Making it visible
Barco is a Belgian-based leader in display and visualization solutions. In this case, professors Steve Muylle and Marion Debruyne (Vlerick Leuven Gent Management School) look at projector development options within the Events business unit
Barco, the Belgian American Radio Corporation was born in 1934 and specialized in the assembly of radios. It has since evolved to become a world leader in display and visualization solutions. In 2008 it posted some €725 million in sales. Headquartered in Belgium, listed on the Brussels stock exchange, the company operates in almost 100 countries and employs some 4,000 people. The Media and Entertainment division provided nearly a fifth of sales. Within that division, the Events business unit is the biggest unit.
The case authored by professors Steve Muylle and Marion Debruyne (see reference below) places us in the shoes of Chris Colpaert, the Director Product Management in this Events unit. Colpaert is returning from the industry’s major trade show, Infocomm, and needs to prepare a report laying out the product development management options available to Barco.
Segments of light
The Events unit product range centers on projectors , LED blocks and displays. The projectors are used in indoor and outdoor events, for musical concerts, fashion shows and major corporate events. Barco segments its market based on the size of the venue, from extra-large (e.g. rock concerts) to mid-sized venues. Barco’s market share turns out to be proportional to the size of the venue. The extra-large venue in which Barco is the market leader commands high margins but relatively lower volumes.
There are three performance criteria for projectors: brightness, resolution and compactness. The bigger the venue, the greater the performance on these criteria must be. Brightness is measured in lumen (a 100 Watt American bulb emits 1500-1700 lumen) - Barco’s highest range projector, the ELM R18, offers 18,0000 ANSI lumen but it is about to release a 25,000 ANSI projector. Resolution is measured in pixels - for example, the Super Extended Graphics Array (SXGA) Standard calls for resolution of 1280 x 1024 pixels. Barco’s 25,000 ANSI projector respects the even higher Digital Cinema 2K (DV2K) standard at 2048 x 1080 pixels. The final criterion, compactness, relates to the facility with which the equipment can be transported and installed. A projector for a large-scale venue is not as portable as your computer, as it can weigh over 200kg.
Light lovers
Barco sells its systems to rental companies who in turn, rent the equipment to the firms organizing the events. Rental firms write off projectors in two years; depreciated equipment is sold to the so-called tier 2 rental companies.
The first tier rental companies choose equipment on the basis of performance, service, ease of use and price. The larger the venue the more the first criteria come into play. In the segments where Barco shines, performance and service are key criteria. As a way of improving its service, Barco offers a golden warranty extended warranty contract for a second or third year and providing customer support engineer service on site.
Barco interacts with its customers yearly on two occasions. In its Rental Partner meetings it invites major customers to a resort-like destination in particular to discuss its product roadmap with them. The second occasion is the annual Infocomm show where all the manufacturers and customers get together.
Competitors
Across its segments, Barco must deal with several competitors. Its closest competitor, very present in Barco’s two leading segments, is a Canadian firm, Christie. What’s more Christie is proving its technological mettle: for the extra large venue, it has just introduced a standard-setting 28,000 lumen projector; for the large venues it has concocted an exceedingly attractive performance-compactness package with a projector weighing only 65kg but offering 14,000 lumen.
In the large venue segment, two other competitors constitute threats to Barco. A geographical neighbor, UK-based DPI, commands some 10% of the market but has not, for the time being at least, exhibit the same technological innovativeness as Christie. Japan’s Sanyo controls a similar 10% of the large venue market.
Sanyo’s major thrust, however, has concerned mid-sized venues. Here it is in competition with another Japanese firm Panasonic. Both these companies hadve the wherewithal to fight it out on prices in this higher-volume, lower-margin segment. One issue for them is finding skillful local dealers able to provide good service in markets far away from their Asian base ; where they have been able to surmount this obstacle, as Panasonic has in Germany, their quality-price package proves very attractive.
Product development options
For product development Chris Colpaert is considering four options.
The first is to outdo Christie’s latest offering for the extra large venue. On the positive side, this option would galvanize the R&D department, it would also feed into digital cinema projector development and it offers high margins. On the negative side, the volume is comparatively low which would create sales department reticence.
The second and third option concern large venues. The second option would go for the higher end. This would provide more of a challenge for the engineers, offer higher margins than the third option and generate more volume than the first option.
The third option aimed at the lower end of the segment would generate higher sales volumes but R&D would not be excited about undertaking a design-to-cost project.
Lastly, Barco could take on the Japanese competitors in the mid-sized venue segment. This would require tremendous cost discipline on the part of the engineers, but would provide the greatest volumes for the sales people.
One factor that might add even more spice to the case discussion are recent developments at Barco, ones that have arisen since the research done by Professors Muylle and Debruyne. The 2009 crisis took a big toll on Barco with sales dropping 12% to €638 million. The Events division alone lost €90 million in sales, meaning that a sequel to our case would no doubt prove interesting… But to end on a brighter note, any U2 fans among our readers will be interested to know that Barco handles the group’s concerts and an article in the recently created company magazine covers that noisy side of the projection business (click here).
Reference:
ECCH 510-021-1
“Barco: Leading the Events Market”
Professors Steve Muylle and Marion Debruyne
Vlerick Leuven Gent Management School
Published March 2010
