Globalisation, Ranbaxy style

US to become largest market by 2003

Corporate India is only beginning to respond to the challenge of globalisation. To be sure, quite a few companies do indeed aspire to be global players, but they have only succeeded up to a point or in specific conjunctures like being the world’s lowest cost producer of scooters, aluminium or steel. The transition from being lowest cost producers to becoming world class hasn’t happened till now. A low ranking in Asia’s 1,000 largest companies is all that has been achieved so far. Corporates like Ranbaxy Laboratories Ltd, however, are different than the rest in their strategies of globalisation. The company was guided by a clear vision of becoming a research-based international pharmaceutical company and has made determined strides to acquire an international profile since the 1990s. These efforts appear to be paying off, if the speech of Mr D S Brar, CEO of Ranbaxy — at a meeting on “Globalising Indian business — The way forward” organised by the Confederation of Indian Industry — is any indication. The company’s US operations will become the largest contributor to its global sales by 2003. Ranbaxy’s sales to the American market, which started only in February 1998, are expected to cross $220 million by then. Ten years from now, the company’s corporate strategy also will be dictated by its US strategy. These are noteworthy statements from one of India’s multinational companies. But how did Ranbaxy succeed in getting this far?

Like most Indian corporates, the company also had to overcome the “liability of Indianness” — to borrow an expression of Sumantra Ghoshal, Gita Piramal and Christopher Bartlett in the book Managing radical change. Expectations of low cost, low price and low margins bedevil their efforts to go global. Amidst such expectations, margins obviously cannot be raised to enhance global competitiveness. Despite such constraints, however, Ranbaxy responded by moving up the value curve: from bulk drugs and intermediates to generics and conventional dosage forms. Then on to value added and branded generics and later to new drug delivery systems. The ultimate ambition is of course to participate in new drug discoveries in the future. Moving up such a curve improves the bottomline as margins on bulk substances and intermediates do not exceed 10 per cent but go up to 100 per cent or more for new drug discoveries. Ranbaxy also realised that it cannot make headway in going global without having a major US presence — which it sought to do by acquiring critical mass through acquisitions. Ranbaxy’s surefooted moves to stake a major American presence deserve to be closely tracked by corporate India as it comes to terms with globalisation.