Nanophase Technologies Corporation What is the market strategy of Nanotechnology during the time of the case? Nanophase Technologies is an industry-leading nanocrystalline materials innovator and manufacturer with an integrated family of nano material technologies. Its market strategy can be explained as under: Target market: Even though Nanophase started as a research and development unit and its major revenues came from government research contracts, it transited itself from an R & D unit to a commercial enterprise. Thus, its target market were the businesses which were involved in manufacturing and production of products in diverse processes like personal care, sunscreens, abrasion-resistant applications, environmental catalysts, antimicrobial products, and a variety of polishing applications, including semiconductors, hard disk drives, and optics. Out of these the largest product market for Nanophase was zinc-oxide powder, which is used as an inorganic ingredient in sunscreen, cosmetic and other health care products produced by the BASF cosmetic chemicals group. Sales to BASF cosmetic chemical group accounted for 75. 5% of Nanophase's revenue.
Besides this, Zinc-oxide is also used as an ingredient in Dr. Scholl's foot spray to act as a fungicide and prevent the nozzle from clogging. The company expects the market potential for its products in this sector (health care and cosmetics) to be about $45 million. Product: Nanophase makes use of nanotechnology to produce nanocrystalline particles in powder form using metallic materials such as aluminum, cerium, copper, iron and zinc.
The two of the most important technologies Nanophase uses are Physical Vapor Synthesis (PVS) and Discrete Particle Encapsulation (DPE). It is because of the PVS process that Nanophase is able to produce nanoparticles with properties that are highly desirable to customers. These properties help the product create features like spherical, nonporous particles of uniform size and large surface area, particles virtually free of chemical residues and particles that flow freely without clustering together. The DPE process provides nanoparticles specific characteristics such as preventing the particles from sticking together or enabling them to be dispersed in a fluid or polymer to meet the specific customer needs. Besides this, the company also uses the PVS process and the Nano Arc Synthesis TM to custom-size the particles for a customer's application. Thus, from the above we can clearly see that the Nanophase is a customer centric company and is always trying to match the needs of its customers.
Nanophase produced chemicals and materials that added quality to the products the manufacturer (Nanophase's customer) produced. At the same time its products had other benefits like it helped reduce the cost of producing the final products for the manufacturer, improve customer satisfaction etc. This statement can be justified by using some of the chemicals and materials Nanophase produced, as an example and understanding their attributes. This has been explained below: Nanophase produced zinc-oxide powder as an inorganic ingredient in sunscreens, cosmetics and other health care products produced by the BASF cosmetic chemical group. These zinc-oxide formulations when added to sunscreen the specially designed particles allowed harmless light to pass through the sunscreen while the ultraviolet light bounces off the particles and never reaches the skin. This is an example of the quality products Nanophase produces.
Nanophase also helps manufacturers to decrease their manufacturing cost by replacing the expensive palladium chemical to cerium dioxide, (a cheaper chemical), which is used in the converters to reduce exhaust emissions in cars. Nanophase also provides manufacturers with the technology which is used to make transparent sunscreens into ingredients for coatings designed to improve the scratch resistance of high gloss floor coatings, vinyl flooring and counter tops. Apparently, nanoparticles fit so tightly together that they make vinyl flooring up to five times more scratch resistant than existing products. This helps increase customer satisfaction and also improve quality of the products. Promotion: Nanophase made extensive use of direct marketing strategy in order to increase demand for its products and also identify potential customers. The company's CEO believed that in order to be successful it was very important that Nanophase have a very close relationship with its customers.
It is very important that customer expectation be met or else it would be very difficult for the company to survive in the long run especially in the future when the competition will be massive. Hence, the company formed teams to identify an unsatisfied need and apply the company's proprietary technology and products to solve a problem. The company was also engaged in ongoing research, technology licensing and strategic alliances to expand revenue. The company also used a business development team to work on nanotechnology applications with new customers. The activities of this team included evaluation and qualification of potential markets, identifying the lead customer in each market and the development of a strategy to successfully penetrate a market.
Such teams helped the company form a partnership with its customers to create solutions to customer problems, meet their expectations and satisfy their needs, improve relationship with them and intern try and retain a customer in the long run. Besides this, the company also made optimum utilization of opportunities of a prospective customer. For instance when a customer made inquiries through different media sources, the company followed up on these inquires to determine the needs of a customer and tried to solve his problem by proving a nanotechnology solution. The company also developed its website in order to use emarketing as a tool to inform potential and existing customers about its latest innovations and services.
Besides this, the company also used sampling as a strategy to market its products. The company permitted the potential customers to experiment with small research samples of nanoparticles. Hence, the company never left any opportunity to wholly market its product to a potential customer. Place (distribution): Since the company was marketing its products directly to the customer especially in the home market (domestic market), it was selling its products directly to the customer. The company organizes tradeshows, presentation, technical conferences etc to market its products and also sell its products to the customers. In the international market (and some selected domestic market) the company was selling its products through trained agents and distributors.
Since the company's products were made from nanotechnology it was very important that distributors and agents have the adequate knowledge before selling the products. Therefore, proper training was essential. The company tries to use experienced sales agents in selected markets as they believe that this is a fast and cost effective way of increasing the company's sales. Besides this, Nanophase has its own website (web) which is used as a very important source to market its products and also increase sales of its products. The company has different sections in the website which gives information about the various products of the company along with its attributes. Hence, it proves to be a very useful tool for selling products to the potential customers.
Price: Nanophase presently, does not face a situation where the competition in the market is so intense that the competitors will have to cut prices. Besides this there is no doubt that any firm using nanotechnology will have to go through very heavy research and development cost. Also, a well trained staff both for manufacturing and selling the product are also key essentials for any company to improve the quality of its products and meet customer expectations. Thus, nan technological products would be priced at a premium rate. Since Nanophase has its advantage of being the only firm which is capable of producing substantial quantities of nanoparticles to rigid quality standards and the company is also acknowledged by industry peers as the world leader in commercialization of nanomaterials it can price its products at a very high price. But since the company is making losses since the last few years because of the recession in the economy the company cannot charge very high prices.
Besides this, Nanophase clearly knows that the future competition is going to be very intense as companies with better technical and financial resources will be entering the market. Thus, it is very important that the company try and retain customer loyalty to face future competition. The company does not want to be in a situation where it is loosing potential customers because the prices of the Nanophase products are very high. Therefore, even though the company is providing excellent quality products, with excellent customer satisfaction it cannot charge very high prices. The products Nanophase sells are premium products but looking at the present market scenario it is not possible for the company to charge equally premium prices.