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The Analysis of Eli Lillys Joint Venture With Ranbaxy
The Indian pharmaceutical industry in the 1990s presented both an opportunity and a challenge for foreign companies. On the one hand, the developing country had a steadily growing market of eight hundred million people and an expanding middle-class. On the other hand, the nation had strict rules concerning the patent law, and the citizens did not spend much on medications due to their financial limitations. Eli Lilly (EL) was one of the largest drug-producing firms worldwide which were interested in entering the new environment and decided to follow the path of international cooperation to do it. The company formed a joint venture with the Indian manufacturer Ranbaxy which allowed both to achieve their specific goals and build a mutually beneficial partnership.
The strategy pursued by EL in India can be considered right since, instead of strictly relying on its own capacitates and starting anew in a challenging market, it focused on finding an experienced partner. Ranbaxy was a well-established business in India, by working with them, EL managed to solve the problems of dealing with the local regulations and producing medication at a low price. The Indian company, because of its recognized status, could receive all the necessary approvals from the government agencies without any obstacles. The manufacturer offered their productions facilities and low-cost services, compared to the Western firms, which allowed EL to avoid spending extra resources on setting up their own operations. Moreover, the two companies chose to sell only those drugs which were competitive and affordable for the local consumers. This yielded substantial profits to the joint venture and made it one of the leading pharmaceutical businesses in India. Thus decreased its potential expenses and achieved success in a new market, which indicates the strategy was correct.
The Joint Venture of the two aforementioned companies had proven beneficial and provided both of them with positive results. The performance of this partnership can be considered successful because of the strategy they used and the fact that in 2001 they became the forty-sixth largest pharmaceutical company in India. Moreover, many other subsidiaries of the Western businesses, which entered the local market, did not manage to survive, which again demonstrates the effectiveness of this Joint Ventures approach. The cooperation expanded the knowledge bases of the two firms, for example, EL gained a valuable insight into the Indian pharmaceutical industry. While Ranbaxy learned about the Western approach to business, the importance of teaching its employees the company values. By building a joint venture, EL and Ranbaxy achieved exceptional performance and derived much useful information from their partnership.
The right strategy for EL to follow concerning its cooperation with Ranbaxy would be to continue working with them while at the same time creating a separate subsidiary company. This will allow them to target different social groups, the Joint Venture will produce affordable medications for the majority of the consumers, and the subsidiary will manufacture drugs for the middle and upper-middle-class citizens. This strategy can be implemented by persuading the Ranbaxy executives not to sell their share in the venture and offering them to produce the more expensive medications for the new company. Thus, EL will extend its partnership with the Indian colleagues and further promote its brand in the country.
Cooperation with the pharmaceutical manufacturer Ranbaxy allowed Eli Lilly to establish itself in India and achieve significant success. The strategy of the Joint Venture was the right choice since it allowed to reduce the potential costs and effectively deal with the countrys regulatory bodies. The successful performance of the partnership is evidenced by its high ranking among the local drug companies. It taught both companies valuable lessons, EL learned about the Indian pharmaceutical industry, and Ranbaxy discovered the Western business approach. EL should continue its work with the Indian colleagues and, at the same time, find its separate subsidiary to address different price ranges. It will help expand the companys presence in India and satisfy the demands of the growing middle-class.
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