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Eli Lilly in India: Rethinking Joint Venture Strategy

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Tamara Tomanic

on 14 November 2014

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Transcript of Eli Lilly in India: Rethinking Joint Venture Strategy

Eli Lilly in India: Rethinking the Joint Venture Strategy
Why A Joint Venture In
In
d
ia
?
What Did The Partners Realize ?
American pharmaceutical company founded in 1876
Core competency
:
R&D
Research operations in over 55 countries
R&D facilities in 8 countries
Manufacturing plants in 13 countries
Products marketed in 125 markets
Indian Pharmaceutical Industry in 1991
Threat of new entrants – MEDIUM

Bargaining power of Supplier – LOW

Bargaining power of Buyers – LOW

Threat of substitutes – MEDIUM

Rivalry – HIGH





No future in generics field

Tackle culturally distant market

Learn how to deal with foreign regulatory agencies

Foundation of independent regulatory agency

The Joint Venture
The

Performance

of the JOINT VENTURE
Sales Comparison
How to Enter?
The 46th largest pharmaceutical company in India
Sales rose from Rs 559 million to Rs 876 million over three years.
Value and cultural development maintained a low employee turnover rate.
Strong cooperation and healthy relationship were highly valued.
What would you do ?
Why India ?
Buy a percentage of Ranbaxy
Buy out Ranbaxy
Enter a joint venture with another partner
Pros:
Cons
Full control over the operations
Receives full proportion of the returns
100% FDI allowed
Patent protection favors Lilly
Already mature enough to carry out operations in Indian market
Cons:
Pros:
Cons:
Would have to establish their own supply and distribution channel
High initial costs
Pros:
Can draw on already existing supply and distribution channels
New partner could bring fresh ideas to the venture
one of the few MNEs that did not have a presence in India
Costly and time consuming to find another company
Might not find a company that compliments their culture
800 million inhabitants; 200-300 potential target market
lower cost of production
--> competitive disadvantage
Eli Lilly could continue drawing on Ranbaxy's Reputation
Cost savings as it does not have to create its own channels or look for a new partner.
Eli Lilly
Ranbaxy
No guarantee that Ranbaxy won't change their mind in the future
Ranbaxy could sell their share to anybody.


Effective framework for ethical marketing

Knowledge of how to enter into various other joint ventures

Knowledge of the competencies required to be an international R&D concern
Cons:
Pros:
Cons:
Cons:
Pros:
'to become a research based international pharmaceutical company'
Founded in 1961 in India
Core competency: Generics
Ground operations in 43 countries
25 manufacturing facilities across 8 countries
Products sold in 150 countries
In 2012 net revenue of $2.3 billion

Eli Lilly- Ranbaxy Indian Financials from 1998-2001
In Rs
Thank You For Listening!!
Any Questions ????
Cultural Distance Between US & India
How much would you be willing to pay ?
How much would you be willing to pay ?
Enter a new Joint Venture ?
Buy a percentage of Ranbaxy?
Buy out Ranbaxy?

Eli Lilly
Ranbaxy
November 1991
Agenda
50/50 stake in JV
Ranbaxy supplies products to JV


Ranbaxy sources intermediate products
What was in it for Ranbaxy
(apart from money)?
Terms of Joint Venture
Threat of new entrants – HIGHER

Bargaining Power of Suppliers – LOW

Bargaining power of Buyers – LOW

Threat of substitutes – LOWER

Rivalry – HIGH
Eli Lilly Ranbaxy in 2001
Buy Out Ranbaxy!
Company Overview- Eli Lilly
Challenges faced while entering India
Modes of Entry
Company Overview- Ranbaxy
Gains from JOINT VENTURE
Assessment of Overall Performance
Alternative Strategies
Recommendation
Ranbaxy
Competition
Ranbaxy will produce the goods for the joint venture
?
?
?
?
What is a fair price?

How much intrinsic value is there?

Are there possible downsides if Ranbaxy overvalues? Or Eli Lilly undervalues?

Can two companies with a decade-long history of co-operation agree?
Full transcript