Eli Lilly Case
Competing through Strategy
Case:
Eli Lilly in India: Rethinking the Joint Ventures Strategy I. Brief Summary
Global pharmaceuticals had presence in India since early 80’s and it was not until 1993 that Eli Lilly International decided to establish a Joint Venture with India’s second largest laboratory and exporter, Ranbaxy. This move happened in a very challenging context as both companies have very different profiles and backgrounds. The main differential characteristic was the nature of their products. While Ranbaxy was focused on generics and in other intermediate products, Eli Lilly International core business was the commercialization and development of new drugs through an aggressive R&D strategy. The trigger for Eli Lilly to start thinking of going into India was the liberalization process in pharmaceutical markets as a consequence of the change of the economic model from import-substitution to an export-oriented. The foreign ownership was allowed to be 51% (rose from 30%) and additional free market conditions were expected for the coming years. Despite this trend, there were many restrictions that Eli Lilly would have faced if they did not count with a local partner. These include access to government pharmaceutical and health relevant authorities, an adequate logistics and distribution system, and manufacturing facilities. For Ranbaxy, the main objective was to gain additional market share and increase in sales. The Joint Venture was established, and worked through the years with good results. Ranbaxy (including Eli Lilly) went from the 3rd place in market share in 1996, to the first place in year 2000.
Year 2001 brought many variables into the Joint Venture situation. The most important is that government liberalization process continued in a positive trend and at that point of time, foreign investors were allowed to own the 100% of any company in the pharmaceutical industry. This structural change was combined with a relative illiquid
Case:
Eli Lilly in India: Rethinking the Joint Ventures Strategy I. Brief Summary
Global pharmaceuticals had presence in India since early 80’s and it was not until 1993 that Eli Lilly International decided to establish a Joint Venture with India’s second largest laboratory and exporter, Ranbaxy. This move happened in a very challenging context as both companies have very different profiles and backgrounds. The main differential characteristic was the nature of their products. While Ranbaxy was focused on generics and in other intermediate products, Eli Lilly International core business was the commercialization and development of new drugs through an aggressive R&D strategy. The trigger for Eli Lilly to start thinking of going into India was the liberalization process in pharmaceutical markets as a consequence of the change of the economic model from import-substitution to an export-oriented. The foreign ownership was allowed to be 51% (rose from 30%) and additional free market conditions were expected for the coming years. Despite this trend, there were many restrictions that Eli Lilly would have faced if they did not count with a local partner. These include access to government pharmaceutical and health relevant authorities, an adequate logistics and distribution system, and manufacturing facilities. For Ranbaxy, the main objective was to gain additional market share and increase in sales. The Joint Venture was established, and worked through the years with good results. Ranbaxy (including Eli Lilly) went from the 3rd place in market share in 1996, to the first place in year 2000.
Year 2001 brought many variables into the Joint Venture situation. The most important is that government liberalization process continued in a positive trend and at that point of time, foreign investors were allowed to own the 100% of any company in the pharmaceutical industry. This structural change was combined with a relative illiquid