Bps - Porter's Analysis of the Industry

Porter's Analysis of the Industry

1. Suppliers' Bargaining Power (High)

1.1) The industry has scarcity of quality suppliers which in turn strengthens the bargaining power of the sole quality supplier of tubes i.e. Sony (+)

1.2) The fact that a major player in the projector market is itself dependent on its competitor's manufactured unit, indicates the high bargaining power that the buyer enjoys (+)

1.3) The market is fairly consolidated with the number of players in the market being low. Hence, the suppliers' bargaining power may get affected (-)

Overall, the suppliers' bargaining power is high.

2. Buyers' Bargaining Power (Medium)

2.1) Buyers have few options of projector manufactures to choose from (-)

2.2) The nature of the product is such that the switching cost is low and hence, the bargaining power of supplier is strengthened (+)

2.3) There is a possibility of price war between the competitors which would eventually help the buyers, providing them with more bargaining power (+)

Overall, the buyers' bargaining power is medium.

3. Threat of Substitute (Low)

3.1) The industry is not threatened by any close substitute

Overall, the threat of substitute in the industry is low.

4. Threat of New Entrants (Low)

4.1) The market is highly consolidated and hence there may not be any space for new entrants (-)

4.2) Significant investment in R&D and technical expertise is required. This may amount to a barrier for entry to a new entrant (-)

4.3) However, since the switching cost is low, new players may be inclined towards entering into the market (+)

Overall, the threat of new entrants in the industry is low.

5. Industry Rivalry (High)

5.1) The market witnesses intense competition as there is no single leader in any of the segments (-)

5.2) All players in the market are technically competent and are actively innovating with new technology to manufacture better products (-)

Overall, rivalry in the industry is low.

Case Study - Barco Projection Systems Section C - Group 11

PGP 2011-13 Page 3

SWOT Analysis for Barco Projection Systems

Strengths

Barco, the parent company of BPS, is committed to becoming market leader in niche markets. BPS is no exception to this rule. BPS operates in the niche market of technically superior projectors and is the market leader in the graphics sector of the projector industry. Thus BPS enjoys a reputation of a well established player in its niche market.

The second major strength of BPS is a strong commitment to Research and Development. 8 to 10% of Barco's annual turnover and 15 % of its employees were dedicated to R&D.

Weaknesses

BPS depends too much on a division of its competitor, Sony, for an essential component (picture tube) in its projectors. There has been no product innovation in the Graphics projector segment, as BPS has not come up with a new Graphics projector for 2 years, since 1987 when it launched the BG400, which hints at complacency.

BPS has failed to anticipate Sony's ambitions and this suggests that BPS has insufficient intelligence on its competitor's activities.

Opportunities

There aren't too many opportunities for BPS at the moment. But, BPS can try to commit itself to developing a product which is as good, if not better than Sony's and selling it at a competitive price. BPS can utilize its large R&D department to achieve this objective.

Threats

The most obvious threat posed to BPS as of now is Sony's introduction of 1270 superdata projector, which might oust BPS's BG400 from its position as the industry's highest performing projector. It has been rumoured that Sony's product is priced much lower (20-40%) than the market price and if this turns out to be true then BPS can expect an erosion of a significant chunk of its market share.

Price Strategy for Barco

Barco is facing the threat of losing a considerable market share to Sony due to the launch of 1270, a high scan rate graphics projector at a very lower price. Barco charges US$12000 for BD600 and US$24000 for BG400 as retail price. To face this new product Barco can cut its existing price by reducing its gross margin which is 59%. Sony's 1270 shall reduce the difference between the two segments i.e. data and graphics as the new 1270 shall have features of both data and graphics projector. Thus Barco can reduce the price of the products BD600 and BG400 by a considerable amount to prevent its customer base.

Case Study - Barco Projection Systems Section C - Group 11

PGP 2011-13 Page 4

If Barco develops its BD700 on time then it can at least pose a reply to Sony's new 1270. Though BD700 won't beat 1270 but still considering the current orders Barco can expect revenue of $4.3 million by being priced at $16000.

If Barco goes for BG800 then due to the offering of a very high scan rate of 90 kHz it can expect high revenue in spite of maintaining high prices. This shall prevent Barco from falling in an unsustainable price cut war with Sony due to its superior features.

The product BG700 if developed can be priced comparable