Barco Projection Systems:Worldwide Niche Marketing
Dilemma: With the expected launch of Sony 1270,BPS is at the risk of losing as much as 75& of its projected profits for the year 1990. BPS currently has 4 options:
Continue with BD700 project which is 87% complete (27 Person-Months left)
Develop BG 700 (Upgrade of BD700) with the sole addition of higher scanning frequency to match that of 1270
Develop BG800 to surpass Sony 1270 performance by using 8" Sony tube. This will consume 87 Person-Months and there is only a 40% chance of making the Infocomm deadline
Reduce the current price of BG400 & BD600 to maintain market share.
Value Analysis:
Expected profit for BPS with the launch 1270 from SONY
1988 (without 1270)
1989
Units
528
750
Turnover
$12672000
$17994240
Profit (without 1270)
$3674880
$5218330
Profit (assuming 30% loss of market share when 1270 at 20000)
-
$3652831
Profit (assuming 60% loss of market share when 1270 at 15000)
-
$2087332
Launching BD700 will not be profitable since it will be an inferior product compared to 1270.Also, going for price wars will not help BPS as Sony is the market leader
BG700 inspite of having a scanning frequency that could match 1270,the digital graphics projector will still be inferior to 1270 in terms of picture quality and resolution.
Opting for these alternatives will result in loss of considerable market share and hence this will have an impact in the company's revenue.
In tune with company's objective to be among the top 3 manufacturers and strong commitment to R&D, they should go for an aggressive strategy to launch BG800 even though there is only 40% chance of meeting Infocomm deadline. In addition to this,till the launch of 1270, price of BG400 should not be altered.