Ranbaxy's Globalization Strategies and its Foray Into the US

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Case Details:

Case Code : BSTR188
Case Length : 17 Pages
Period : 1995-2005
Organization : Ranbaxy Laboratories Limited Plc.
Pub Date : 2005
Teaching Note :Not Available
Countries : US, India
Industry : Pharma

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Globalization Efforts

In India, the Drug Price Control Order (DPCO) was introduced in 1970 to ensure adequate availability of essential drugs at reasonable prices through direct control over drug prices by the Indian government. About 22 drugs and their formulations were under price control. The DPCO was amended in 1979 increasing the number of drugs under price control to 347.

These price controls limited the growth opportunities for Ranbaxy, and encouraged the company to expand abroad. Ranbaxy's journey towards globalization began in 1975. The company initially concentrated on selling bulk drugs and intermediates in the overseas markets. However, the gross margins in exporting bulk drugs were as low as 10% in the overseas markets, and at times, this was insufficient even to cover the cost of overseas sales and distribution (Refer Table I for the details of gross margins in global pharmaceutical industry in 1999). Parvinder once said to his colleagues who had doubts about the feasibility of succeeding in Western markets, "Ranbaxy cannot change India. What it can do is to create a pocket of excellence. Ranbaxy must be an island within India..."

The Globalization Strategy

Ranbaxy's globalization efforts were carried out in a clear sequence. It started by prioritizing markets, followed this by entering these markets to understand the business environment, and then proceeded to set up infrastructure and finally expand into these markets. To establish a noticeable presence, Ranbaxy made huge investments and also adopted the route of alliances.

The strategy Ranbaxy adopted was to acquire generic brands overseas, emphasize brand management, and enter markets with high potential. Ranbaxy's entry strategy varied depending on the country it was targeting. Several factors like gross national product (GNP), per capita income, health expenditure, and the local pharmaceutical market were taken into consideration. Ranbaxy looked at the range of products available in the market, patents, and demand for new and existing products. Then, it decided on the product that it would like to launch in the market. In some countries, Ranbaxy made acquisitions in order to strengthen its product portfolio. For instance, Ranbaxy acquired OHM Laboratories in the US in 1995...

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