Strategic Alliance in Indian Pharmaceutical Industry

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Sri Sharada Institute Of Indian Management - Research
(A unit of Sri Sringeri Sharada Peetham, Sringeri)
Approved by AICTE
Plot No. 7, Phase-II, Institutional Area, Behind the Grand Hotel, Vasant Kunj, New Delhi – 110070
Tel.: 2612409090 / 91; Fax: 26124092
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Submitted by:|
Name: Jagriti Singh (20090123) Amardeep Tomar(20090106) Shilpa Jaiswal(20090155) Anil Chauhan(20090108)| Batch:| 2009 – 2011.|



The competitive landscape of the Indian business firm has seen a dynamic change in the 1990s as a result of dual institutional changes of economic liberalization and changing intellectual policy regimes. Liberalization and its accompanying changes in trade, industry, foreign investment and technology policy regime, triggered previously protected Indian companies towards capability enhancement. This translated into a two pronged competitive strategy by the Indian firm - the adoption of a defensive strategy was aimed at protecting its competitive position in the domestic market and an assertive strategy aimed at leveraging new opportunities through internationalization. This paper examines the changing strategic orientations of the Indian Pharmaceutical industry through a study of its international venturing. It finds that firms have used acquisition as well as alliances in the spirit of co-opetition rather than competition, both in the domestic and international market as an important element of the industry’s survival strategy.

Introduction to Indian Pharmaceutical Industry

In the The Indian pharmaceutical industry has shown tremendous progress in terms of infrastructure development, technology base creation and a wide range of production. Even while undergoing restructuring, it has established its presence and determination to flourish in the changing environment. The industry now produces bulk drugs belonging to all major therapeutic groups. Strong scientific and technical manpower and pioneering work done in process development have contributed to this. Total production of bulk drugs and formulations during 1997-98 is estimated at Rs. 26280 million and Rs. 120680 million respectively. The growth rate has been around 15% for bulk drugs and 20% for formulations during ninetees. The performance on the export front is also noteworthy, clocking a growth rate of more than 20% in 1997-98. Nevertheless, the scope to increase the volume of exports is tremendous.

In last decade emerging economies have begun to account for an increasing flow of global FDI. Not only have countries like India and China become important investment destinations, they are also beginning to account for an increasing flow of outward FDI (OFDI). In the Indian case while inward FDI doubled between 2004 and 2006, OFDI grew four times in the same period (UNCTAD 2007) led by increasing flows of cross border M&A activity by firms in the IT and pharmaceutical sector.

The increase in overseas activity by Indian firms can be seen as their response to globalized competition since 1990s. With liberalization and changes in trade, industry, foreign investment and technology policy regime, previously protected Indian companies have been exposed to global competition. Indian firms increasingly realized that their existing technological and other capabilities accumulated with predominant dependence on protected home markets and under the import substitution policy regime of the past were clearly inadequate to cope with this new competition unleashed by a more liberalized business environment. This forced them to improve their competitive strength immediately and enlarge their position in the world markets. Indian companies realized that adopting a long term competencies building strategy with large investment...
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