Eli Lilly - Ranbaxy Case Project

Eli Lilly - Ranbaxy Case Project

Establishing an international joint venture can result in substantial gains but can also result in great costs. Joint ventures between companies in different countries can enhance the companies' experience in the global business market. It can be a potential gateway to possible business deals and endeavors for future profits. Though there are many benefits in establishing an international joint venture it can come with many stipulations. If a company does not do the research or evaluate all possibilities that come with an IJV, it could lead to potential losses. Eli Lilly Ranbaxy is an example of a joint venture that was pursued with the right strategy, which was a result due to a changing US pharmaceutical market and a rapidly expanding India market.

The two companies in this IJV were both significant players within their home countries, Eli Lilly and Company in the US and Ranbaxy Laboratories Limited from India. When the possibility of establishing a joint venture was approached in 1992, the Indian market for pharmaceuticals was becoming more open to foreign direct investment. Also India at the time was putting a limit on the amount of foreign ownership, from 40 percent to 51 percent, creating less foreign competition in the region. With numerous of opportunities opening up within the Indian market, Eli Lilly saw this as a stepping-stone for future clinical testing. Both companies having common backgrounds and goals of being a research oriented international pharmaceutical company, embarking on a joint venture seemed ideal.

Eli Lilly would establish a presence in the region and gain access to the distribution network enjoyed by Ranbaxy. Furthermore, this JV would result in lower costs in production as well as basic research, which are considerable factors in their broad strategy. The evolution of the international joint venture was strategically handled with early success, starting off with the name of the company, Eli Lilly Ranbaxy; it was strategically named for future success within the region. Mascarenhas stated, "The reason for this was based on my earlier experience in India, where 'good quality' rightly or wrongly, was associated with foreign imported goods. Eli Lilly Ranbaxy sounded foreign enough!" With Ranbaxy being the largest manufacturer of bulk pharmaceuticals in India, and with a domestic market share of 15 percent, they provided the knowledge needed for the local market and helped establish a name in the region for Lilly. Mascarenhas and Gulati had a good working and personal relationship; they had good interdependent communication, which was a crucial factor in the JV implementation and because Ranbaxy provided Eli Lilly with easy entrance and networks to the Indian market.

After the establishment of the joint venture the two companies focused on creating an organization where there was strong support from both sides. Many employees had an opportunity to establish a legitimate career within the Eli Lilly Ranbaxy Corporation. Indeed, this was refreshing considering the high turnover rate within the industry, where the union served as a crutch. Within a year after building the infrastructure from the ground up, the JV was able to launch different products and had more than 200 employees.

The joint venture provided product and marketing strategies, in which they employed successful corporate social responsibility of providing the physicians with relevant medical information Ranbaxy and Lilly were two companies that were successful in establishing a joint venture because they had a lot of the same common values. They both had high ethical standards, when presenting their products to doctors within the market; they would answer all questions correctly and to the best of their knowledge. Since their products were not known within the local market, Eli Lilly used a strong sense of honesty called the "Red book values", with local doctors and began to gain their respect and trust.

Andrew Mascarenhas, from Eli Lilly and Company was the first successful managing director for the joint venture. Throughout his tenure he helped shape and build the joint venture from the ground up. With a driven initiative and was responsible for the hiring of the sales force and recruitment of medical doctors. As a leader, Mascarenhas was faced with unique challenges; he had to deal with cash flow constraints, limitations on pricing and other government regulations. Also within the Indian market there was low recognition and high turnover rates for sales jobs. Mascarenhas and his team had to strategize on how to appeal to a wider range of employees through future opportunities amongst the company. Eli Lilly Ranbaxy invested in a training program. The program was created for the employees to hold strong values for the positions they were hired for and the positions were customized to Indian standards. Mascarenhas brought Eli Lilly's values to the joint venture; he was instrumental in the training program and made sure those values were