Eli Lily in India

1. How would you evaluate Eli Lilys strategy to enter India?

Eli Lily a leader in pharmaceutical products in USA especially in oral and injectable antibiotics and in supplying insulin
and related diabetic care products traced back its incorporation since early 1940s backed by a company philosophy and
commitment to achieve excellence in scientific and managerial excelleance.Research and Development is always been
crucial to Eli Lillys sustainable success and growth. In the mid 80s under the chairmanship of Dick Wood Eli Lilly began
a significant move towards globalization of its operations by expanding its OUS (company outside the USA)
operations.as a result by 1992 Lillis presence in cross country production operations expanded to 25 countries and
marketing in more than 130 countries. During 1992 Eli Lilly headed by Sidney Taural wanted to expand to Asia where a
promising market for pharmaceutical goods was emerging and several growing Asian countries like India are liberalizing
their foreign trade policies by opening their doors to foreign investments. Lilli also looking for new partnerships for its
clinical testing activity which is essential to stay innovative and ahead of its competitors. Eli Lillys change in strategy
was due to the reason of increasing manufacturing costs due to strict governmental policies, rise in inflation in mid 90s
and intrusion of cheap generic drug manufactures in the USA market. Where as in India the manufacturing costs are
lower and recently change in Indian governments foreign trade policy in which foreign investors can hold up to 51%
ownership in any Indian company as well as India was a country with its huge population majority of which belongs to
the countrys middleclass that possess a great potential customer base. Its major population could afford to purchase
foreign medicines with slightly higher prices and with better quality than the local medicines supplies, Further India has
borders with many developing vast economies such as China and Russia where Eli Lilly sees the potentiality of
expansion .It got Ranbaxy as its offshore business partner which was another plus point in its strategy of expansion as
Ranbaxy a famous brand in pharmaceutical industry in the India and was managed by a visionary leader Dr. Singh.
Thus Eli Lillys products could be pushed in to Indian markets with ease by using its partners reputation and marketing
platform. Thus due to this alliance Eli Lillys capital cost was projected to lower than in comparison to its
US plants and R&D expenses was estimated to remain within the limit as it could share it with its partner and there was
possibility to conduct economical clinical research in India Accordingly in spite of the problems arises due to Indias
weak patent laws which prevented Eli Lilly from sharing its research expertise, choosing India as its investment
destination
and
establishing
an
alliance with Ranbaxy is
obviously
a smart strategy for Eli Lilly to establish its presence in India.

2. Consider the three leaders of the JV? What are the unique challenges each faced?
Andrew Mascarenhas selected to become the first managing director of the Lilly Ranbaxy JV put efforts to
build the JVs operational team and positioning of the JVs products in the Indian markets. He developed the
marketing strategy to leveraging the possible markets for its products. Further he changed the JVs name from
Lilly Ranbaxy to Eli Lilly Ranbaxy as this seemed to give the JV a special foreign company identity which
favored by the Indian market as a brand of good quality drugs. Challenges he faced in the hiring of a good
sales force, doctors and financial team including training them on the JVs philosophy and Eli Lillys code of
conduct. He faced the challenge to protect companies patents as there was no authoritarian laws for
protection of patents was in action and company was losing due to leakage of its patents and IPRs to local
generic drug manufactures .He introduced a new employee management scheme to cope with the high
employee turnover rate. As a result till the end of his tenure the JV reached its breakeven and started
operating independently with profits.
Rajiv Gulati, became managing director in the year 1999 of the Lilly Ranbaxy JV. He enlarged the staff
numbers to correspond with the growing operations of the JV.He pioneered in creating a separate medical and
regulatory unit to handle the product approval process with government. Gulati faced challenges related to
how to expand JVs supporting systems to cope with its growing business thus he put the systems and
processes together in order to make the company bigger than ever before.
Chris Shaw succeeded Mascarehas and focused on build systems and processes by hiring senior level staff
and created a team in developing standard operating procedures (SOPs) as a preparedness for future growth
and expansion .Shaw streamlined the sales and marketing processes around therapeutic areas to enhance
the knowledge capabilities of the sales and marketing team. Shaw faced challenges in getting processes and
systems organized which were in a scattered manner in the company. Thus he aimed to bring uniformity first
and foremost within the organization.

3. How did the JV perform? What did the partners learn?

Eli Lilly used the Ranbaxys knowledge about Indian markets to get itself established on Indian Pharmaceutical
industry.Ranboxy supplied products from its own portfolio to Eli Lilly and help to make Eli Lillys semi-finished
products marketable. Thus Eli Lilly have used Ranbaxys production facilities and marketing strategy to sell
products under its brand name. The JV between the two companies formed with a 50:50 partnership with an
authorized capital of Rs 200 million and a subscribed capital of Rs 84 million .The JV was driven by high
ethical values and innovation driven and appeared to be a win-win profitable for both the partners. Eli Lilly get
benefited in acquiring low cost Intellectual property rights and clinical trials with the support of Ranbaxy
moreover the possibility to expand to Russian markets has been strengthened. Presence under the name of
Ranbaxy helped Eli Lilly to overcome various trade peculiarities of Indian markets as well as government
regulations. Ranbaxy gained the benefits of the JV with Eli Lillys technological superiority in research and
production of cardio-vascular, anti-infective, and anti-cancer drugs. Eli Lillys strong code of ethics and
customer centric business model helped Ranbaxy to gain goodwill in the Indian market. It gets access to a
number of foreign markets including USA where Eli Lilly is a well famous brand thus by associating with it
Ranbaxy see an opportunity for global expansion of its export activities and manufacturing plants in foreign
soils. By 2000-01 Eli Lilly Ranbaxy JV become almost independent with a growth rate around 8% annually.
Following are the learnings by each company from the JV:Eli Lilly Gained necessary knowledge about Indias local market within a short period of time, without the JV, it
would have taken years of market research and cost a huge sums of money to gain by the company. Got
Ranbaxys name as a solid brand name to push its products in the Indian markets. Gained knowledge about
Ranbaxys market knowledge and access to its intellectual property rights. Get to know about government
regulations and policies without being affected it directly as the manufacturing activity was mainly conducted
by its partner.
Ranbaxy: Gained prestige to be a global brand in pharmaceutical products and able to get associated with a
globally famous brand name. Ranbaxy can use Eli Lillys resources and expertise to do business in the
international market, which could not have possible easily as Ranbaxy though popular in the domestic markets
yet has no significant knowledge about foreign markets.
4. What would you recommend to the partners?
In the face of changing global business environments companies like Eli Lilly face tough challenge to maintain
the alliance. so Eli Lilly and Ranbaxy, need to review and re-evaluate their joint venture alliance from time to
time in order to change as per the situation requires. The two partners, in spite of their well-known successful
JV have different goals. Eli Lillys goal to remain innovative while Ranbaxy concentrated on genetic drugs.
Thus it is advisable to remain concentrated on their respective core activities and take decision relating to
strategic business expansion and growth with accountability for their decisions .Ranbaxy has been
experiencing stringent cash flow problems due to its extended international sales and need to improve its
financial positions its maintaining adequate cash reserves with it. Eli Lilly need to deal with the weak IP rights
rule in the country in order to protect its trade secretes being leaked. Now under the new pricing policy
changes
by
Indian
Govt.
thus Eli
Lilly
could
reduce
its
products
and
being global price brand Eli Lilly did not want local manufacturing
During the JV time, now With new price control and patent protection it can introduce its products to the Indian
Market. Following are some challenges that the JV is going to face in the foreseeable future.
Change in the global trend of pharmaceutical industry, increasing mergers and acquisitions between firms,
longer approval time for new products, Rising competition from generic drug manufactures and increasing cost
of inputs and processes. Change in the bargaining capacity of suppliers and customers.

Recommendations: Keep rapid market growth as Indian Foreign trade policies are becoming more liberalized
so new entrants could dilute its existing market share.Stretegic Shift towards chronic therapies. Stay attached
to patent products and aim for more strategic expansion in Asia. Maintain the current operations with Ranbaxy
with existing 50:50 partnership and develop ways to protect valuable synergies under changed markets.
Eli Lilly needs to be more independent in its Indian operations so that both the companies will be able to
perform at their full capacity.