2. 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
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3. 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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4. 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?
Emergent strategy -
the decisions that
come out from the
complex processes in
which managers
interpret the intended
strategy and adapt to
changing external
situation.
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Mintzberg suggests only 10%–30% of intended strategy is
realized.
External factors (political situation, production cost, labor
cost)
5. 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?
Patent Act of
1970 (7 years)
WTO
accession
in 1995
2005
another
Patent act
(20 years)
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Rising
production
cost
Stiff
competitio
n in
generic
market
Rapid
development
s in
infrastructur
e
External
Environment
6. 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?
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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7. 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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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?
8. 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?
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
8(Chaudhuri, S. 2005)
9. 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.
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Strategy 1 Cost
Leadership.
Strategy 2: Niche strategiesStrategy 3: Differentiation
Patent product
Focus on
manufacturin
g 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
10. 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?
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.
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Conclusion:
11. 2.Should Ranbaxy focus its attention on developing markets
or the developed markets of the USA and Europe.
Potter’s Diamond:
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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)
12. 2. Should Ranbaxy focus its attention on developing markets
or the developed markets of the USA and Europe.
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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.
13. 2. Should Ranbaxy focus its attention on developing markets
or the developed markets of the USA and Europe.
Recommendations:
Merger and Acquisition,
which will give access
to foreign market
and resource.
Partnership and Strategic Alliances
to create synergy effect.
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create TRUST and
IMAGE of the
Ranbaxy company
14. 3. Does India have a suitable infrastructure for innovation.
14
India’s Investment for Infrastructure in following sectors (US$ billion)
15. 3. Does India have a suitable infrastructure for innovation.
15
India’s Employment scale
16. 3. Does India have a suitable infrastructure for innovation.
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:
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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.
17. 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.
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3. Does India have a suitable infrastructure for innovation.
I
m
p
r
o
v
i
n
g
18. 3. Does India have a suitable infrastructure for innovation.
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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.
19. 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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