Barco Strategic Alternatives

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Barco Strategic Alternatives

• Marketing Strategy, 37000-04
• October 23, 2008
• Presented by
• Suzanne Harvey
• Maggie Holt
• Phil Larson
• Dan Villalon
• Nate Wilhite

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Issue

• Competition
• Market Risk Sony seeks to consolidate the high-
  and mid-markets with the 1270 SuperData
  projector
• Product Risk Sony 1270 is a superior product
  that dominates BPS product line on both price
  and performance
• Supply Risk Sony manufacturers the cutting edge
  tubes BPS needs
• Company
• Defined market based on scan rate instead of
  overall picture quality and ease of use
• Customer
• Rapid growth in mid- to high-end projector market
• Willing to pay a premium for higher picture
  quality (e.g. scan rate, lumens, resolution)

BPS faces a significant threat to its current
market share in both the mid- and high-end
projector markets and has lost its position as
the leader in innovative projector technology
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Recommended Strategy
BPS must rapidly recapture its position as the
leading innovator in the industrial projector
market

• Why?
• BPS cannot compete except at the high-end
• Competitive advantage in high-end electronics for
  projectors
• Distribution channel not geared towards low- to
  mid-market
• Status quo is not sustainable
• 30-60 potential market share loss and 75 of
  profit at risk
• Risk of product obsolescence
• Cannot compete on price alone
• How?
• Shift all resources to immediate development of
  BG800
• Maintain current pricing until 1270 pricing
  announced

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Product Strategy Alternatives
Innovative Leadership
Continue building BD700, release BG800 late 1990
Develop the BG800
Develop the BG700, release BG800 early 1991

• Low execution risk, as technology and marketing
  efforts are already in progress
• Maintain RD employee morale
• Pushed out of market / product obsolescence
• Reduction in profit by up to 75 (with poor
  future prospects)
• Lose our position as leading innovator
• Distributor and dealer attrition

• Scanning frequency equal to Sony 1270
• Capacity exists for 2-3 month lead-time
• Pushed out of market / product obsolescence
• Reduction in profit by up to 85 (with poor
  future prospects)
• Customer loss from cancellation of BD700
• Sony 1270 dominates the BG700 on all major
  product features
• Distributor and dealer attrition

• Re-asserts innovative position
• Allows BPS to maintain premium pricing and
  profitability
• Maximizes benefits of existing distr. network
• Minimizes erosion of BPSs market share
• Potential to establish new footholds in
  growth-markets (North America, Far East)
• Capacity exists for 3-month lead-time
• Profit loss minimized (50 max projected)
• Sourcing risks from compatible lenses
• Uncertainty of product roll-out timing
• RD already strained from current projects,
  product quality may be affected
• Delays on customer orders and loss from
  cancellation of BD700

Benefits
Risks
Recommended Action
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Pricing Strategy Alternatives
Improved Profitability
Wait and See Strategy (Wait for 1270 Pricing)
Preemptive Pricing Strategy (Cut Price on BD600
and BG400)

• Benefits
• Short-term market share maintenance
• Risks
• Price cut that reached consumers would not
  substantially increase volume sales
• Potential price war with Sony
• Potential other competitive retaliation (e.g.
  supply of tubes, hoarding lens supply)
• Undercuts BPSs ability to charge premium in the
  future
• Price cut may not reach consumers (diluted by
  dealers and distributors)

• Benefits
• Maintain ability to charge premium prices
• Prevents short-term loss of sales and profits
• Reduces likelihood of retaliatory competitive
  actions from Sony
• Risks
• Market share loss in the short-term
• Decline in orders of BD600 as customers pre-order
  the Sony 1270

Recommended Action
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Promotion Placement Strategy
The BG800s success will depend on its entrance
to the graphics market

• Promotion
• BPS should focus advertising efforts on the North
  American and Far East markets, emphasizing the
  superior technology and ease of use of the BG800
• Sony 1270 will be heavily advertised in Europe --
  largest-ever publicity campaign already initiated
• BPS has the opportunity to focus efforts on two
  higher-growth markets, and should be willing to
  commit greater resources to this
• Placement
• BPS must maintain focus on systems dealers and
  continued training at the dealer-level
• Dealers should be given increased commissions and
  bonuses to convert existing BD700 owners or 1270
  orders to BG800
• This must be communicated to dealers immediately,
  as orders for 1270 have already commenced
• Existing corporate customers, like IBM, should be
  approached about converting to the BG800

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Appendix
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Projected Impact on Revenue
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Projected Impact on Operating Profit
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Projected Financial Results - Detail