Case 6-3 Eli Lilly in India: Rethinking the Joint Venture Strategy

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The case consists of two major pharmaceutical companies that joint to collaborate their research and pharmaceutical technologies to start a joint venture in India. Both have valuable resources that have benefited both companies during the joint venture. Now both are questioning if there is still any value in maintaining the joint venture in India and will be deciding what will be the best route to take. Ranbaxy Laboratories wants to be bought out, but Eli Lilly is worried of the financial implications of such move. There were two pharmaceutical companies that were looking for ways to expand globally to position themselves in a competitive advantage from their competitors. One was located in the United States, which was Eli Lilly and…show more content…
Lilly also saw opportunities to use the world for clinical testing, which would enable it to move forward faster, as well as shape opinion with leaders in the medical field around the world; something that would help in Lilly’s marketing stage. Ranbaxy‘s R&D efforts began at the end of the 1970s; in 1979, the company still had only 12 scientists. Ranbaxy approached Lilly in 1992 to investigate the possibility of supplying certain active ingredients or sourcing of intermediate products to Lilly in order to provide low-cost sources of intermediate pharmaceutical ingredients. The two companies had very different business focuses.
Once Indian JV was formed, they were facing with the following issues. They were new and it was very difficult for them. They did not have a distribution network and Lilly did not want to invest heavily in setting up a distribution network.
The employee turnover in the Indian pharmaceutical industry was very high. The first products that came out of the joint venture were human insulin from Lilly and several Ranbaxy products; but the team faced constant challenges in dealing with government regulations on the one hand and financing the affiliate on the other. There were also cash flow constraints. The company lacked in systems and processes that brought stability to the fast-growing organization. They also did not have in place standard operating
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