Repositioning Ranbaxy

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Ranbaxy’s Laboratories Limited’s (Ranbaxy) profile as a pharmaceutical company underwent a sea change during the period 1985-1995. During this period Ranbaxy diversified into different products, markets and in general over the ‘value curve’. Its export sales grew from 7.45% of total sales in 1985 to 42.4% of total sales 1995. The growth in the foreign markets was primarily led by bulk drugs and intermediates, which constituted 80% of the foreign sales in 1995. Driven by the vision of CEO Parvinder Singh, Ranbaxy had consciously started moving up the value curve into branded generics in the emerging markets and commodity generics and bulk drugs in the developed markets. At the same time Ranbaxy started its thrust into New Drug Formulations by investing in Basic R&D facilities in India.

The Indian market was governed by price controls in the 1970s and 1980s – a situation that did not incentivise research. This, coupled with low per capita income resulted in demand for drugs that was not very high in sophistication. The bias for small scale resulted in over-capacity that led to excessive price competition. This kind of rivalry in the domestic market prompted Ranbaxy to adopt a differentiation strategy. Ranbaxy tried to create differentiation through Marketing and Process Technology. This resulted in improved product/brand profitability, and an increase in brand life cycle, similar to the post-patent approach adopted by many research-based companies. At about the same time, Ranbaxy embarked on an export drive. This gave Ranbaxy improved margins, an entry-point into several international markets, and an opportunity to spread its risks away from the controlled Indian market. Without doubt Ranbaxy was blessed with benign factor conditions: significant cost advantages in R&D and in manufacturing. The role of supporting industries was not very significant as import of bulk drugs, that were not produced domestically, was allowed by the Indian...
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