ranbaxy - strategy management

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RANBAXY LABORATORIES LTD.

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Content• Introduction

1. Ranbaxy has the choice of continuing as the manufacturer of imitative generic drugs or becoming the developer of proprietary medicines. Discuss the pros and cons of each strategy. Could it do both?

2. Should Ranbaxy focus its attention on developing markets or the developed markets of the USA and Europe.

3. Does India have a suitable infrastructure for innovation.

• Conclusion

• References

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Introduction Ranbaxy Laboratories Limited is India's largest pharmaceutical company.

Ranbaxy was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor for a Japanese company Shionogi.

Headquarters Located in Gurgaon, Haryana, India

Incorporated on 16th June, 1961 at Delhi. Manufacture drugs, medicines, cosmetics and chemical products.

In 2008 acquired by Daiichi Sankyo Japanese co.

Global company, present in 46 countries and manufacturing ,facilities in 6 countries

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Emergent strategy - the decisions that come out from the complex processes in which managers interpret the intended strategy and adapt to changing external situation.

Mintzberg suggests only 10%–30% of intended strategy is realized.

Mintzberg, H., & Waters, J. A. (1985)

External factors (political situation, production cost, labor cost)

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Patent Act of 1970 (7 years)

WTO accession in 1995

2005 another

Patent act (20 years)

Rising production

cost

Stiff competition

in generic market

Rapid developments

in infrastructure

(Chaudhuri, S. 2005)

External Environment

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Before a suitable strategy can be found, it is helpful to consider characteristics of both products:

– Generic drugs - Product characteristics • low price and high volume• patent free•trust unimportant• brand unimportant (e.g. asprin, paracetemol, etc.)

– Requirement = low –cost production destination

– Patent drugs – Product characteristics• High cost of R&D• Highly skilled R&D• Long time R&D (5 years minimum)•Trust important•Brand important (e.g. Glaxo, Zeneca, Pfizer, etc.)

– Requirement – highly educated, technically advanced, high trust, well connected (with other complimentary pharmaceutical organisations, universities, etc.)


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Ranbaxy’s strategic resources

• Cheap labour • Continuingly improving level of skills • IT technology• Acquired company and strategic alliances (ex: Germany’s Betapharm

Arzneimittel) • Improvements in infrastructure


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Generic Drugs Patent medicines

+ low product price+ high revenue + researchers at Datamonitor predicts that the patent expirations will be from now till 2016. (pick 2011-12. ex: clopidogrel bisulfate (Plavix), for the first time)-Rising production cost in India compeered to Newly developing countries (Indonesia, China, Philippines)- 20 years patent protection

+ 10 years without taxes on patent medicines (in India)+ high potential success as improving education level, rising IT technology+ middle class as potential segment for sales - high investment in R&D- long period to invent and testing new product- high cost of advertising

(Chaudhuri, S. 2005)

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1. Ranbaxy has the choice of continuing as the manufacturer of imitative generic drugs or becoming the developer of proprietary medicines. Discuss the pros and cons of each strategy. Could it do both? For an organisation to obtain a sustainable competitive advantage Michael Porter suggested that they should follow either one of three generic strategies.

Strategy 1 Cost Leadership. Strategy 2: Niche strategies Strategy 3: Differentiation

Patent product

Focus on manufacturing

generic

Generate profit

Recommendation : Ranbaxy is rapidly loosing one of its competitive advantage such as low production cost as India is fast developing country, thus production cost increases, so to be sustainable there is a need to move manufacturing to N.D.Cs.

Haberberg and Rieple, 2008

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If Ranbaxy has the appropriate strategic resources, it is recommended that it:

• Continues to produce generic drugs, possibly moving production to a destination where production factors are lower;

• Begin developing new patented drugs in India.

Conclusion:


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2.Should Ranbaxy focus its attention on developing markets or the developed markets of the USA and Europe.

Potter’s Diamond:Presence of High quality, Specialized inputs available to Firm: Skilled & Educated work force.

The rules and incentives that govern competition: Government policies and investment programs to encourage innovation

Local availability of supporting industries in clusters than an Isolation

The nature and sophistication of local customer needs

Potter (1990)

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Potter’s Diamond: Developing Countries USA and Europe

Firm’s structure, strategy and rivalry

High level of competition in generic market, which is stimulate innovation

High level of competition in generic market, which is stimulate innovation (Merck & Co., Inc)

Factors conditions Low cost of production (Russia, China), increasing infrastructure,

High level of workers skills, Good infrastructure, Participation in International Organization (WTO,NAFTA,EU)

Demand condition Growing demand, middle class High level of life an demand

Related and supporting industries

Improving level of educations High level of education and IT technologies

Ranbaxy should consider partnerships in Russia and China because India is geographically, culturally, ideologically and politically closer to Russia and China than to Europe or US.

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Recommendations:Merger and Acquisition, which will give access to foreign market and resource.

Partnership and Strategic Alliances to create synergy effect.

create TRUST and IMAGE of the Ranbaxy company

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India’s Investment for Infrastructure in following sectors (US$ billion)

Geiger and Rao (2009)

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India’s Employment scale

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Global Competitive Index (GCI) today is portraying mixed picture of India’s competitiveness as it is constrained by few structural problems simultaneously having rapid economic growth being the world fastest growing economy:

Pro ‘s Con ‘s

• Huge domestic market and rapid growing middleclass boosting investment and consumption.

• Not having very strong groundwork of competitiveness to sustain and accelerate its growth in near future.

• Sophisticated financial markets which is helping business to develops.

• Increasing red tape and corruption in governmental institutions.

• Knack for innovation with high degree of business sophistication .

• Investing in vital areas of competitiveness which will help India when its value chain will move upwards.


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• The present infrastructure is improving, especially in some areas (Bangalore, Mumbai and Delhi).

– Education– Transportation – Energy supply– institutional and regulatory infrastructure for trials and pharmaceutical – Communications

– Heterogeneous Population.

Kapur And Ramamurti (2001),


Improving

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Conclusion :

Following key areas efficiently tackles with the problems discussed earlier:

• India does have a suitable infrastructure for innovation when compared in certain areas with its competing countries.

• Also, India is at par with much more advanced economies in the world having vibrant democracy and favorable demographics trends.

THUS, answer is YES India does have suitable infrastructure for innovation also, in Pharmaceutical industry.

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Conclusion

• Ranbaxy should consider its production on both products and move its manufacturing to N.D.C because production cost in India is increasing fast (Russia and China).

• Company should expand to developing countries as well as to US and Europe.

• India is at par with much more advanced economies in the world having vibrant democracy and favorable demographics trends and does have suitable infrastructure for innovation also, in Pharmaceutical industry.

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References

Potter, M., (1990), The competitive advantage of nations, London : Macmillan

Mintzberg, H., & Waters, J. A. (1985). Of strategies, deliberate and emergent. Strategic

Management Journal, p.p.257–272.

Chaudhuri, S. (2005) The WTO and India's Pharmaceutical Industry: Patent Protection,

TRIPS, and Developing Countries, Oxford University Press Pharmacy Times, p.p.52-

52.

Kapur , D. And Ramamurti, R., (2001), “India’s emerging competitive advantage in

services”, Academy of management Executive , 15 (2)

Haberberg, A. and Rieple, A.,(2008), Strategic Management, Oxford university Press

NY

Geiger, T., and Rao S.P. (2009) , “The india’s competativeness review”, world economic

forum.

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THANK YOU

ranbaxy - strategy management

Documents

intended strategy

suitable strategy

emergent strategy

generic strategies

niche strategies strategy

rd rising production

aslow production cost

generic drugspatent