Lilly

Both companies were looking for particular interests that included globalization, foreignmarketing, and offshoring of the manufacture of drugs to India. By 1992, Lilly did not have anyother option other than to start a JV with a local company in India in order to explore the Indianmarket. Government regulations in India did not allow Lilly to have more than 51% of the directinvestment. Therefore, Lilly found a proxy company in order to introduce its pharmaceutical products in the Indian market. Beamish (2010) states that a JV can be an excellent vehicle for doing business in a foreign market, while sharing start-up risks, operating risks, and profits witha partner.In addition to this, other factors that Lilly thought would be ideal for it to go into the JVincluded the fact that Ranbaxy was the second largest exporter in India to different counties likeRussia and R&D expenses of only 2-5% of sales. Lilly had a special interest in entering theRussian market, so entering into a JV with Ranbaxy seemed to be a dream come true. Ranbaxyalready had a preexisting distribution network as well as a domestic share of 15 percent in India.The chemical synthesis abilities that reduced manufacturing costs to such low levels weremuch more bearable to Lilly than the cost of production in the United States. Furthermore, Lillythought that the use of its ethical standards, foreign branding and infrastructure would ensure thesuccess of the JV. Lilly had a possibility of conducting cheap clinical trials in India compared tothe cost of doing the same in the United States.The JV between Lilly and Ranbaxy would not last very long, as the conditions bindingthe two together began to disintegrate. Despite the anticipated benefits in sourcing low costresearch in the drug industry from India, other factors contributed to the collapse of the JV,