Rethinking the Joint Venture Strategy in India

Topics: India, Pharmaceutical industry, AstraZeneca Pages: 21 (6075 words) Published: November 8, 2010
Executive Summary

The effects of globalization are prevalent in almost all industries world-wide; the pharmaceutical industry is no exception. Through the globalization of markets and production, there has been a dramatic shift in the last several years. Eli Lilly is a leading company in the US and throughout the world, and they’ve had to adapt to the trends that come as a result of globalization including moving operations overseas and capitalizing on advantages present in other markets. The company has done well in this department, as their products are available in over 130 countries. One of their large successes stories was creating a joint-venture with the leading Indian pharmaceutical provider Ranbaxy.

The two companies originally had very complimentary visions and aligned business models that made them a perfect fit for collaboration. However, after careful analysis of the business environment in India, observing the changing tastes of consumers and adaptation of new laws and policies, it is advisable for Eli Lilly to re-evaluate their relationship with their partner company. This report presents their options including the costs and benefits of each option along with one final recommendation and careful instruction for implementation.

Eli Lilly, like all firms competing in international markets, must focus on core competencies and ensure their focus is aligned with their company objectives. Often, firms lose-sight of these objectives and fall victim to unprofitable projects. Eli Lilly, with its reputation for innovation, has the potential to succeed in the Indian marketplace, with a tailored enough strategy. A variety of avenues exist for Eli Lilly. They may enter into negotiations with Ranbaxy and possibly get them to remain interested in the joint venture. They may cease-ties with the company and operate in the Indian market without a crutch. This report will highlight the different effects of each potential suggestion along with the strategic repercussions of each.

PESTEL Analysis


The Independence of India did little to change their dependence on imports for pharmaceuticals products for many years. It was not until government institutions and large corporations extended health coverage to workers, that India would begin the production of pharmaceutical products domestically. As an extension of British colonial rule, the Indian population adhered to The Patent and Deigns Act, which enforced adherence to international patent law. Post-independence the Indian Drugs and Pharmaceutical Limited was established in 1961 with the help of the World Health Organization.


The industry has been growing rapidly as a result of increasing worldwide incomes and a universal demand for better health care. A majority of the world market for pharmaceuticals has traditionally been concentrated in North America, Europe and Japan. Developing countries like India, although large in population, were relatively poor in comparison to their North American counterparts. India was characterized by an extremely low per capita GDP, where healthcare expenditures accounted for a very small portion of this total. As well, prices for pharmaceutical products in India are among the lowest in the world.

The Indian pharmaceutical market had grown at an average 15 percent through the 1990s, but the trends indicated a slowdown in growth, partly due to increased price competition, a shift toward chronic therapies, and the entry of large players into the generic market. Foreign Direct Investment (FDI), which in the past was outlawed, was now being encouraged and was increased to 51 from 40 percent in the 1990’s.

In 2001, worldwide retail sales were expected to increase 10 per cent to about US $350 billion dollars. The US was expected to remain the largest and fastest growing country among the world’s major drug markets over the next three years. There was a consolidation trend in the industry with...
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