Eli Lilly in India

Topics: Generic drug, Pharmaceutical industry, Ranbaxy Laboratories Pages: 12 (3124 words) Published: June 16, 2013
Eli Lilly in India: Rethinking the Joint Venture Strategy
Case Study Analysis – Final Exam

Submitted by Lloyd Stallings

April 15, 2012

IMAN 615: Dr. Daniel E. Gilbert

Eli Lilly in India: Rethinking the Joint Venture Strategy

Executive Summary

Eli Lilly and Company is a pharmaceutical company, founded in 1876, that integrates many departments and supply-chain management.   The company in itself discovers, develops, manufactures, and sells a broad line of human health and agricultural products (Lilly.com). Eli Lilly had grown to become one of the leading pharmaceutical companies in the United States, and by 1992 its products were being manufactured and distributed throughout 25 countries with sales in over 130 countries. In Eli Lilly’s effort to further implement its globalization strategy into India, Eli Lilly entered into a joint venture with Ranbaxy Laboratories Ltd., an established pharmaceutical firm in India which was started as a family business in 1960. The two companies joined in 1992 to form the Eli Lilly-Ranbaxy Private Limited (ELR) joint venture. In the case study entitled, “Eli Lilly in India: Rethinking the joint venture strategy,” it describes the global pharmaceutical environment throughout the 1990s into the beginning of the 21st century the growth and of both Eli Lilly and Ranbaxy through their globalization efforts, and their assessment on next steps for the JV . As the global pharmaceutical market grew and ultimately changed since the inception of the ELR joint venture, both Eli Lilly and Ranbaxy reexamined the fundamentals of the venture to see if it was a good business decision to maintain their current alliance. In this paper I will provide analysis on the global pharmaceutical environment, the business environment in India and country specific entry strategies, an overview of the current strategic issues facing the JV, strategic objectives, use of analysis tools (Porter’s Five Forces and SWOT), alternatives to the maintaining the joint venture and recommendations.

Central Question

The ELR joint venture, established in 1992 between Eli Lilly and Ranbaxy, and by the end of 1996, the venture had reached the break-even point and was becoming profitable. Although the venture was showing tremendous promise, the two partners had two very different business focuses within the pharmaceutical market. Ranbaxy’s business focus was in generics and they catered they strategy to gear toward growth within that segment of the market. Eli Lilly’s business focus was in the area of innovation and discovery. This poised a potential issue for the continued partnership between the two pharmaceutical companies. Given the current environment in the global pharmaceutical industry and different business focus of each of the partners in the venture, the following central question must be assessed in my analysis of the case study: Does ELR joint venture agreement still fit into the strategic objectives of both the Eli Lilly and Ranbaxy pharmaceutical companies? If the ELR joint venture is maintained, what should be the strategy of the venture going forward? If the ELR joint venture is to be dissolved, what would be the reason for breaking up an overall successful venture in the Indian pharmaceutical market? Strategic Issues

1. Two different business focuses

Although the Eli Lilly and Ranbaxy were in agreement to form a joint venture, the two pharmaceutical companies had two different business focuses. Ranbaxy was focused on the generic segment of the pharmaceutical business. Eli Lilly however was focused on innovation and discovery. The different focus of the two partners could be viewed as strength to a JV but it can also be viewed as a potential risk to the venture. Business relatedness between partners can have a significant effect on JV control (Hanvanich et al., 2005). Although the two companies are part...

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