Eli Lilly in India rethinking the Joint venture strategy Case Solution
1. Did Eli Lilly pursue the right strategy to enter the Indian market?
Eli Lilly has pursued the appropriate strategy in order to enter in India because it is observed that most of the MNEs do not have strong presence in India, which would help to achieve competitive advantage. Along with this, the demographics show that it has 800 million residents from which the potential target market would be 200 to 300 people and also there would be low cost of production.
Cooperation with Ranbaxy was a good strategy for Eli Lilly to set up its existence in India. Ranbaxy was the second biggest manufacturing organization of mass medications and generics with local market share in the overall industry of 15% in India with strong distribution channel and the second biggest exporter to various nations, including Russia (where Eli Lilly was endeavoring to reach), with capital cost 50 to75% lower than those of practically identical US plant and R&D costs of 2 to 5% of the sales.
Moreover, Ranbaxy developed its own particular procedure for Eli Lilly's patented medication Cefaclor. Since Eli Lilly's product patent for Cefaclor failed in 1992, and that the firm was hoping to secure its monopoly with process licenses, which were expected to expire just in 1994, this gave mutual advantage between the two organizations.
Along with this, the joint venture may lead towards problems due to weak patent laws in India, which would restrcit the US partner to share its research expertise however the agreement identified the only benefit of low cost research from India.
2. Consider how the joint venture has evolved. What is your evaluation of the three successive venture leaders? What unique challenges did each face?
The evolution of joint venture:
Eli Lilly had expertise in the oral and injectable antibiotics and was considered as the leader in the industry. Eli Lilly’s Red Book values made unique marking, which made Ranbaxy to be seen as a moral pharmaceutical organization and differentiated it from other local companies.
It was the largest supplier of insulin and this venture led to access of generic products to Ranbaxy’s market. On the other hand, Ranbaxy was the leading exporter in India, and this made Lilly to enter in the joint venture in order to penetrate the international market. Along with this, it would increase the internal audit rating of Ranbaxy and its products can easily be marketed in India, which would result in evolution of this joint venture.
Evaluation of three successive leaders:
Leader 1: Evaluation of Rajiv Gulati:
He became the managing director in 1999, and during his time, he developed the regulatory and medical unit for handling the product approval process from Indian Government. During his time, the joint venture was successful and achieved average growth rate of in the industry. On the other hand, he was successful to hire and retain the Indian managerial staff.
Challenges faced by Rajiv Gulati:
He faced challenges in terms of its values and codes, which needed to coordinate in the joint venture as it was not a simple task. Along with this, the Indian government reform as a managerial director was the biggest challenge to overcome.
Leader 2: Evaluation of Chris Shaw:
He became the managerial director in 1996 and focused on building the system and other process in order to meet the needs of joint venture. Along with this, he developed SOPs (standard operating procedures) that would help to increase the stability of fast growing organization.
Challenges faced by Chris Shaw:
He was facing the challenge of cultural differences as he was not a resident of India. It was very difficult adhering the SOPs and to build the processes and systems in the first growing joint venture.
Leader 3: Evaluation of Andrew Mascarenhas:
Andrew Mascarenhas was the first managing director and was building the joint venture group, positioning the venture in the market, setting its operations building up the marketing strategy and hired the professional doctors. He successfully ran the venture by sticking to the Indian culture and by valuing it.
Challenges faced by Andrew Mascarenhas:
The challenges he confronted included hiring the sales team and professional doctors and financial individuals and training them based on the organization's philosophy, theical, and values of Eli Lily. Along with this, he introduced new HR management policy in order to decrease the turnover rate and at the end of his management, he achieved the breakeven and was turning to its profitability....................................