Ranbaxy has a choice between continuing as a manufacturer of generic drugs or developing proprietary medicines. It could potentially do both by continuing low-cost generic production while beginning to develop patented drugs in India, which has a suitable but improving infrastructure for innovation. Ranbaxy should focus on both developing and developed markets through mergers and strategic partnerships that give it access to foreign markets and resources, especially in geographically and culturally close countries like Russia and China.

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
• References
2

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
3

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?
Mintzberg suggests only 10%–30% of intended strategy is realized.
External factors (political situation, production cost, labor cost)
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, H., & Waters, J. A. (1985) 4

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?
External Environment
Rising
production cost Patent Act of
1970 (7 years)
Rapid Stiff 2005
developments competition WTO
another
in in generic accession
Patent act
infrastructure market in 1995
(20 years)
(Chaudhuri, S. 2005) 5

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.)
6

7. 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?
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
7

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 + 10 years without taxes on patent medicines
+ high revenue (in India)
+ researchers at Datamonitor predicts that the + high potential success as improving
patent expirations will be from now till 2016. education level, rising IT technology
(pick 2011-12. ex: clopidogrel bisulfate (Plavix), + middle class as potential segment for sales
for the first time) - high investment in R&D
-Rising production cost in India compeered to - long period to invent and testing new product
Newly developing countries (Indonesia, China, - high cost of advertising
Philippines)
- 20 years patent protection
(Chaudhuri, S. 2005) 8

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.
Strategy 1 Cost Leadership. Strategy 2: Niche strategies Strategy 3: Differentiation
Generate profit Patent product
Focus on
manufacturing
generic
Haberberg and Rieple, 2008
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. 9

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?
Conclusion:
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.
10

11. 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.
Local availability of supporting
industries in clusters than an
Isolation
The nature and sophistication of
local customer needs
The rules and incentives that
govern competition: Government
policies and investment programs
to encourage innovation
Potter (1990)
11

12. 2. Should Ranbaxy focus its attention on developing markets or the
developed markets of the USA and Europe.
Potter’s Diamond: Developing Countries USA and Europe
Firm’s structure, strategy and High level of competition in High level of competition in
rivalry generic market, which is generic market, which is
stimulate innovation stimulate innovation (Merck &
Co., Inc)
Factors conditions Low cost of production (Russia, High level of workers skills,
China), increasing Good infrastructure,
infrastructure, Participation in International
Organization (WTO,NAFTA,EU)
Demand condition Growing demand, middle class High level of life an demand
Related and supporting Improving level of educations High level of education and IT
industries 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. 12

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 create TRUST and
to foreign market IMAGE of the Ranbaxy
company
and resource.
 Partnership and Strategic Alliances
to create synergy effect.
13

14. 3. Does India have a suitable infrastructure for innovation.
India’s Investment for Infrastructure in following sectors (US$ billion)
Geiger and Rao (2009)
14

15. 3. Does India have a suitable infrastructure for innovation.
India’s Employment scale
Geiger and Rao (2009)
15

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:
Pro ‘s Con ‘s
• Huge domestic market and rapid • Not having very strong groundwork of
growing middleclass boosting investment competitiveness to sustain and accelerate
and consumption. its growth in near future.
• Sophisticated financial markets which is • Increasing red tape and corruption in
helping business to develops. 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.
Geiger and Rao (2009) 16

17. 3. Does India have a suitable infrastructure for innovation.
• The present infrastructure is improving, especially in some areas
(Bangalore, Mumbai and Delhi).
– Education
– Transportation I
m
– Energy supply p
r
– institutional and regulatory infrastructure o
v
i
for trials and pharmaceutical n
g
– Communications
– Heterogeneous Population.
Kapur And Ramamurti (2001),
17

18. 3. Does India have a suitable infrastructure for innovation.
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.
18

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.
19

20. 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
20
forum.

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