Summary of Eli Lilly Ranbaxy Case

The case talks about the progress of a Joint Venture between two pharmaceuticals companies Eli Lilly and Company, based in United States and Ranbaxy Laboratories, based in India. Eli Lilly was one of the leading pharmaceutical companies in United States. With increase in competition from generic drug manufacturers in US and parallel trade activities between US and nearby countries, shares of branded drugs companies were getting affected. SO, companies started to shift to other world markets and in mid 1980s Eli Lilly moved towards global markets and in 1992 they started looking for opportunities in emerging markets in Asia. With economic reforms being brought up by India in early 1990s, Foreign Direct Investments were encouraged and it was upto 51% ownership in the drugs and pharmaceutical industry.

By the early 1990s, Ranbaxy became India’s largest manufacturer of bulk drugs and generic drugs with a market share of 15%. Having a core competency of chemical synthesis, Ranbaxy started outsourcing a little bit and thus approached Eli Lilly (only foreign big player not having a hold in Indian market) to get into Joint Venture where Ranbaxy can supply active ingredients or intermediate products. In this way Eli Lilly will get the sources at low cost and can start getting their foothold in India. Eli Lilly’s marketing strength can also be used in this Joint Venture to market the drugs. While Ranbaxy would gain an access to global markets where Eli Lilly already had a strong hold.

Joint Venture was very successful mainly because of a great compatibility among both companies’ businesses and also work culture. Both the appointed heads from each company were of high ethical standards and respected each other. An important decision was made on to change the name of the joint venture from Lilly Ranbaxy to Eli Lilly Ranbaxy as the new name sounded more foreign. This was done in order to meet the local perception of considering imported goods to be of superior quality.

Eli Lilly Ranbaxy mainly focused on therapeutic areas where Eli Lilly had a niche in order to avoid price war as they did not wanted to adopt a localization strategy and wanted to be in a global rice band considering India as a high volume, low cost and low profit market. Later, their strategy evolved and started focusing on two groups of products. First was patented drugs where there was a significant barrier to entry and the other was off-patent drugs, where Eli Lilly was able to add special value to repel competitors. Eli Lilly with its strong marketing capabilities marketed that off-patent product manufactured by Ranbaxy by providing medical informations to physicians. Thus, with all these successful strategies this Joint Venture had reached a break even in three years in 1996.