco expected Sony to respect their vision of the marketplace which was not a very wise thing to do considering they operate in the same market. Barcos vision was based on their own capabilities. It was unrealistic to expect a direct competitor to follow the same. Sony wanted to become the market leader in graphics projectors. Barco might have been overconfident about its R&D strength and might have become complacent. If they had pushed more in R&D, then maybe they would have been in a better position to respond to Sonys threat by launching a better product soon.

5. How should Barco react? Effectively Barco has three options 1) Develop BD700 and fulfill the orders placed earlier. Compete against Sony 1270 with BG400 for one year. Develop BG800 or a more advanced graphics projector during the next year. 2) Postpone development of BD700 and concentrate on BG700 3) Postpone development of BD700 and concentrate on BG800 We would suggest that the first option is the best one. In this case, Barco would be effectively competing against Sony with an inferior product. Assuming that the 1270 will be priced at $20,000, the BG400 would lose 30% of its market share. Since graphics segment contributes 23% of the revenues, Barco would lose something like 7% of its revenues for one year. We feel that this would be a justifiable trade-off for maintaining the loyalty of the customers by sticking to the promised delivery dates of BD700. In the other two cases, we have to postpone BD700 which may result in customers cancelling orders and opting for competition. After BD700, Barco needs to concentrate on developing a strong competitor for 1270 with which it can capture back the market share and revenues. It may be BG800 or it may even be a better product keeping in mind the R&D strength of Sony and the fact that Sony may develop 1270 further. The fact that Barco is competing with an inferior product for a year will not be held against it in future. If Sony, which had products inferior to Barco till now, could shake up the market with a great product, there is no reason to believe that Barco will not be able to do the same to Sony a year later. Along with this, Barco should also focus on dealing with multiple vendors for the key projector components, especially when one of them also happens to be its major competitors. Barco can look in the direction of developing the vendors as one of its long term goals.