Did Eli Lilly Pursue the Right Strategy to Enter the Indian Market
In 1993 Eli Lilly, one of the leading pharmaceutical firms in the USA, started a joint venture in India with the leading Indian company Ranbaxy. The decision was dictated by the conditions of the US market and opportunities of the Indian market. Costlier manufacturing practices due to strict governmental control, soaring prices in 1990s, invasion of cheap generics to the USA market as opposed to low costs in India and new regulations that opened Indian market to foreign investments (up to 51%) created tempting conditions to enter one of the emerging huge markets of the world.
Alliance with Ranbaxy was a smart strategy for Eli Lilly to establish its presence in India. Ranbaxy was the second largest manufacturing company of bulk drugs and generics with domestic market share of 15% in India with established distribution network and the second largest exporter to different countries, including Russia (which Eli Lilly was attempting to reach), with capital cost 50-75% lower than those of comparable US plant and R&D expenses of 2-5% of sales. Besides, Ranbaxy developed its own process for Eli Lilly’s patented drug Cefaclor.
Since Eli Lilly’s product patent for Cefaclor expired in 1992 and the firm was expecting to protect its monopoly
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