Originally Published MDDI September/October 2003

NEWSTRENDS

Gregg Nighswonger

In what is viewed as a global trend, the plastics industry appears to be favoring business strategies that focus on technological innovation to increase market share and protect existing markets, according to analysis by Frost & Sullivan (San Jose, CA). Firms in the medical sector also appear to be adopting business models that rely on innovation-based strategies to strengthen their market position, according to some industry representatives contacted by MD&DI.

Analysts with Frost & Sullivan speculate that the shift away from conventional practices, such as mergers and acquisitions, is being driven in part by sagging growth potential in many product segments that are approaching maturity. The firm's analysts suggest that future growth of the plastics industry "will depend on the pace of high-tech advancements in different segments of the value chain."

Says Frost & Sullivan industry manager Amit Tandon, "Mergers and acquisitions and enhancement of capabilities by horizontal and vertical integration, in many cases, have not resulted in high growth. Companies have quickly realized that introduction of sophisticated new products is essential for market expansion."

Tandon explains that "Many well-known companies are stepping up the tempo of innovation processes to develop and commercialize new technologies." She cites the commoditization of many early breakthroughs by DuPont as examples of the factors that are driving a shift in the company's strategic focus. Tandon notes that DuPont is working in potential areas such as flat-panel displays, fuel cell biomaterials, and DuPont Sorona, a new polymer platform with applications in the apparel industry.

According to Frost & Sullivan, plastics are still replacing metals and other materials despite the saturation of many traditional applications. Specific functions requiring specialty polymers and high functionality are considered to be one such area.

The medical plastics sector also appears to be feeling the need to innovate to remain competitive. Hedden Miller, marketing manager, healthcare applications, of Ticona (Summit, NJ), believes part of the reason for the shift in strategy is "the depressed state of the stock market and the fact that investment capital is somewhat low. And mergers and acquisitions just aren't happening as much as they were two to three years ago when everybody was being bought up. Actually, from my perspective, it's a smarter strategy to focus on applications and new technologies versus acquiring somebody just to increase sales." Miller adds, "If you look at it, Tyco is a great example of that, where they've merged so many healthcare divisions over the last three years that they don't know what one division is doing versus another. And now they're focusing on new-application development to grow their bottom line and to increase their profitability."

Daniel Behrens, marketing manager, healthcare applications, at the Ticona GmbH Kelsterbach, Germany plant, says, "We always have to improve our materials and support our customers with the right materials. For example, [our customers suggested] we develop materials without any animal additives. That's the reason we announced the NT grades, which just have vegetal origins." Continuity of quality in such innovative raw-material lines is also important. Says Behrens, "As these grades are specified, it's quite important for our customers that we stay on these grades, that they can be safe for the whole production [cycle] of that device. Customers want reassurance that they can always get this grade and that it never will be changed."

Miller suggests that one important factor driving development of new materials is the pace of medical devices being created for changing markets. "You have medical OEMs working on new application technologies that basically require new materials to make them safe and effective, so they can be launched in the marketplace," says Miller.

Photo courtesy of TICONA

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