Eli Lilly : A Pharmaceutical Company

849 WordsApr 12, 20174 Pages
Case Background: Founded in 1876, Eli Lilly is a pharmaceutical company that completes nearly every step of the product supply chain internally. The company researches, develops, produces and sells a large variety of agricultural products as well as human healthcare items. Over the past century, Eli Lilly has risen to become one of the largest and most successful pharma companies in the USA. In 1992, the year of Eli Lilly-Ranbaxy Private Limited joint venture (ELR), the company’s products were produced in 25 countries and sales spanned over 130 countries. This successful international integration gave Eli Lilly encouragement to continue their globalization strategy in India through a Joint Venture (JV) with Ranbaxy Laboratories, a…show more content…
In addition, if Eli Lilly continues the JV as is, they could be missing out on other potential companies and markets to pursue business relations with. However, according to exhibit 7, the major product segment information of Lilly has shifted from 35% anti-infectives and 26% neurosciences in 1996 to 48% neurosciences and 24% endocrinology in 2000. While the major project segment of Ranbaxy remains in anti infectants from 49% in 1996 to 56% in 2000. This suggests that the conflict of product between the two companies was insignificant and therefore, from Eli lilly’s perspective, continuing the joint venture would be a good option. Option 2: Sell entire stake in JV Selling Eli Lilly’s entire stake within the Joint venture can bring both positive and negative impacts on Eli Lilly. To evaluate this option, the key question lies on whether terminating the Lilly-Ranbaxy relationship and consequent one-off cash flow overweighs the risks of trade secret leakage, potential loss of market share in the indian market in the long run. Selling off the stake in a JV allows Eli Lilly to cut ties associated with Ranbaxy and get a sum of immediate cash. According to exhibit 5, it should be noted that the other expenses for Eli Lilly has been increasing from 157907 to 254822 from 1988 to 2001. Coupled with the instability and lower entry barriers to the market, selling the entire stake in JV could
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