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Case Analysis: Eli Lilly in India:

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Submitted By jproyale
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1. Did Eli Lilly pursue the right strategy (i.e., should it have used a joint venture) to enter the Indian market? Why or why not? You should refer to Chapter 6 of the notes for guidance.

With the upward trend of globalization, cross-border commercialization has become inherent in business strategies pursuing not only improved competitiveness but to avoid market share erosion. Expanding to new markets, reducing friction with socio-cultural and legal barriers, reduce capital costs, securing raw materials and implementing economies of scale are just a few motivations which to look abroad for and consider the intricacies of operating in another country. Changes in India’s economic policies from an import substitution to an export-driven one, was the legal foundation that allowed Eli Lilly to pursue its interest to market its drugs in India, where it already had relationships with local manufacturers to produce human or animal insulin for the Soviet Union market, but did not for the Indian market (Bartlett & Beamish, 2014, p. 524) The opportunity presented by Ranbaxy, the second largest pharmaceutical company in India, to supply certain active ingredients or intermediate products to formulate and complete Lilly’s, and for the Joint Venture (JV) to sell and distribute those products, was the perfect opportunity to enter a “new” market while sharing the costs and risks with a well-known and respected partner. With the then existing market conditions (Sales turnover caps, mandatory formulated sales distribution to wholesalers and pharmacies, week intellectual property rights, competing generics selling at 1/60th of comparable US prices and a high-volume, low-price and low-profits), the JV proposed by Ranbaxy and pursued by Eli Lilly was definitely the right strategy to adopt. The decision to enter a JV with Ranbaxy allowed Eli Lilly to develop its credibility in India…...

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