Case 6-3 Eli Lilly in India

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CASE 6-3 “Eli Lilly in India: Rethinking the Joint Venture Strategy”

1. I think Eli Lilly pursued the right strategy joining Ranbaxy Laboratories to enter the Indian market. While companies were using the global market to amortize the huge investments required to produce a new drug, they were hesitant to invest in countries where the intellectual property regime was weak. During the 1990s both companies had a strong reason for the joint venture. Ranbaxy wanted to make its presence globally and Lilly wanted to get their feet on Indian grounds. In 1992, Ranbaxy approached Lilly 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. Based on the strategic alliance, Ranbaxy would supply certain products to the joint venture from its own portfolio that were currently being manufactured in India and then formulate and finish some of Lily’s products locally. From the beginning, both companies had a lot in common, they both believed in high ethical standards, technology and innovation, and future of patented products. They created the joint venture with $7.1 million capital and an initial subscribed equity capital of $3 million, with equal contribution from Lilly and Ranbaxy, leading to an equity ownership of 50 percent each.
India, with an 800 million population had about 300 million of people that were considered to be within the country’s middle class that represented the future of India. Therefore, Lilly saw the joint venture as an investment the company needed to make to build a great presence in this country. Andrew Mascarenhas, the managing director of the joint venture, and Rajiv Gulati, director of marketing and sales, worked on getting the venture up. They hired a financial analyst, a medical…...

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