Barco Case

Credible threats by Sony

* Value for money: If the predictions are true, Sony’s 1270 would be a better product in terms of pricing as well as product characteristics.

* Market segment consolidation: Sony’s trying to consolidate the data & graphics segment by launching a quality product competitively priced. This jolts Barco’s core belief of offering high-end products for niche markets at a premium price.

* Diluting Barco Brand: Sony’s currently perceived as a mass producer of low-end reliable products at cheaper price. With the onset of 1270, it’s trying to change the market perception of sony to “Quality products @ low prices”.

Sony’s competitive advantage

* Economies of scale: A mass-producer which can compete effectively on prices

* Rich & intensive market distribution network: Compared to selective distribution network of just 100 dealers for Barco.

* Sony Brand: An already reputed brand in the market with significant penetration in data & video segments.

* Market leader in Data & video segment

Effects of immediate price cuts

* Barco might end up entering into a price war with a big player who can leverage economies of scale & drive out Barco easily. Also, even after loss of market shares, the profitability is higher (Exhibit 1).

* Lower prices meant lower margins for dealers & takes away their incentive to pitch your product to customers.

* Barco’s premium price reinforces it’s core image of technologically superior products. Dropping prices is inconsistent with their current strategy, thereby raising questions on product quality & eventually may lead to brand dilution.

* Banking their decisions solely on pricing structure of a product, which is still a gray area would be too premature a decision.

Option 1 – Continue with completion of BD-700

Pros:

* Just 27 of 207 person-hours left. Project would be delivered well on time& no completion risks involved.

* It’s...