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Eli Lilly in India: Rethinking the Joint Venture Strategy - Case Study Example

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The choice of the country is most probably wrong. India had already decided, back in 1970, to eliminate the patents on all drug products. This allowed the country to develop a very good or robust generics drug industry (ANI, 2011, p. 1). In a sense, the joint venture was…
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Eli Lilly in India: Rethinking the Joint Venture Strategy
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ELI LILLY IN INDIA (Rethinking the Joint Venture Strategy) ID Number: of of School (University)
Estimated Word Count = 652
Date of Submission: February 12, 2012
ELI LILLY IN INDIA
1. The choice of the country is most probably wrong. India had already decided, back in 1970, to eliminate the patents on all drug products. This allowed the country to develop a very good or robust generics drug industry (ANI, 2011, p. 1). In a sense, the joint venture was bound to fail, because from a strategic marketing viewpoint, each partner to the joint venture was competing against each other. The products that Eli Lilly tried to sell in India were already being sold by Indian manufacturers (Celly, Dhanaraj & Beamish, 2004, p. 559), some of them perhaps sold even by Ranbaxy itself prior to the joint venture. India was chosen as it had looked promising as a market because of its very huge population.
2. Having a partner is not necessarily wrong. It is a good way to enter a new market when a prospective investor wants to gain market access immediately; it is a way to leap-frog or jump-start operations (sort of taking a shortcut) in new markets (Contractor & Lorange, 2002, p. 122). Partnership is a good thing when the partners fit each other in terms of the objectives. This means a congruence of their strategic aims on whatever they want to do or accomplish and there is compatibility in cultures and every conceivable conflicts taken first into consideration in drafting the joint-venture agreement. In fact, the JV allowed Eli Lilly to gain a toehold in India quite easily (Celly, Dhanaraj & Beamish, 2004, p. 562).
3. It is not so much as having the wrong Indian partner, since any Indian drug maker would still be operating within the same context of free patents. What was wrong was the very choice of entering the Indian market. But in this particular case, there is a conflict of the partners respective interests – Eli Lilly was driven by innovation and research while the Ranbaxy firm was focused on the generics business (ibid. p. 561). Eli is a multinational enterprise (MNE) with global interests while Ranbaxy is concerned with local issues.
4. The joint-venture structure was wrong because it was based on partners equal equities (50%-50%) so no single partner can influence the strategic direction of the partnership. A lot of the accomplishments were based on the close and cohesive working cooperation between the two top executives, Rajiv Gulati and Andrew Mascarenhas (ibid. p. 561), although Eli Lilly retained the right to appoint the CEO of the JV itself (ibid. p. 558). In effect, the joint ventures success had in a great way depended on the personalities of the two top executives and their cordial or friendly working relationship.
5. The JV leadership did not commit any mistakes, in fact, they tried their best to make their joint venture succeed in the Indian market. However, it must be noted at this point here that most successful joint venture partnerships have one partner having a majority stake. This is to ensure that strategic policy directions are pursued as well as giving the major partner tighter operational control of the joint venture. Having an equal stake sets up the joint venture on a shaky foundation because nobody has effective control. Eli Lilly may have another ulterior (hidden) motive in entering the India market and that is the chance to be do human clinical trials for its newly-developed drug products (ibid. p. 562).
6. The final outcome of the joint venture was that Ranbaxy Laboratories sold its entire stake to Eli Lilly for about $17 million (and not $70 million) back in 2001 in view of the newer changed circumstances in the pharmaceutical industry in India (PTI, 2001, p. 1) as the government allowed 100% foreign ownership. This was in preparation of Indias signing the WTO treaty to be a member by 2005 by which time it would grant patent protection to all new chemical entities or bulk drugs (Celly, Dhanaraj & Beamish, 2004, p. 566).
Reference List
ANI (2011, March 23). India-EU trade deal threatens access to life-saving drugs. The Economic Times. Retrieved February 12, 2012 from http://articles.economictimes.indiatimes.com/2011-03-23/news/29178197_1_generic-drugs-generic-medicines-patent-law
Celly, N., Dhanaraj, C. & Beamish, P. W. (2004). Eli Lilly in India: rethinking the joint venture strategy. In Christopher A. Bartlett & Paul W. Beamish (Eds.), Transnational management: text, cases & readings in cross-border management (pp. 552-567). Dubuque, IA, USA: McGraw-Hill.
Contractor, F. J. & Lorange, P. (2002). Cooperative strategies in international business: joint ventures. Piscataway, NJ, USA: Rutgers University Press.
PTI (2001, July 06). Eli Lilly buys Ranbaxys stake in JV. The Hindu. Retrieved February 12, 2012 from http://hindu.com/2001/07/06/stories/06060006.htm Read More
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