WHAT PROMTED RANBAXY TO INCLINE THEMSELVES TOWARDS GLOBALIZATION? In India, the Drug Price Control Order (DPCO) was introduced in 1970 to ensure adequate availability of essential drugs at reasonable prices through direct control over drug prices by the Indian government. About 22 drugs and their formulations were under price control. The DPCO was amended in 1979 increasing the number of drugs under price control to 347. These price controls limited the growth opportunities for Ranbaxy, and encouraged the company to expand abroad.
RANBAXY’S INTERNATIONALISATION STRATEGIES
Ranbaxy's journey towards globalization began in 1975.
In 1977, Ranbaxy established a subsidiary in Nigeria through a joint venture and in 1984 it expanded operations to Malaysia and it continued so on. Now here, see how they started to penetrate and the strategy they used-
The main motives of Ranbaxy’s Nigeria venture were to exploit its process advantage by supplying cheap drugs to the unmet demand in a developing country
The joint venture in Malaysia was formed by the Indian and Malaysian government. Compare to the 10% holding in the Nigerian joint venture, Ranbaxy had a 53% holding in their Malaysian joint venture.
Since then Ranbaxy has expanded its geographical presence through joint ventures to new countries like Thailand, Canada and China and through wholly own subsidiaries in countries like the Netherlands and Hong- Kong.
The firm also began expanding its production facilities in Europe by setting up a subsidiary in the UK (1994) and establishing a manufacturing plant in Ireland (1995).
These have proved instrumental in Ranbaxy’s forays into other European markets; the company first entered UK and created a critical size which provided the company with a platform to expand it further in Europe. After UK entry it swiftly expanded into
Poland ($ 6 million),
Hungary ($ 4 million),
the Czech Republic ($ 8 million) and
the Slovak Republic ($ 8 million);
The manufacturing plant in Ireland provides the backbone of Ranbaxy’s European business.
In 2004, the company consolidated its position in the European market further by acquiring the fifth largest generics company in France.
In 2006 Ranbaxy acquired two generic companies namely, Terapia in Romania and Ethimed in Belgium and followed that by buying a large unbranded generic product portfolio of Allen S.P.A in Italy.
Here it is worth noting that; Ranbaxy began with joint ventures in developing countries first and then in other developed countries??????????
At the heart of strategy was sequential expansion-
This strategy has proved to be an important source of learning for operating in international markets.
Gain understanding of the market and what the company would need to do to gain a foothold in the market
First prioritize market in overseas country,
Then export in that country or form joint venture to understand dynamics,
Then set up infrastructure and
During their work in Nigeria, Malaysia, Thailand and others, they picked up and learnt what is meant to operate in international market, at patent regimes, at marketing and distribution. It is completely different.
So they moved up value chain in their products and up the export markets from developing nations to developed countries.
“Though organic growth is good, benefits of right fit are many; and that was visible with their successful run after acquisitions”.
The benefits are created through synergies formed by the product pipeline of Ranbaxy and assets provided by overseas firms.
Ranbaxy have a large pipeline of products, cheap manufacturing facilities and an ambition to enter the advanced markets of Europe and the US. However they lack distribution set up, regulatory capabilities and high-end technological capabilities. Thus...
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