Project Ranbaxy

2 | P a g e Ranbaxy Laboratories Ltd., India.

Table of Contents

1. Introduction..........................................................................................................................................4

1.1 Mission, Vission and aspirations.......................................................................................................5

1.2 Growth of Ranbaxy............................................................................................................................6

2. Organizational Structure.......................................................................................................................7

3. Core – competency.............................................................................................................................11

4. Life at Ranbaxy..................................................................................................................................11

5. Culture at Ranbaxy.............................................................................................................................12

6. Business Model..................................................................................................................................13

7. Factors leading to growth...................................................................................................................13

7.1. Focus on Differentiated Products................................................................................................13

7.2. R&D in Ranbaxy.........................................................................................................................15

7.3. First – Mover Advantage............................................................................................................15

7.4. Information Security and Information synergy...........................................................................16

7.5. Acquisitions................................................................................................................................17

7.6. Agreements and collaboration....................................................................................................17

8. Corporate Social Responsibility.........................................................................................................18

9. Decline of Ranbaxy............................................................................................................................20

10. Analysis of the decline....................................................................................................................21

11. Weitzel and Jonsson’s Model of Organizational Decline...............................................................23

12. SWOT Analysis..............................................................................................................................24

12.1. Strengths........................................................................................................................................24

12.2. Weaknesses...................................................................................................................................24

12.3. Opportunities.................................................................................................................................24

Group A2 Organizational Theory Design and Change


12.4. Threats...........................................................................................................................................24

12.5. Top Competitors...........................................................................................................................25

13. References.......................................................................................................................................25



1. Introduction

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

Shionogi. The name Ranbaxy is a portmanteau word from the names of its first owners Ranbir and

Gurbax. Gurbax Singh had taken a loan from Bhai Mohan Singh’s finance company Bhai Traders and

Financiers Pvt. Ltd, but was unable to repay the money and transferred ownership of his company

instead. Bhai Mohan Singh bought the company in 1952 from his cousins Ranbir Singh and Gurbax

Singh. Bhai Mohan Singh started off by selling imported drugs. In 1956, India banned the import of

finished pharma products and Ranbaxy opened a manufacturing plant in Okhla. That office is now with

Bhai Mohan Singh’s youngest son Analjit Singh (the promoter of the Max group of companies). After

Bhai Mohan Singh's son Parvinder Singh joined the company in 1967, the company saw a significant

transformation in its business and scale. It was Parvinder’s vision that Ranbaxy invest in both R&D as

well as manufacturing in order to survive. In 1973, Ranbaxy went in for a public issue “to bankroll the

(R&D) project and raised Rs 70 lakh from the market. And in 1977, Davinder Singh Brar joined

Ranbaxy. The duo—Parvinder Singh and Brar—are widely credited with turning around Ranbaxy’s

fortunes. Parvinder’s son, Malvinder Mohan Singh took over as the CEO in 2006. Both sons Malvinder

Mohan Singh and Shivinder Mohan Singh sold the company to the Japanese company Daiichi Sankyo in

June 2008.


http://en.wikipedia.org/wiki/Daiichi_Sankyo

http://en.wikipedia.org/wiki/Shivinder_Mohan_Singh

http://en.wikipedia.org/wiki/Malvinder_Mohan_Singh

http://en.wikipedia.org/wiki/Malvinder_Mohan_Singh

http://en.wikipedia.org/wiki/Portmanteau

http://en.wikipedia.org/wiki/Shionogi


1.1 Mission, Vission and aspirations


Values of Ranbaxy

Customer Satisfaction High quality products Enhance wealth of share holders

Practice dignity and equity Foster mutually beneficial relationship Be responsible corporate citizen


In 1993, Ranbaxy adopted its Mission – a goal that explained why the organization exists and what it is

to be doing. Aspirations define the official goals that act as guiding principles for the organization.

Ranbaxy defines above some of its terminal values which reflect a desired end state that the

organization wishes to achieve.



1.2 Growth of Ranbaxy

Year Significance1961 Company Incorporated

1973* Ranbaxy goes public* Multipurpose chemical plant set up in Mohali for manufacture of APIs

77 First JV in Lagos (Nigeria) is setup

85* Ranbaxy Research Foundation is established.* Stancare, Ranbaxy's second pharmaceutical marketing div. Starts functioning

87 Production start-up at modern APIs plant at Toansa (Punjab)88 Toansa plant gets US FDA approval90 First US patent granted – Doxycyline91 New facility at Mohali92 Agreement with Eli Lily of USA to set up JV in India to market Eli Lily's products

93* Agreement to set up JV in China - Guangzhou China Ltd* Enunciates corporate mission - to become a research based international Pharmaceutical Co.

94

* New Research Centre at Gurgaon* Registered HQ in UK & USA* Fermentation plant Paonta Sahib is commissioned* GDR listed in Luxembourgh Stock Exchange

95 Acquisition of Ohm Labs. Inc. – US

97RLL crossed sales T/O of Rs 10,000 million * Exports reached all time high - Rs 5000 million

98 Enters world's largest pharma market – US with Products under its own name

2000* Acquires Bayer's Generics business in Germany* Forays into Brazil. Largest pharma market in S America

2001New manufacturing facility in VietnamRanbaxy USA crosses sales of $ 100 mn - fastest growing co. in US

2003* Economics Times award for Corporate Excellence - The Co. of the Year 2002-03* Ranbaxy & GSK enter into global alliance for drug discovery and dev.

2004Acquires Aventis and starts ops in France* Elite club of Billion Dollar Cos.

2005Launches Ops in CanadaThird R&D facility in Gurgaon

2006

Acquisition in S AfricaAcquires GSK Businesses in Italy & SpainAcquisition in RomaniaStrategic alliance with zenotech in global markets

2008Redefines business model - Daiichi Sankyo as majority partner to create strategic combination of an Innovator & Generic Powerhouse

2009 Reconstitution of Executive leadership after Sankyo takeover


Board of Directors

Independent Director

Non Executive & Independent Director

Chief Executive Officer & Managing Director


Non Executive &Non Independent Director

Shareholders

Executive Committee

Mr. Ramesh L. AdigePresident, Corporate Affairs &

Global Corporate Communications

Mr. David BriskmanChief Information Officer

Mr. Omesh SethiChief Financial Officer

Mr. Dipak ChattarajPresident, Corporate

Development & Strategy

Dr. Sudarshan K. AroraPresident, R&D (Generics,

NDDS & Drug Development)

Dr. T G ChandrashekharVice President, Global Quality

& Analytical Research

Mr. Bhagwat YagnikHead – Global Human

Resources

Mr. Arun SawhneyPresident, API GBU, Global Manufacturing & Supply

Chain


2. Organizational Structure



BOARD OF DIRECTORS

Dr. Tsutomu Une

Chairman Non Executive & Non independent Director.

Dr. Tsutomu Une was inducted as a Director on the Board of Ranbaxy Laboratories

Limited on December 19, 2008 and appointed as Chairman on May 24, 2009. Dr. Une joined Daiichi

Pharmaceutical Company Limited (Daiichi), Japan in April 1970 and has held many important

managerial positions. He was inducted on the Board of Daiichi in June 1999 and subsequently served as

Managing Director for various functions during October 2002 to June 2006, when he was promoted as

Senior Managing Director, Global Corporate Strategy of Daiichi. Dr. Une was inducted as Director in

the Board of Daiichi Sankyo Company Limited in September 2005 and has been a Member of the

Board, Senior Executive Officer, Global Corporate Strategy of Daiichi Sankyo since April 2007. Dr.

Une is a graduate from Hokkaido University School of Veterinary Medicine and holds Ph.D. in

Microbiology.

Mr. Atul Sobti

Chief Executive Officer & Managing Director

In his current role he is responsible for the global business operations of the Company

encompassing pharmaceuticals, consumer healthcare, API, manufacturing and R&D. Prior to joining

Ranbaxy, he spent seven years at Hero Honda and left them as the Executive Director, Sales, Marketing,

Finance and HR. 30 years of his career spans over diverse industries such as durables, information

technology, services, automobiles and now pharmaceuticals. Mr. Sobti joined Ranbaxy in October 2005,

as the President, India, Middle East, Asia Pacific and the Global Consumer Healthcare business and was

elevated to Chief Operating Officer in January 2007. An alumnus of the Indian Institute of Management,

Ahmedabad, Mr. Sobti completed his graduation in Economics (Hons) from St. Stephens College,

University of Delhi.


http://www.ranbaxy.com/aboutus/Executiveteam_dispnew.aspx?id=69&flag=



Mr. Takashi Shoda

Non Executive & Non Independent Director

Mr. Takashi Shoda was inducted as a Director on the Board of Ranbaxy Laboratories

Limited on December 19, 2008. Mr. Shoda graduated from Faculty of Pharmacy, Tokyo University in

March 1972 and immediately joined Sankyo Company Limited, Japan (“Sankyo”), where he held

various important positions mainly in the international operations group. In June, 2001 he was elected as

Director of the Board of Sankyo and concurrently assumed the position of General Manager,

International Pharmaceutical Division. He was then promoted to Managing Director in the following

year and in June 2003 became its President and Representative Director. Mr. Shoda is President and

Chief Executive Officer of Daiichi Sankyo Company Limited since September 28, 2005.

Dr. Anthony H. Wild


Dr. Anthony H. Wild was inducted as a Director on the Board of Ranbaxy Laboratories

Limited on December 19, 2008. He is the co-founder and General Partner of BOWS Pharmaceuticals

AG. Until its acquisition by Meda AB in August 2007, he was the Chairman of the Med Pointe

Pharmaceuticals Inc., having served also as CEO from 2001 to 2006. MedPointe was formed around

2001 by the acquisition of the Carter-Wallace Company by MedPointe Capital Partners LLC, an

investment group founded by Dr. Wild in the year 2000. Between 1995 and 2000, Dr. Wild worked with

Warner-Lambert Company of Morris Plains (NJ) as the Executive Vice President and President of its

Global Pharmaceuticals Sector since 1996 till its acquisition by Pfizer as part of its hostile acquisition in

2000. Mr. Wild graduated in 1968 with an Honors degree in Chemistry from University of York and

also holds a Ph.D. in Physical Chemistry in 1971 from University of Cambridge.

Mr. Rajesh V. Shah







Mr. Rajesh V. Shah was inducted as a Director on the Board of Ranbaxy Laboratories Limited on

December 19, 2008. Mr. Shah is the Co-Chairman and Managing Director of Mukand Ltd., Mumbai. He

has in the past served as an Independent Director on the boards of ONGC Limited and Hindustan

Petroleum Limited. He has also served as President of the CII during 1998-99 and held leadership

positions in the Young Presidents Organization (YPO). Mr. Shah has completed Master of Arts from the

University of Cambridge, UK, Masters in Business Administration from the University of California,

Berkeley and has attended an Executive Management Programme at the Harvard Business School, USA.

Mr. Akihiro Watanabe


Mr. Akhiro Watanabe was inducted as a Director on the Board of the Ranbaxy

Laboratories Limited on December 19, 2008. A founding partner of GCA and the founder

of GCA’s predecessor company, Global Corporate Advisory, Mr. Watanabe has over 25 years

experience in providing M&A advisory services both in Japan and overseas. He has spent 20 years with

KPMG primarily focusing on M&A advisory and M&A transaction related services. He is also a visiting

professor at the Business School at Kobe University and Chuo University as well as at the postgraduate

law school at Hitotsubashi University and a frequent speaker on industry panels related to M&A topics

including cross-border transactions, MBOs and takeover defense strategies. Mr. Watanabe is a Japanese

CPA and a graduate in Commerce and Accounting.

Mr. Percy ShroffNon Executive & Independent Director

Mr. Percy Shroff was inducted as a Director on the Board of Ranbaxy Laboratories

Limited on March 27, 2009. Mr. Shroff is a graduate in Arts from Whittier College,

California. He has an experience of over 20 years in the medical field in Japan and India and was

instrumental in establishing the India offices as well as business operations of Elekta AB, a Swedish

multinational providing advanced clinical solution. Mr. Shroff has held various managerial positions in





the Elekta Group in India as well as overseas since he joined the company in 1991. In 1997, he was

appointed as Managing Director - India Head of Elekta Instrument India Private Limited.

3. Core – competency

4. Life at Ranbaxy


Low cost, innovative and high quality product flow

Manufacturing Efficien

cies

Aggressive

Marketing

R&DCapabilit

iesHighly competitive

domestic market

Labor

Infrastructure

Global Quality

Standards

Skilled Scientist Pool

- Generics - Innovative Research

Process

ChemistryExpertise


A career at Ranbaxy means an opportunity for ample learning & growth. It offers avenues to work

across the globe alongside the finest minds. The Company offers a challenging assignment, a world

class working environment, professional management, competitive salaries, and stock options along

with exceptional rewards. Group Life Insurance, Medical Insurance and Pension plans are a few

examples of the benefits provided to the employees and their dependents. Stock ownership is a part of

the compensation for the managers early in their career at Ranbaxy: business results reflect straight

away in their pay slip.

Such opportunities, defined career paths and allocation of rewards provide motivation to the

managers and employees to work in the best interests of the company. The flexibility to work across

regions develops the skills of the employee and keeps their motivation level and learning curve high.

It minimizes the need for the employee to look out for better avenues and as such builds a long lasting

team and provides stability to the human resource capital. It also, to some extent, minimizes the

Agency problem. By aligning the goals of the employees with that of the companies by giving them

stock options is a further act in this direction. By allowing people to work across in Ranbaxy’s

different functions (cross- functional teams), they are empowered to direct the value creation

activities necessary to complete different projects.

5. Culture at Ranbaxy

Opportunities have never being a constraint for the deserving. Ranbaxy believe in employee growth that

goes beyond vertical movements and change in designations. Potential and performance are the pillars

of career progression at Ranbaxy. A robust development process supports this. This shows that the

culture at Ranbaxy is highly organic.



6. Business Model

7. Factors leading to growth

The key to Ranbaxy’s growth lay in the strategic decisions taken by its management from time to time.

These strategies – specific patterns of decisions and actions – helped them achieve a competitive

advantage. It exemplifies how symbiotic interdependencies can be managed and harnessed for the

organization’s benefit, by manipulating the specific and general environmental forces. Ranbaxy’s

main strategy to manage its environmental forces seems to be through forming strategic alliances for

various products and markets. The company has followed an r-strategy i.e. the strategy of entering a

new environment early, and has thus reaped the benefits of being an early entrant in new markets.

7.1. Focus on Differentiated Products

The Company realized the importance of having a versatile product portfolio and thus is focusing on

offering differentiated/value-added new products to the Indian masses. Ranbaxy has accelerated its pace

to bring in new differentiated products in the Indian market to consolidate its leadership position.


Global Reach Developed &

Emerging markets

Product

Portfolio Generics, Branded Gx

Branded, OTC

Innovative

Research NCE, NDDS, Niche FTF

Therapeutic

Width & DepthAcute, Chronic


Ranbaxy is building upon the practice of Related Diversification – entry into a new domain that is

related in some way to an organization’s domain – to gain a competitive advantage.

Examples

1. Rank in Therapy Segments

Over the last few years, Ranbaxy has realigned its domestic operations to the needs of its target

customer groups to have a more focused relationship with the doctors. This is aimed at providing

customer specific quality services surpassing expectations.

By forming relationship with doctors, demonstrates that Ranbaxy manages symbiotic resource

interdependencies by the way of co-optation to manage its specific environment better.

2. Entering into the Oncology Segment

Since Ranbaxy did not have a significant presence in the Oncology segment, it entered into a

strategic alliance with Zenotech Laboratories Ltd (Zenotech Labs) of Hyderabad, India, a

company with a stronghold in this segment.

3. Strengthening Presence in the Asthma Segment

Ranbaxy has entered into an ‘In-licensing’ agreement with Eurodrug Laboratories, the

Netherlands-based Pharma company for the Asthma product Doxophylline – a Novel Xanthine

Bronchodilator. It is a strategic step in the direction of expanding the product portfolio through

differentiated products for the Indian market, in the post-patent era.

4. NCE Products – India Focus

Recently a licensing agreement with a Swissbio-pharmaceutical company, Debiopharm, was

signed for the New Chemical Entity (NCE) Drug in the Gastroenterology segment.



5. Strengthening Product Basket in New Markets

In Canada, soon after the launch of its products in 2005, Ranbaxy is further expanding its

product portfolio through in-licensing and has already emerged as a pioneer in this area. In mid

2006, Ranbaxy Pharmaceuticals Canada Inc (RPCI) and Janssen-Ortho Inc (JOI) entered into a

licensing and supply agreement for a generic version of Risperidone compressed tablets, sold

underRanbaxy’s label, Ran™ Risperidone.

In-licensing agreement demonstrates that Ranbaxy makes use of the informal strategy of long term

contracts to manage its resource interdependencies.

7.2. R&D in Ranbaxy

NDDR – A Separate Entity Decentralization

Ranbaxy received an in-principle approval from the Board of Directors to de-merge its Drug Discovery

Research (DDR) operation. This is a significant step in creating an independent pathway for DDR with

dedicated resources and enhanced focus for long-term value building. Ranbaxy's state-of-the-art research

infrastructure and scientific talent pool can be more effectively leveraged through an independent

vehicle that better aligns assets with priorities to accelerate the company's drug discovery programs. The

resulting operational freedom and flexibility will also help to open up new growth opportunities, while

providing a platform for increased collaboration.

By the way of decentralization of NDDR, Ranbaxy has promoted flexibility and responsiveness by

allowing the research department to make on the spot decisions. Ranbaxy practices division of labor

and specialization by allocating dedicated resources and creating scientific talent pool to DDR. The

core competency of DDR is to discover new drugs.

7.3. First – Mover Advantage

Ranbaxy saw a great business opportunity in Japan, the world’s second largest pharma market, and

hence entered the market in the year 2002 through a strategic alliance with a mid sized research

pharmaceutical company, Nippon Chemiphar Co, Ltd (NC) of Japan. Ranbaxy acquired a 10% equity



stake in its generic subsidiary Nihon Pharmaceutical Industry Co, Ltd (NPI). The company further

consolidated its presence in Japan by increasing its equity stake in the NPI, from 10% to 50% in 2006

and NPI, thus, became a 50:50 joint venture (JV) between Ranbaxy and NC.

7.4. Information Security and Information synergy

Since early 2006, Information Security (Infosec) has been a priority at Ranbaxy. Dr. Malvinder Mohan

Singh, CEO and MD, Ranbaxy, took the lead to introduce. ‘Operation Safed Sagar’ – an initiative

targeted at protecting the company’s information assets. The program is focused on bringing behavioral

change in people, sensitizing them to the importance of Information Security.

A policy framework called the Information Security Management System (ISMS) has been introduced

and Standard Operating Procedures (SOPs) laid down. A verification and validation framework has been

formulated in the ISMS to ensure sustenance of this initiative and eventual assimilation into the

Ranbaxy way. The sensitization process started through a well-crafted communication program

highlighting the risks and the appropriate behavior. Specific policies and procedures have been

introduced. Through concerted efforts of various teams involved in the project, Ranbaxy employees

have gradually understood the importance of Information Security as the rule of CIA, which is

Confidentiality, Integrity and Availability.


Ranbaxy


By using Information security Ranbaxy has demonstrated that is uses IT

To make critical information accessible to employees.

To facilitate beliefs norms and values of Ranbaxy.

To enhance motivational effects of cultural values.

7.5. Acquisitions

Acquisitions in a row

June 2005 Efarmes in Spain

March 2006 Senetek in the US

March 2006 Allen in Italy

March 2006 Terapia inRomania

March 2006 Ethimed in Belgium

July 2006 Mundogen in Spain

Sep 2006 Cardinal Drugs in India

Dec 2006 Be-Tabs in South Africa

In the year of 2007 alone, Ranbaxy made an acquisition of 13 established and well recognized brands of

the dermatology segment from Bristol-Myers Squibb in the US.

Thus Ranbaxy has aggressively adopted merger and takeover strategy for growth in newer markets.

7.6. Agreements and collaboration

7.6.1. Agreement with GSK Extended

Ranbaxy extended its strategic R&D alliance with GlaxoSmithKline (GSK), established in 2003, to

provide Ranbaxy expanded drug development responsibilities and further financial opportunities.

Ranbaxy’s role, which was to conduct the optimization chemistry required to progress drug leads to the

stage of candidate selection, enlarges to advance leads beyond candidate selection, to completion of



clinical proof of concept. GSK thereafter will conduct further clinical development for each program

and take resulting products through the regulatory approval process to final commercialization.

By forming strategic alliance with its competitor, GSK, Ranbaxy has demonstrated that it uses

strategic alliance to manage its competitive interdependencies.

7.6.2. Collaborating with DST

In another development, Ranbaxy entered into a collaborative agreement with the Department of

Science & Technology (DST), Government of India, in the area of New Drug Discovery Research

(NDDR). Under the agreement, DST will provide financial support by way of soft loans to Ranbaxy, for

two NDDR programs in the therapeutic areas of Anti-infectives and Inflammation. The funding will

enable Ranbaxy to conduct the preclinical toxicity studies/safety studies of the Company's NCEs in

these areas and take the molecules up to human Phase-I clinical trials.

On the basis of its strong fundamentals of innovation, entrepreneurship and aggressive marketing,

Ranbaxy has carved a formidable position at home and a growing footprint in the global pharma

market. The Company has displayed all the qualities of a nimble, agile and a dynamic organization

that has made balanced and strategic alliances in the developed as well as the emerging markets. The

company has been able to tackle many of the environmental uncertainties by way of collaboration,

innovation and alliances.

8. Corporate Social Responsibility

An essential component of Ranbaxy’s corporate social responsibility is to take care of the

community.

Based on the theme ‘Health for All’, Ranbaxy set up ‘Ranbaxy Rural Development Trust’ in

1978; later re-christened as Ranbaxy Community Health Care Society (RCHS) in 1994.



Provides a blend of curative, preventive and health promoting services amply supported by

laboratory services covering areas of maternal child health, family planning, adolescent health,

reproductive health and education.

AIDS awareness and counselling is also a priority component of the programme.

Established very meaningful and useful partnerships with the Government, Medical Colleges,

NGO’s , Educational Institutions, Confederation of Indian Industry (CII) and other likeminded

agencies which has helped RCHS to broaden its scope of services.



9. Decline of Ranbaxy

The problems at Ranbaxy started with the sudden resignation of its CEO Mr. D.S Brar in 2004, under

whose leadership, Ranbaxy had witnessed some of its best years. Ranbaxy had grown rapidly in the late

1990s and the early 2000s. Its revenue grew from Rs.1, 560 crore in 1999 to Rs.3, 614 crore in 2004.

The company became a regular in the list of top 10 companies on the Bombay Stock Exchange (BSE) in

terms of market capitalization. Mr. Brar had long been involved in the progress of the company, and his

resignation, under unpleasant and unclear terms raised apprehensions among the share holders. Mr.D.S

Brar was replaced by Mr. Brian Tempest, who had previously been regional director (Europe,

Commonwealth of independent states and Africa), but was however just warming the seat for the next

CEO Dr.Malvinder Singh who was just 33 yrs old.

In September, 2008 the U.S. Food and Drug Administration (FDA) banned imports of more than 30

generic drugs made in India by Ranbaxy Laboratories Ltd. In banning the generic drugs’ importation,

the FDA cited safety concerns over Ranbaxy’s production practices at two facilities, namely, Dewas and

Paonta Sahib. However, the problems at the Ranbaxy facilities relate to the audit of the firm’s drug

manufacturing processes, and not to the specific failure of any Ranbaxy product to meet its required

specifications or to reports of human illness due to a manufacturing problem with Ranbaxy products.

Ranbaxy is also the focus of a separate criminal investigation into whether it submitted fraudulent data

to the FDA that allowed sale of substandard drugs. The import ban affects generic versions of several

popular medicines, including the anti-cholesterol drug Zocor; Acyclovir, which treats herpes; the

heartburn pill Zantac; and AIDS drugs. Because these drugs can be supplied by other generic drug

manufacturers, the FDA does not expect a medicine shortage.

In light of all these developments, Ranbaxy’s Quarterly showed dismal returns. In the three months

ended 31 December 2008, the firm, reported a net loss of Rs.680 crores, compared with a net profit of

Rs.188 crores in year-ago quarter. The company was acquired by Japan’s Daiichi Sankyo Co. Ltd in

November 2008. The CEO Dr. Malvinder Singh attributed the unprecedented forex volatility following

unforeseen global financial crisis and almost 25% dollar-rupee movement for the losses. In the previous

quarter, Ranbaxy had lost Rs.395 crores on account of a loss on currency hedges and a one-time

inventory writedown caused by the ban imposed in September by the US Food and Drugs



Administration (FDA) on products made at its two plants in Dewas, Madhya Pradesh, and Paonta Sahib,

Himachal Pradesh.

The profit margin analysis of the quarters is shown below:

2006 2007 2008 2009

-1200

-1000

-800

-600

-400

-200

0

200

400

600

800

Profit

Profit

10. Analysis of the decline

1) Ethical stance taken by the organization and the behavior of top managers strongly influences the

organizational culture. As the company received warnings for submitting improper documents

and falsification of documents it exposes lack of ethical culture in the organization, in case of

Ranbaxy, failure to come out with sufficient justification even after receiving several warning

letters exposes the fact that a ethical stance was not taken by the organization.

As we know developing a good reputation reduces transaction cost, i.e. cost of interacting with

external environment, as FDA issued warning letters to Ranbaxy it led to the fall of reputation of

the company. This resulted in sudden decline of stock prices which led to huge losses for the

company in the fourth quarter of 2008.

2) The other major factor which led to the decline was the growth in the organization was

influenced by kinship more than the technical competence and the efficiency. Mr. Brar was one



of the most successful president of Ranbaxy. After he had taken over from Mr. Parvinder Singh,

Ranbaxy had grown from strength to strength with increasing market shares and Entry in to new

markets, but his resignation under dubious circumstances followed by a brief transition period

tenure of Mr. Brian Tempest and appointment of Dr. Malvinder Singh as the CEO emphasized

that importance was given more to kinship rather than effectiveness of the person. If the family

members do not have the strategic and organizational skills, it is better to hand over the complete

running of the company to professional managers. In fact, the Ranbaxy story is one where such

an event did happen. Yet, family interference and control got the better of this process and the

case is a classic one of failure of transition to professional management.

This emphasizes Weber’s second principle of bureaucracy, which states that if in an

organization, family relationships are given priority rather than technical competence; it can

be harmful for the growth of the organization, which is evident in this case.

3) As Ranbaxy grew and extended its operations into many countries and other variety of drugs the

complexity of the external environment increased and it was not an easy task to have control

over the external environment, the changes in external environment had a great influence on the

decline of Ranbaxy for example

a) Increase in competition for generic drugs and developed countries increasing the life

cycle of patented drugs which resulted in decrease in demand for generic drugs.

b) Increased regulation on generic drugs in the developed countries like USA which led

to FDA imposing regulations on Ranbaxy, this increased stringent measures had a severe effect

on several drugs manufactured by Ranbaxy.

The fluctuation in value of dollar was also a major factor, due to decline in dollar value the

company which had invested money in terms of dollars suddenly had to encounter decrease in its

cash balance.

These factors signify how interconnectivity between forces in the external environment increases

complexity. As the regulations were imposed by FDA, the stock prices fell so it was very

difficult to control the external environment.



This led to lack of control of Ranbaxy over its external environment and the company’s top

management was not able to device strategies to control external environment which finally led

to Acquisition of Ranbaxy by Daaichi, Japan based Drug manufacturer

11. Weitzel and Jonsson’s Model of Organizational Decline

Stage 1: Blinded

In this stage, the organization is unable to recognize the internal or external problems that threaten

their long term survival. In the case of Ranbaxy, the management failed to recognize the threat in the

form Of the stringent regulations governing the entry of generic drugs in developed countries like

USA etc.This led to them receiving warning letters by FDA, early in 2006, for not complying with

their regulations.

Stage 2: Inaction

Despite receiving a warning letter in January of 2006 and tabulating a response in which corrections

to the stability data previously submitted to the agency in several abbreviated new drug applications

(ANDAs) were included. It also included corrected stability test reports for various medicines, and

showed instances where stability test dates that previously had been submitted to the applications were

false. In some cases stability testing was conducted several months later than the dates reported in the

applications. However the management failed to learn the lesson and did not implement the changes

in the process to ensure proper documentation of all the processes involved which led to auditing

problems in checks by FDA in 2008. Prompt action at this stage by management would have

prevented the decline.

Stage 3: Crisis

The company faced FDA import bans on various products manufactured at two of its facilities in

India leading to a fall in the value of its share. The company faces huge losses to the tune of 1044

crores in 2008.This also precipitated a change in the management of the company by the parent

company daaichi sankyo. This essentially forms the effective reorganization needed to prevent the

decline.



12. SWOT Analysis

12.1. Strengths

1. Strategic Alliances – GSK and Merck.

2. Differentiated Product Offering – Generics, Branded Gx, Branded, OTC. Broad product

portfolio imparting revenue stability.

3. Patents.

4. Strong presence in diverse geographies insulating business risks.

5. Aggressive Marketing.

6. Manufacturing Efficiencies – Labour, Infrastructure and Global Quality Standards.

7. R&D capabilities – skilled scientist pool, research across Generics as well as Innovative

Research (NCE, NDDS, Niche FTF), and Process Chemistry Expertise.

8. Low cost innovation and high quality product flow.

9. Strong CSR programs contributing to a positive reputation in the industry.

12.2. Weaknesses

1. High Cost structure related to manufacturing, R&D and distribution.

2. Lack of ethical culture, proven when Ranbaxy submitted improper and falsified documents to

USFDA.

3. Legal and Compliance issues with its manufacturing facilities at Dewas and Paonta Sahib in

India.

4. Tarnishing reputation in the industry because of the above two issues.

5. Nepotism in the organization – high degree of family interference and control.

12.3. Opportunities

1. Untapped high-growth emerging markets.

2. Ageing world population can act as a fundamental growth driver by providing increase in

demand for medicines.

3. Possible leverage on Daiichi Sankhyo’s strengths.

12.4. Threats

1. High entry barriers – technology and resource intensive.

2. Productivity under pressure – saturated developed markets.



3. Disruptive Technologies challenging established portfolios.

4. Increased regulations on Generic Drugs in developed countries like USA.

5. Unpredictable dollar rate fluctuation.

12.5. Top Competitors

The following companies are the major competitors of Ranbaxy Laboratories Limited

1. Dr. Reddy's Laboratories Limited

2. Abbott India

3. Morepen Laboratories

4. Kopran

5. Sun Pharmaceuticals Industries Ltd

6. Nicholas Piramal India Ltd

7. Novartis India Limited

8. GlaxoSmithKline Pharmaceuticals (India) Limited

9. IPCA Laboratories Ltd.

13. References

Ranbaxy – Annual Report

Ranbaxy World

http://www.ranbaxy.com

http://www.livemint.com

http://www.thehindubusinessline.com

http://www.dnaindia.com


http://www.dnaindia.com/

http://www.thehindubusinessline.com/

http://www.ranbaxy.com/

Project Ranbaxy

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