Eli Lilly Should the Ranbaxy Essay

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The question is whether to seek another partner or to buy out the company. One of the benefits of the JV has been the Ranbaxy distribution network. Using another Indian partner would mean a change in this network, and that could compromise earnings potential because as the largest pharmaceutical company in India Ranbaxy has the best distribution network. In addition, there are cultural considerations -- other Indian companies may have difficulty dealing with the ethical standards of the joint venture. The members of the current JV have been trained in these ethical standards. In addition, Eli Lilly has worked hard to build its own brand name in India and associate that brand with its standards.

Recommendation and Conclusion

It is recommended that Eli Lilly purchase Ranbaxy's share in the subsidiary. There are still options for the two companies to work together, particularly in distribution. Even without Ranbaxy's distribution, Lilly has established a unique brand and culture for the company and it may be difficult to incorporate the culture of any other Indian company if the Ranbaxy share was sold to another Indian firm. Lilly would also lose a good distribution network, whereas it might be able to retain some of that network if it owns the subsidiary outright.

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There are challenges associated with buying Ranbaxy's share. Lilly does not know what the asking price for this share will be, and fears that it may be too high. They will need to set a maximum price that they think the share is worth to use in negotiations. However, there are significant downsides associated with bringing in another Indian partner that make that option a challenge. By maintaining control over the culture and form of the venture, Lilly stands a better chance of being able to reap the benefits of the changes in the Indian….....

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