Eli Lilly In India Rethinking The Joint Venture Strategy Case Study Solution
1 How would you assess the overall performance of the joint venture? What did each partner get out of the venture?
It is observed that the joint venture was mutually profitable for both the entities. In terms of Eli Lily, the joint venture benefited in acquiring the low cost sources, clinical trials and to increase the probability of exporting to Russia. Along with this, Eli Lilly gained the profitability from integration with RayBan as it provided the presence in the Indian market under the name of RayBan.
On the other hand, RayBan observed that the joint venture would be profitable in terms of cardio vascular, anti-cancer and anti-invective drugs provided by the company. Also, RayBan obtained strong image due to Lilly’s positive code of ethics as well as it would receive the access to international market especially the United states of America.
Along with this, the financial statement shows that Eli Lilly and RayBan joint venture made 8% growth and became independent and autocratic in 2000 to 2001.
2. What actions would you recommend for the RayBan partnership? What are the implications of your recommendation? How would you implement your recommendation?
Recommendation for RayBan partnership:
The two companies had different focuses as Eli Lilly was focusing on innovation while RayBan was focusing on the generics. As the joint venture grew mature, they concentrated more on the core activities and control on the decision making.
It is recommended that Eli Lilly should not accept to pay $ 70 million for Cranberry’s shares however, Lilly should evaluate the real value of the joint venture that it owns or develops the exit strategy through which the investment and risk can be carried further until Cranberry’s stocks reached to $70 million.
Implication of recommendation:
The joint venture was started with $7.1 million and initial equity of $3 million, both the companies had equal contribution. The joint ventures had $ 11 million in total assets and it was integrated in the Indian market and generated profit of $1 million in a year.
It was observed that in 1995, the Indian government allowed 100% of direct investment in the pharmaceutical industry and the industry is expected to grow 15% by 2015 and there may be risk in terms of the operations of the joint venture.
Implementation of strategy:
The first step should be to review the company’s and industry’s strategy in order to determine the synergy with the goal of JV and the long term contract would help to achieve better strategic fit.
The second step should be to assess the suitability of the joint venture and to make sure that it is fit with the firm’s goal, strategy and compatibility throughout the life of the venture.
The third step should be mutually written and signed agreement that discourses structure, objectives, financial and other major asses and resources contribution created in the joint venture
By following these steps, the joint venture would be successful and results in:
- Easily access to markets
- Strong distribution networks
- Increase capacity, staff and purchasing
- Increase the intellectual property rights
- Eliminate the need for borrowing funds.
Right strategy to enter in India:
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