Eli lilly in india: rethinking the joint venture strategy

JONATHAN VAZQUEZ 2090690

MAN 4633 – STRATEGY IN THE MNC – FALL 2010
INSTRUCTOR: LOUIS MELBOURNE

CASE QUESTIONSCASE: Eli Lilly in India: Rethinking the Joint Venture Strategy

NOTE: Answer all questions using complete sentences. NO BULLETS!!1. Did Eli Lilly pursue the right strategy (i.e. should it have used a joint venture) to enter the Indian market? Why or why not?


When in 1993, EliLilly, one of the leading pharmaceutical firms in the USA, started a joint venture in India with the leading Indian company Ranbaxy, they were simply aiming to lower costs. The decision was mainlydictated by the conditions of the US market and opportunities of the Indian market. Costlier manufacturing practices due to strict governmental control, with prices going up during the 90s, invasion ofcheaper generics to the USA market as opposed to low costs in India and new regulations that opened Indian market to foreign investments created tempting conditions to enter one of the emerging hugemarkets of the world. I believe the alliance with Ranbaxy was a smart strategy for Eli Lilly to establish its presence in India. Ranbaxy was the second largest manufacturing company of bulk drugs andgenerics with domestic market share of 15% in India with established distribution network and the second largest exporter to different countries, including Russia (which Eli Lilly was attempting toreach), with capital cost 50-75% lower than those of comparable US plant and R&D expenses of 2-5% of sales. Besides, Ranbaxy developed its own process for Eli Lilly's patented drug Cefaclor. Since EliLilly's product patent for Cefaclor expired in 1992 and the firm was expecting to protect its monopoly with process patents that were due to expire only in 1994, this gave great scope for a...