...1. Did Eli Lilly pursue the right strategy (i.e., should it have used a joint venture) to enter the Indian market? Why or why not? You should refer to Chapter 6 of the notes for guidance. With the upward trend of globalization, cross-border commercialization has become inherent in business strategies pursuing not only improved competitiveness but to avoid market share erosion. Expanding to new markets, reducing friction with socio-cultural and legal barriers, reduce capital costs, securing raw materials and implementing economies of scale are just a few motivations which to look abroad for and consider the intricacies of operating in another country. Changes in India’s economic policies from an import substitution to an export-driven one, was the legal foundation that allowed Eli Lilly to pursue its interest to market its drugs in India, where it already had relationships with local manufacturers to produce human or animal insulin for the Soviet Union market, but did not for the Indian market (Bartlett & Beamish, 2014, p. 524) The opportunity presented by Ranbaxy, the second largest pharmaceutical company in India, to supply certain active ingredients or intermediate products to formulate and complete Lilly’s, and for the Joint Venture (JV) to sell and distribute those products, was the perfect opportunity to enter a “new” market while sharing the costs and risks with a well-known and respected partner. With the then existing market conditions (Sales turnover caps, mandatory...
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...CASE 6-3 “Eli Lilly in India: Rethinking the Joint Venture Strategy” 1. I think Eli Lilly pursued the right strategy joining Ranbaxy Laboratories to enter the Indian market. While companies were using the global market to amortize the huge investments required to produce a new drug, they were hesitant to invest in countries where the intellectual property regime was weak. During the 1990s both companies had a strong reason for the joint venture. Ranbaxy wanted to make its presence globally and Lilly wanted to get their feet on Indian grounds. In 1992, Ranbaxy approached Lilly to investigate the possibility of supplying certain active ingredients or sourcing of intermediate products to Lilly in order to provide low cost sources of intermediate pharmaceutical ingredients. Based on the strategic alliance, Ranbaxy would supply certain products to the joint venture from its own portfolio that were currently being manufactured in India and then formulate and finish some of Lily’s products locally. From the beginning, both companies had a lot in common, they both believed in high ethical standards, technology and innovation, and future of patented products. They created the joint venture with $7.1 million capital and an initial subscribed equity capital of $3 million, with equal contribution from Lilly and Ranbaxy, leading to an equity ownership of 50 percent each. India, with an 800 million population had about 300 million of people that were considered to...
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...ADMN417 Assignment 2: Eli Lilly in India: Rethinking the Joint Venture Strategy Executive summary: Eli Lilly entered into a joint venture with Ranbaxy in India in 1992. A decade later both must decide whether this relationship remains mutual beneficial. Both companies have enjoyed a strong working relationship with identical value system as well as strong growth. Ranbaxy has become international and thus needs to concentrate more on generics and growth in US and UK; the joint venture with Eli Lilly no longer seems to be central to Ranbaxy’s current goals. With major changes in India’s regulation and patent protection, Eli Lilly can now enter the Indian market independently and soon would enjoy product patent protection. Dr. Lorenzo Tallarigo, president of Intercontinental Operations at Eli Lilly should end the joint venture with Ranbaxy in India. Eli Lilly will purchase all outstanding shares held by Ranbaxy at a fair market value, rebrand its name in India to simply Eli Lilly, and maintain current staff from the joint venture. The current operation from the previous joint venture should be maintained without any additional major changes since profits are already assured beyond 2005. Ranbaxy will be able to focus on the international markets with additional capital and Eli Lilly to continue growth in India. Problem statement: A decade after the formation of the joint venture, several changes have occurred in both the external environment as well as the expectation of...
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...Eli Lilly in India: Rethinking the Joint Venture Strategy To: Dr. Lorenzo Tallarigo, President of Intercontinental Operations From: Senior Operations Director Re: Strategic direction for joint venture between Eli Lilly Co and Ranbaxy Laboratories Limited Problem After enjoying a successful JV partnership with Ranbaxy for the last few years, the strategic decision that Lilly now has to make is how to move forward. The Indian pharmaceutical industry has witnessed some significant changes and it seems that the business goals of both companies have diverged as well. Situation Overview Thus far it appears that Eli Lilly’s decision to enter the Indian market has been a wise one. It has enjoyed a successful partnership with Ranbaxy, which has also allowed its brands to gain recognition within the local market. Considering other metrics, including sales growth, access to new distributors and innovative product development, the JV has proven to be successful as well. Both parties agree that the JV has proven mutually beneficial, however circumstances have changed considerably since the venture was first initiated. Ranbaxy has expanded its own operations internationally and expanded its global reach through various acquisitions. In addition, the business strategies of both firms have taken a divergent direction. Lilly would like to continue to focus on the development of its patented global drugs, through innovation and discovery. On the other hand, Ranbaxy believes that its...
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...ELI LILLY IN INDIA RETHINKING THE JOINT VENTURE STRATEGY Abhay Kishore – 01 Abhishek Kunal – 05 Anil Kumar Jadli – 11 J.Harish – 25 Khushal Malik – 28 Sharad Singh – 49 PHARMACEUTICAL INDUSTRY – Global Trend • • • • Mainly concentrated in the United States, Europe, and Japan Developing a drug from discovery to launch took 10 to 12 years. Cost of development of drug is between $500-$800 million. Drugs were strictly controlled by government agencies: o o o o Food and Drug Administration (FDA) – USA, CPMP – Europe 12% 8% North America Europe 38% 18% Asia Japan MHW – Japan DPCO & Indian Patent Act - India • • Size of industry : USD 960 billion in 2012. Few Firms control entire market (Oligopoly). 24% ROW • 4 Firms – Control 20% , • 20 Firms – 50-60%, • 50 Firms – 65-75% PHARMACEUTICAL INDUSTRY – Global Trend • Covered the chemical substance itself • Offered typically 20 years of protection • Usually a lag time of 1012 years by the time the patent was obtained and the launch date • Covered the method of processing or manufacturing the product • Very little protection because it was easy to slightly modify the process Global Issues in Pharma Sector • Prices in of the drugs varied in developed countries • US & Canada by factor 1.2 to 2.5. • Europe by factor 1.1 to 2.5. Parallel Trade: an outside company sells a patented product in a market not designated to sell the drug. o • Independent firm exploited parallel trade by using the differentials...
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...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...
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...CASE 6.3 ELLY LILLI IN INDIA: RETHINKING THE JOIN VENTURE STRATEGY Summary: The case consists of two major pharmaceutical companies that joint to collaborate their research and pharmaceutical technologies to start a joint venture in India. Both have valuable resources that have benefited both companies during the joint venture. Now both are questioning if there is still any value in maintaining the joint venture in India and will be deciding what will be the best route to take. Ranbaxy Laboratories wants to be bought out, but Eli Lilly is worried of the financial implications of such move. There were two pharmaceutical companies that were looking for ways to expand globally to position themselves in a competitive advantage from their competitors. One was located in the United States, which was Eli Lilly and Company and the other one was located in India, which was Ranbaxy Laboratories. Research and development was crucial to Lilly’s long-term success. Ranbaxy Laboratories was a firm that was evolved into a serious research-oriented firm. With the change, in the government, India was attracting foreign investors in the pharmaceutical industry. Lilly decided to form the joint venture in India to focus on marketing Lilly’s drugs there, and a formal JV agreement was signed in November 1992. The main key issues of this case are as follow. The pharmaceutical industry had come about through both forward integration from the manufacture of organic chemicals and a backward integration...
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...Eli Lilly case questions 1) Did Eli Lilly pursue the right strategy to enter the Indian market? It was a right strategy for Eli Lilly that started a joint venture with Ranbaxy to enter the Indian market. First of all, Ranbaxy was the second largest pharmaceutical company that manufactures bulk drugs and generic drugs in India, with a domestic market share of 15 per cent. It had established broad distribution network, and it was the second largest exporter of all products in India. Ranbaxy’s capital costs were 50 per cent to 75 per cent lower than those of comparable U.S. plants. Second, the timing was perfect for Eli Lilly to enter the Indian market. During 1970s, the Patents Act 1970 and the Drug Price Control Order (DPCO) was issued. And India was opening its drug market. Third, there was possibility to conduct cheap clinical trials in India. 2) Considering the evolution of the JV, evaluate the challenges that JV leaders faced in each phase. Andrew Mascarenhas was the first managing director of the joint venture. He created the JV’s team, positioned the JV in the market, set its operations developing the marketing strategy. Challenges he faced were hiring sales force and recruiting doctors and financial staff. He trained them on the company's value, philosophy and code ethical conduct. The JV reached break-even and was becoming profitable at the end of his managing time. Chris Shaw built systems and processes to bring stability to the fast growing organization...
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...Assignment 2 —Eli Lilly in India: Rethinking the Joint Venture Strategy Executive summary Eli Lilly entered the Indian market in a joint venture with Ranbaxy, in order to capitalize on increasingly favourable market conditions, low costs and to gain a foothold for entering other Asian markets. This move succeeded because of a commitment to values for the two partners, cooperation and excellent management. Ranbaxy smoothed the way with existing distribution networks, government contacts and local market knowledge. Lilly provided foreign expertise, competent managers and capital. The venture earned both firms significant advances in market share and earnings, and the relationship remained positive throughout. As the Indian economy has become increasingly liberalized and open to foreign investment, there is great potential in the market. Other foreign firms are entering the market, and as a well-established powerful player in the market Lilly no longer needs to use Ranbaxy as an intermediate. Lilly seeks continued, stable growth in the region and needs to consolidate and refocus its business in niche drugs to remain competitive in a changing global business environment. Ranbaxy wants to move away from generics to become a more internationalized and R&D based company like Lilly, but needs significant cash flow in order to grow abroad. Both firms are considering options for the future. Problem statement Eli Lilly-Ranbaxy, a joint venture in India must re-evaluate...
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...Eli Lilly in India Case Study BUS 545 – Global Business Management May 31, 2015 Andrew Juarez Professor Barnett Executive Summary This report provides an analysis and evaluation of the case study “Eli Lilly in India”. The general overview of the case study is the discussion of the Joint Venture agreements between two parties. Eli Lilly a reputable pharmaceutical company entered the Indian market in a joint venture agreement with Ranbaxy. The joint venture between both parties was initially a positive move, they both had an increased market share, and were driving earnings, and the relationship between both companies was positive without negative circumstances. Thus, the issue problem arose when the partnership was at an impasse, both of the companies had different perspectives on the future of the joint venture, while Ranbaxy Laboratories Limited felt that generics would be most suitable for the future development of the company, Eli Lilly and Company were focused on growth and innovation. They had both made their mark within the growing Indian economy, though other firms began to flood the market. The decision had to be made whether Eli Lilly would continue to use Ranbaxy as an intermediate or would it be better for them to rethink the joint venture as they were seeking something that Ranbaxy wasn’t, stable growth in the global business environment. The company background, the current situation and any competitive issues. Eli Lilly & company works to discover...
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...The Problem Joint Ventures do not always work and when they do they don’t work indefinitely. What Eli Lilly and Ranbaxy are facing now is the dilemma of rather to continue with their JV, Eli Lilly Ranbaxy, or should they separate and continue each one by its own means. The situation represents both a problem and an opportunity to both companies, as there are important trade-offs to be considered before any decision is taken. The Environment In the last decade the environment for the pharmaceutical industry changed radically in India. Before the 1990’s there were no regulations for patent recognition and the government had an active role in establishing drug prices through the DPCO, which were situated amongst the lowest in the world. Profit margins were also regulated at around 6% of sales. As a result many of the multinationals started exiting the Indian market. As India enter the GATT and the WTO in 1994 patent protection would become active in India from 2004-2005. In the international arena, patent regulation was also little by little becoming stronger and many of the big players were going through M&A processes that further increased the sales concentration in few companies. These companies had a hard time competing with local laboratories that produced generic drugs with no R&D expenses and at a fraction of the price. Eli Lilly Ranbaxy portraits the example of the traditional JV in which Ranbaxy, a company from less-industrialized country, offered the knowledge and...
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...Eli Lilly in India : Rethinking the Joint Venture Strategy Pharmaceutical companies spend more than 20% of their sales on research and development (R &D). Patents for product ( for 20 years) and process were essential means by which a firm protected its proprietary knowledge and they could command higher prices for their products. Many multinational pharmaceutical firm subsidiaries in India imported drugs from their country of origin and made a huge profit. However in 1970¶s, the patents for all pharmaceutical and agricultural products were abolished and process patents permitted for 5 to 7 years. The Drug Price Control Order (DPCO) instituted price controls by government, multinationals market share dropped from 80% in 1970 to 35% in mid 1990s so they were forced to exit from India due to lack of patent protection in India. In November 1984 Dr. Manmohan Singh , the finance minister encouraged foreign direct investment and increased the maximum limit of foreign ownership from 40% to 51%. Colonel Eli Lilly founded Eli Lilly and Company in 1876. It was a world leader in injectable antibiotics and in supplying insulin. Ranbaxy in early 1990¶s was India¶s largest manufacturer of bulk drugs and generic drugs. Ranbaxy approached Lilly to supply certain active ingredients or sourcing of intermediate products to Lilly in order to provide low cost sources of intermediate pharmaceutical ingredients. Success of Joint Venture i) Lilly used Ranbaxy¶s help for getting government approvals...
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...4: ELI LILLY 1. Por lo que podemos observar viendo los resultados obtenidos por la joint-venture, podemos afirmar que sí que se llevó a cabo una buena estrategia al realizar la joint-venture entre Lilly y Ranbaxy, ya que la cuenta de resultados tanto de la empresa conjunta como las de ambas empresas por separado obtuvieron un incremento en sus beneficios, no solo obteniendo reducciones en los costes sino también aprovechándose de las buenas referencias que podían obtener de ambas empresas para combinarlas en la joint-venture, el buen conocimiento del mercado y la reputación en la india de Ranbaxy y la asociación “inconsciente” de calidad que generaban los productos extranjeros importados. Además la buena afinidad entre ambas empresas y el que supieran mantener en mente el objetivo común de ambas que era el buen funcionamiento de la joint-venture, fue un aliciente más en esta asociación. Debemos destacar también el que Eli Lilly omitiese la entrada en el mercado indio de aquellos productos a los que les convenía más la existencia de patentes de producto en lugar de las patentes de proceso (como por el ejemplo el Prozac) y de este modo evitar que otras productoras indias aprovechasen el lanzamiento de dicho producto para variar el proceso obteniendo el mismo producto, podríamos decir que hizo una buena gestión evitando lanzarse piedras a su propio tejado. 2. ( )=retos únicos Andrew Mascarenhas: supo darse cuenta de la necesidad de incluir el nombre de “Eli Lilly” para...
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...RANBAXY LABORATORIES LIMITED Introduction Ranbaxy was founded in Amritsar in 1937 by Ranjit Singh and Dr Gurbax singh, who distributed vitamins and anti-tuberculosis drugs for a Japanese pharmaceutical company. After the Second World War, Ranbaxy continued as a distributor. After some time his cousin brother Mohan Singh bought the company from his cousins Ranjit Singh and Gurbax Singh. Ranbaxy's name is a fusion of Ranjit and Gurbax's names. Ranbaxy Laboratories Limited, headquartered in India, is an integrated, research based, international pharmaceutical company, producing a wide range of quality, affordable generic medicines, trusted by healthcare professionals and patients across geographies. It is ranked amongst the top ten generic companies world wide. The Company serves its customers in over 125 countries and has an expanding international portfolio of affiliates, joint ventures and alliances, ground operations in 49 countries and manufacturing operations in 8 countries. In 2011, Ranbaxy Global Consumer Health Care received the OTC Company of the year award. The Indian government introduced patent legislation in 1970. However this only protected processes. Competitors were free to imitate products as long as they used a different process. This created a disadvantage for MNCs compared to local imitators, and they were further discouraged by the introduction of price controls on drugs and later (in 1973) by restrictions on the amount of equity they could hold in local...
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...A “Calibrated Approach”: Pharmaceutical FDI and the Evolution of Indian Patent Law Web version: August 2007 Authors: Katherine Connor Linton and Nicholas Corrado1 Abstract India has charted its own intellectual property (IP) path over the last 35 years, attempting to foster the growth of a domestic pharmaceutical industry and access to medicine while, more recently, also addressing the requirements of the international IP regime. Multinational companies (MNCs) have responded to India’s movement towards compliance with the W TO intellectual property agreement, TRIPS, by increasing the quantity and quality of foreign direct investment (FDI) in the areas of pharmaceutical research and development (R&D) and manufacturing. By contrast, MNCs have adopted a more cautious attitude toward the patenting and commercialization of new pharmaceutical products in India, waiting to see how Indian courts and patent offices interpret the new laws, and awaiting the enactment of longdebated data protection legislation. The ultimate success of the Indian “calibrated approach” to fostering the domestic industry and access to medicine while also addressing international IP requirements remains to be seen. 1 Katherine Connor Linton (katherine.linton@usitc.gov) is the International Trade Analyst for Intellectual Property and Nicholas Corrado was a law student intern in the Office of Industries of the U.S. International Trade Commission (USITC). The views expressed are those of Ms. Linton and...
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