Barco Projection Systems

All current BPS development projects should be put on hold to facilitate the January launch of the BG800 at the 1999 Infocomm Trade show. The BG800 should replace the BG400 and should be priced between 800,000Bfr and 100,000Bfr. A lower specification model (The BG700) should be made available to the "Data" segment in conjunction with the BG800. The BG700 will replace the BD600 and should be priced between 450,000Bfr and 500,000Bfr. The BD600s should continue to be made available to the Video segment based on the assumption it is currently a profitable segment.

A comprehensive communication strategy should be implemented in conjunction with these short term product mix amendments.Extensive research should be undertaken within the next 12 months to define changing needs of existing segments and emerging market trends or opportunities. Product development should be conducted in relation to end users needs (as opposed to current product based approach) and research findings utilized to facilitate further growth in existing segments and entry into new ones.

International markets (particularly Asia) should be viewed as highest growth and profit potential and thus should be focused on accordingly. Finally, I do not recommend that the existing company strategy be changed. Notations relating to development and launch of BG800:  The Graphic (and Data) segment is highly sensitive to performance. (See Appendix III). Barco has been reliant on and thus, significantly risks losing its reputation as the market leader for performance if the Sony 1270 is launched bearing superior characteristics.

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I understand that this is a product based strategy resulting from competitor activity; however it is clearly the only short term option that will preserve brand equity and market leadership in this segment. (End user strategy discussed later. ) .The graphic segment has the highest forecasted growth rate (40. 2% by 1994 - See Appendix II). It is imperative to company performance that Barco maintains its No 1 position and level of market share (55%) in this rapidly growing segment. (See Appendix II). Only the immediate launch of the BG800 can achieve this.

The Graphic segment has the highest potential for growth in revenue contribution over the next 4 years (Currently only 23% - See Appendix IV). Greatest market penetration already exists for the graphic segment in the USA (See Appendix V), a comparatively low share of 15% exists in the high potential Asian market. Communication and distribution resources should be concentrated in this area accordingly. The BG800 should be priced between 800,000Bfr and 1000,000Bfr (similar pricing structure to the BG400 (See Appendix II)).

Sony has a reputation for mass produced low end products. Given this segment has particularly low price sensitivity (will pay for performance and quality - See Appendix III) it is probable that the lower Sony 1270 will not enter the consideration set of graphic consumers. Profitability and margins can be maintained as a result. In addition, Barco cannot compete profitably at low prices with low margins. There is no evidence to suggest that the current BD700 research and development project should not be used as a basis for the development of the BG800.

R&D have previously demonstrated superior commitment and ability under pressure such that a 40% chance of a timely BG800 launch is a strong underestimate. Existing relationships within the industry will provide a strong base for sourcing required components. Barco's distribution channels are critical to market dominance within each segment and are displaying concern (preemptive negative perceptions) over the comparative capabilities of the 1270 over the BD700.

Consequently the BD700 should be withdrawn. Customers with preorders should be compensated via the launch of the BG700 outlined below. Longer term distribution strategies are addressed below. Exhibit 4 estimates the product lifecycle for a graphic projector as between 1 and 2 years. The BG400 was at the mature stage of its lifecycle and can readily be replaced with the BG800. Notations relating to development and launch of BG700: The Data segment has medium price sensitivity (See Appendix III).

Thus BG800 would provide excess performance and be too pricy for the segment needs. In addition, the segment has the highest margins of all segments and the greatest revenue of all segments (See Appendix IV) to BPS and should not be neglected. Development of a mid level, reasonably priced projector (labeled BG700) should be undertaken and made available to this segment as soon as possible. The BG800 technology can be used as base for the lower specification BG700, facilitating a relatively rapid post trade show launch.

Advanced orders for the BD700 can be replaced by the BG700 maintaining dealer and consumer integrity. Notations relating to development and launch of BG600s: The Video projector market is an area of slow growth (See Appendix II) and low margins (See Appendix IV) but should continue to be facilitated by the BD600s.The BD600s is only at the introduction stage of its lifecycle (See Exhibit 4) and should be afforded opportunity to grow as forecast and improve its market share position.

This strategy should only be continued if the segment remains profitable and requires no further input of resources; otherwise the segment should be exited as it does not fit the overall Company strategy. Notations relating to Communication: A comprehensive communication and marketing mix strategy should be developed in conjunction with the launch of the BG700 and the BG800. Focus of the communication strategy should be aimed at the rapidly growing international segments. (Further detail below).

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