Dr Reddy's Laboratories: Growing Pains
Case Code: BSTR403
Case Length: 16 Pages
Pub Date: 2012
Teaching Note: Not Available
Organization: Dr. Reddy's Laboratories.
Countries: Global; India; US; Europe
Themes: International Management, Corporate Strategy, Strategy Implementation
Abstract Case Intro 1 Case Intro 2 Excerpts
This case study is about Dr Reddy's Laboratories Ltd (DRL), a global pharmaceutical company. Established in 1984, DRL was the largest Indian pharmaceutical company with a net worth of Rs.58 billion in 2007. As a fully integrated pharmaceutical company, DRL provided affordable medicines through its three core businesses - Pharmaceutical Services and Active Ingredients, Global Generics, and Proprietary Products. Since 2008, however, the drug maker went through a very difficult phase. The acquisition of German generics company betapharm Arzneimittel GmbH (Betapharm) in 2006 backfired, sinking the company into its worst ever quarterly loss in the fiscal 2008-09. Pending lawsuits for alleged patent infringements prevented DRL from launching generic products in its biggest market, the US.
Moreover the ban imposed by the US Food and Drug Administration (FDA) on products made at DRL's Mexico unit for violation of manufacturing practices seriously dented the company's image as a quality drug maker. The ban also affected the company's revenues from the US market. A string of accidents which broke out across at DRL's Indian manufacturing facilities brought its safety practices under question. In a bid to crack the generics market in the US, the company lost sight of the domestic market and could not come up with new products in the Indian markets unlike its competitors. As a result, the company lost its coveted position in the domestic market. All these problems led to a decline in the stock price of the company. It was also reported that while founder Anji Reddy wanted to make DRL an innovative research-driven company focused on producing low-cost medicines, the younger generation led by son-in-law GV Prasad (CEO) and son Satish Reddy (COO) sought to make DRL a generics-driven global giant. In light of the problems, the challenge before DRL's management was how to stem the rot and orchestrate a turnaround.
The case is structured to achieve the following teaching objectives:
- Analyze the strategies adopted by DRL to become a global company
- Examine the reasons for the problems faced by DRL
- Understand the issues and challenges faced by an Indian pharmaceutical company in growing its business in the international market
- Explore strategies which would help DRL resolve the key issues and lead to a turnaround
Problems in the US Market
Losing Ground in the Domestic Market
The Road Ahead
Internationalization, Corporate-level and International strategy, Directions for strategy development, Ansoff's matrix, Strategy Implementation, Turnaround strategy, Pharmaceutical, Global pharmaceutical industry, Indian Pharmaceutical industry, Dr Reddy's Laboratories, Globalization, FDA, Patents, Generics, R&D, Betapharm, Anji Reddy
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