Eli Lilly In India Case Study

Eli Lilly In India: Rethinking The Joint Venture Strategy

Question1: Did Eli Lilly pursue the right strategy to enter the Indian market?

In 1993 Eli Lilly, one of the leading pharmaceutical firms in the USA, started a joint venture in India with the leading Indian company Ranbaxy. The decision was dictated by the conditions of the US market and opportunities of the Indian market.

Costlier manufacturing practices due to strict governmental control, soaring prices in 1990s, invasion of cheap generics to the USA market as opposed to low costs in India and new regulations that opened Indian market to foreign investments (up to 51%) created tempting conditions to enter one of the emerging huge markets of the world.

Alliance with Ranbaxy was a smart strategy for Eli Lilly to establish its presence in India. Ranbaxy was the second largest manufacturing company of bulk drugs and generics with domestic market share of 15% in India with established distribution network and the second largest exporter to different countries, including Russia (which Eli Lilly was attempting to reach), with capital cost 50-75% lower than those of comparable US plant and R&D expenses of 2-5% of sales. Besides, Ranbaxy developed its own process for Eli Lilly's patented drug Cefaclor. Since Eli Lilly's product patent for Cefaclor expired in 1992 and the firm was expecting to protect its monopoly with process patents which were due to expire only in 1994, this gave great scope for a mutually advantageous agreement between the two companies. There was also possibility to conduct cheap clinical trials in India.

Although the joint venture ran into problems because of weak patent laws in the country, which prevented the American partner from sharing its research expertise, Eli Lilly obviously, realized the benefits of an arrangement with Ranbaxy in sourcing low-cost basic research from India.

Question 2: Evaluate the three successive IJV leaders. Identify the unique challenges faced by them.

Andrew Mascarenhas was the first managing director and was building the JV's team, positioning the JV in the market, setting its operations developing the marketing dtrategy and enlarging the staff later on. Challenges he faced included hiring sales force and recruiting doctors and financial people and training them on the company's philosophy and communicating Eli Lilly's values and code ethical conduct. He introduced a new scheme of HR management to cope with a high turnover rate. At the end of his managing time the JV reached break-even and was becoming profitable.

Chris Shaw succeeded Mascarenhas and built systems and processes to bring stability to the fast growing organization.

Rajiv Gulati became managing director in 1999. He enlarged the staff even further, to correspond the growing company and created a medical and regulatory unit to handle the product approval processes with the government. At...

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Case Study: Eli Lilly in India: Rethinking the Joint Venture Strategy 3 The case of Eli Lilly is about the joint venture of two of the largest pharmaceutical companies in their respected geographical locations (Eli Lilly in the United States and Ranbaxy Pharmaceuticals in India). Eli Lilly was established in 1876. They specialized in human health and agricultural products and would grow into the world leader in antibiotics and insulin. Ranbaxy, on the other hand, was established in 1960 and would grow to become one of the largest producers of bulk and generic drugs in India. Although both Eli Lilly and Ranbaxy pharmaceutical were the largest pharmaceutical companies in the United States and India, they both understood how important it was to take their company to the next level by expanding globally. In 1992, Eli Lilly was offered a chance to combine forces with Ranbaxy Pharmaceuticals in an attempt to gain competitive advantage. According to Bartlett and Beamish, Eli Lilly “had earlier relationships with manufacturers in India to produce human or animal insulin and then export the products to the Soviet Union using the Russia/India trade route, but those had never developed into on-the-ground relationships within the Indian market” (2008). Prior to officially combining forces with Ranbaxy Pharmaceuticals, Eli Lilly developed an adequate strategy that would allow them to do pre-alliance and post-alliance analysis to ensure that the joint venture with Ranbaxy Pharmaceuticals possessed the potential to gain a successful entry into India’s market along with a competitive edge. Eli Lilly knew Ranbaxy Pharmaceuticals was the second largest pharmaceutical company in India and began their pre-alliance and post-alliance analysis by setting up a meeting with Ranbaxy Pharmaceuticals. In attendance were Ranbaxy Pharmaceuticals’ senior executive vice chairman Dr. Parvinder Singh and chief operating officer D.S. Brar and Eli Lilly’s senior executives, Gene Step, Richard wood, and chief executive officer Rickey Pate. Having

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