The Internationalization Process of the Global Pharmaceutical Industry: A

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Page i

Masters Thesis IB&M 2005-2006

Supervisors:

Dr. Heico van der Blonk Dr. Rudi de Vries

The Internationalization Process of the Global Pharmaceutical Industry: A

Case Study

By:

Noah D. Hopper s1548778

noah_hopper@yahoo.com

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Page i ABSTRACT

THE INTERNATIONALIZATION PROCCESS OF THE GLOBAL PHARMACEUTICAL INDUSTRY: A CASE STUDY

By Noah David Hopper

Chairperson of the Supervisory Committee: Dr. Heico van der Blonk Department of Management and Orginization

The Internationalization of the firm is a well studied topic. This paper looks at the

internationalization process of nine multinational pharmaceutical firms from India, Japan, and the US in relation to the Uppsala model (Johanson & Wiedersheim-Paul, 1975; Johanson &

Vahlne, 1977). The goal of the paper is to apply the Uppsala model to the pharmaceutical

industry and build new theory with this industry. The findings suggest that the first component of the Uppsala model – the establishment chain – may be too general for the pharmaceutical

industry and that additional steps are needed. Further, the study also suggests that the second aspect of the Uppsala model – psychic distance – has no correlation with regards to market choices made by firms in the global pharmaceutical industry. Lastly, the study found that the young firms examined in this paper were not unknowledgeable, lacking technology, and naïve and that firms decisions to enter new markets were well thought-out decisions based on opportunities, market potential and in some cases market size.

Keywords: Global Pharmaceutical Industry, Internationalization process, Uppsala Model, Establishment Chain, Psychic Distance, and Hofstede Data.

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TABLE OF CONTENTS

- Section One -

Chapter 1: Introduction ... 5

1. Problem Indication ...6

2. Main Research Question ...7

3. Research Sub-Questions ...7

Chapter 2: Methodology ... 10

1. The Type of Study ... 10

a. Building and Expanding Theory ... 10

2. The Companies Chosen ... 11

a. Possible Predicted Outcomes ... 13

3. Data ... 14

a. Sources and Criteria ... 14

b. Translation ... 14

4. Limitations ... 15

Chapter 3: Literature Review ... 17

1. Internationalization theories ... 17

2. Analysis of the Uppsala Model ... 19

3. Analysis of Hofstede Data ... 22

- Section Two : Results - Chapter 4: India ... 26

1. Domestic Industry Review ... 26

a. Ranbaxy Laboratories Ltd. ... 26

i. Company Overview ... 26

ii. Data Analysis ... 27

iii. Hofstede Analysis ... 28

b. Dr. Reddy’s Laboratories Ltd. ... 29

c. Orchid Chemicals and Pharmaceuticals Ltd. ... 33

2. Country Review ... 36

Chapter 5: Japan ... 38

a. Daiichi Pharmaceutical Company, Ltd. ... 38

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b. Kissei Pharmaceutical Company, Ltd. ... 41

c. Ono Pharmaceuticals Company, Ltd. ... 44

Chapter 6: USA ... 49

a. Valeant Pharmaceuticals International ... 49

b. West Pharmaceutical Services, Inc. ... 52

c. Bentley Pharmaceuticals Inc. ... 55

- Section Three - Chapter 7: Conclusion ... 61

1. Additions to Theory ... 61

a. Brand Name vs. Generic ... 62

b. Country Specific Findings ... 64

c. Psychic Distance ... 65

d. Final Remarks ... 68

References ... 70

Appendix I ... 80

1. Ranbaxy Laboratories Data ... 80

2. Dr. Reddy’s Laboratories Data ... 82

3. Orchid Chemicals and Pharmaceuticals Data ... 84

4. Daiichi Pharmaceutical Co. Data ... 85

5. Kissei Pharmaceutical Co. Data ... 86

6. Ono Pharmaceuticals Co. Data ... 86

7. Valeant Pharmaceutical International Data ... 87

8. West Pharmaceutical Services Data ... 89

9. Bentley Pharmaceuticals Data ... 90

Appendix II ... 91

1. Hofstede Dataset ... 91

2. Hofstede Data India ... 92

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3. Hofstede Data Japan ... 94

4. Hofstede Data USA ... 95

Appendix III ... 97

1. Conceptual Model ... 97

2. Pharmaceutical Value Curve ... 98

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- Part One – Chapter 1: Introduction

The Uppsala Model developed by Johanson & Wiedersheim-Paul (1975) and Johanson &

Vahlne (1977) was the result of a case study of four firms situated in the domestic Swedish market. The model is one of the most cited internationalization theories to date (Bjorkman & Eklund, 1996; de Wit, 2003; Johanson & Vahlne, 1990; Nordstrom, 1990;

Dow, 2000; etc.) However, those who have applied this theory have stuck to firms based in the smaller domestic markets such as Western Europe. Bjorkman & Eklund, (1996) relate the development of Finnish firms to the Uppsala model, de Wit (2003) to Dutch firms and Dow (2000) to Australian firms. While further studies were recommended for similar small domestic markets after the initial research of the Uppsala model (Johanson

& Wiedersheim-Paul, 1975), later research found that the model would apply to all markets – large and small (Johanson & Vahlne, 1977).

Little research has been conducted on firms in relation to the Uppsala model outside of Western Europe. Bello and Barksdale (1986) found significant correlations for the

Uppsala model when applied to US industrial firms. In this study, the Uppsala model will be applied to nine firms from the US, Japan, and India to examine the validity and expand on the theory. As stated above, the Uppsala mode is a well sought out theory and this study does not aim to discredit this research or stringently test it as has been done in past research. The aim of the paper is to provide a narrow view of the theory in one industry and build upon the Uppsala model in the chosen industry by examining/analyzing firms and in relation to this model. Gill and Johnson (2002:5) make it clear that not only are academic research findings important, it is additionally important that these findings have benefits that apply to managers specific needs and aid them in making decisions. In other words, de-universalizing the model so that it applies to one industry can give a practical element to the model and be useful in aiding managers in their internationalizing process.

The point of this study is to drop the universality of the Uppsala model and apply it specifically to one industry, the nine firms in this study have been chosen from different areas of the global pharmaceutical industry. Because this study does not test the model it will not consist of empirical/statistical research, but instead a case study of the

internationalization process of each firm. Results will be correlated with other firms from the same country, product type, economic background and overall.

The pharmaceutical industry was chosen for this study as it growing, dynamic and highly driven by technology and knowledge. In 2006, IMS Health – an organization that collects and analyses pharmaceutical industry data - predicts that the global pharmaceutical industry will be worth an estimated US $640-$650 billion with a growth rate of six to seven percent (IMS Health, 2005). Additionally, many countries have experienced growth beyond the industrial world average. From 2001-2004, Italy’s growth rate of the generic drugs market was an unprecedented 137.7% (Pharmaceutical Technology Europe, 2005).

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The industry varies greatly within sectors, also making it a topic of discussion. The generic pharmaceutical sector is one of the fastest growing sectors in the global industry.

In 2003 alone, the growth rate was three times that of brand name drugs and made up thirty percent or more of the total pharmaceutical sales in the some of the worlds largest markets – USA, Germany, UK, and Japan (Class, 2005).

Additionally, some developing nations have been driven by the factors of success in the industry. While pharmaceutical firms in developing countries such as India are composed of generic manufacturers (Ranbaxy, Dr. Reddy’s, Orchid Chemicals); developed

countries such as Japan and the United States¹ have focused on brand name drugs. As generic firms do not focus on marketing and brand image, the development and

expansion of the firms differ. Additionally, it is indicated in this research that marketing and R&D expenditure can be produced at lower cost than in developed nations such as the US. While the above reasons make the pharmaceutical industry interesting, the next section gives indications as to why more research is needed in this industry.

1. Problem Indication

Research of the global pharmaceutical industry is becoming increasingly important as many big brand pharmaceutical firms have followed a trend of consolidation and/or diversification (Class, 2005; Datamonitor, 2005). This has resulted in a dynamic and changing global environment for domestic and international pharmaceutical firms, and left some companies with little answer as to what to do next. As new patents are running low, brand name firms must learn from generic firms about how to grow in the global market and market generic products. Bartlett and Ghoshal (2000) stress in their article

“Going Global” that for firms to survive in an information based and knowledge

intensive global market, such as the pharmaceutical industry, they must instill the lessons they have learned in the past for building their futures. As such, many pharmaceutical firms have not followed the stages of development according to the Pharmaceutical Value Curve². Some have no past to learn from and must turn to others for advice Many generic pharmaceutical companies, such as Ranbaxy, Dr. Reddy’s , and Orchid of India, have started their own research and development Pipeline (Buggle, 2005; Ranbaxy, Dr. Reddy’s, and Orchid Annual Reports). In order to survive in the decline of new patents, generic firms will need to increase R&D facilities and funds (Class, 2005). “The successful organizations will be those that recognize the need for change early and start to plan their campaign of response accordingly,” (Class, 2005:238). As these generic global pharmaceutical firms take control of the market with brand name product they will need to know how to take their firm in a new direction and in to new markets. Since generic firms generally do not have a prior history of producing and marketing brand name products in new foreign markets, guidance can be obtained from brand name firms and learning how they expand their firm’s globally.

1 US firms in this study are not yet brand name firms but have a brand name focus.

2 See the Pharmaceutical value curve in the appendix.

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The thesis will consist of a case study analysis of nine global pharmaceutical companies and their internationalization processes. The companies are from India, due to its developing economy with a strong industry; Japan, because it is a developed nation that has some of the toughest domestic conditions (Datamonitor, 2006); and from the USA, because it is the worlds largest pharmaceutical industry and accounts for roughly fifty percent of the global pharmaceutical industry (IMS Health, 2005). The aim of this study consists of analyzing and building on the theory of the Uppsala Model (Johanson &

Wiedersheim-Paul, 1975; Johanson & Vahlne, 1977) and its two components to be described later in this paper – the establishment chain and psychic distance. This paper works to expand the establishment chain within the pharmaceutical industry as well as other similar industries. Additionally, psychic distance will be analyzed for correlation with the results of the case study firms. The goal is to bring new knowledge and insight into the internationalization process of the global pharmaceutical industry in regard to the Uppsala model, psychic distance and measurements of it, and additional step to the establishment chain within the global pharmaceutical industry.

The next two sections include the research questions that are based on the issues,

differences and problems indicated above. These questions will set the parameters for the study presented in the remainder of this paper.

2. Main Research Question

As stated earlier, this paper consist of a comprehensive multiple case study to expand on the internationalization theory purposed by Johanson and Wiedersheim-Paul (1975) – The Uppsala Model. While most theories are developed assuming universality (Thomas, 2002); through my case studies I will work to narrowly apply Johanson and

Wiedersheim-Paul’s (1975) and Johanson and Vahlne (1977) internationalization theory to the pharmaceutical industry as well as examine and expand on their theory within the pharmaceutical industry. This leads me to my main research question:

In what ways does the entry mode into a foreign market and further stages of Internationalization of MNE’s in the global pharmaceutical industry diverge and correlate with the elements of the Uppsala model (no presences, agent, sales sub, manufacture, and psychic distance)?

3. Research Sub-Questions

Additionally Bartlett and Ghoshal (2000) present the Pharmaceutical Value Curve as a growth model for pharmaceutical firms. The value curve provides guidance for growth in one market. The industry is currently running low on patents for new drugs and brand name firms are starting to produce and market generic products which are seen as a step backward in the value curve. Also, the growth pattern may differ in regards to the

establishment chain. Generic products generally require many small and diverse markets.

The need for additional markets makes it important to know how different firms enter and grow within foreign markets as many firms have never marketed generic products.

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In retrospect, from a previous pilot study on the Indian pharmaceutical industry, it was found that developing countries have a great advantage over developed countries in the global pharmaceutical industry. As mentioned earlier, developing countries are able to conduct high quality R&D at home at a fraction of the cost allowing them to afford higher risk in other areas of the business such as entering new markets (Bartlett and Ghoshal, 2000). It was indicated in documents (Ranbaxy Annual report 1998-2004) that Indian pharmaceutical firms were much more aggressive in entering new markets than their foreign western competitors and it appears that generic manufacturers as well as firms from developing countries may be able to move up the value curve and into new markets and the establishment chain easier than a brand name firm from a developing country trying to move down the value curve or into new markets.

While Johanson and Wiedersheim-Paul’s (1975) and Johanson and Vahlne’s (1977) internationalization theory touched on psychic distance³ and explained what it is, there was no information on how the parameter or rankings were distinguished. Geert

Hofstede’s Cultural Dimensions provided data for comparative analysis on the question of psychic distance rankings (Hofstede, 1991; Geert-hofstede.com, 2006). The choices of which foreign market to enter will always be based on some underlying reason or firm policy. However, by examining the data to be collected to see whether foreign markets picked are culturally similar (psychic distance), the largest market available (market potential), the closest market (geographical distance) or other can aid firms in the way they position their organization in the future. Additionally, this will aid in answering questions of why stages of internationalization are skipped or added. Johanson and Wiedersheim-Paul (1975) point out that markets that are so similar to the firm’s country of origin (or such a great market opportunity) might not need to be eased into and may opt to skip to the sales subsidiary or a manufacturing plant stage of the establishment chain. This lead to the first three sub-questions:

Q1: How does a Multinational pharmaceutical firm’s choice of entering a foreign market in the global pharmaceutical industry consider psychic distance, geographical distance, market potential, or the establishment chain when choosing a new foreign market and the way it will be entered?

Q2: In what ways does the entry mode into a foreign market of MNE’s in the global pharmaceutical industry differ by product firm (brand name and generic) and country of origin (developed and developing)?

Q3: In what ways does the establishment chain differ between MNE’s in the global pharmaceutical industry based on the type of firm (brand name and generic) and country of origin (developed and developing)??

In other words, does culture have anything to do with choosing new foreign markets and how they penetrate them or is it some other underlying factor?

3 See literature review later in the paper for additional information.

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While a brand name firm that produces very few drug varieties may pick a foreign market based on market potential over a culturally similar market; a generic

pharmaceutical firm manufactures everything possible and their target is ever disease, virus, or illness in every market. However, cultural clashes add risk to a firm’s

investment when entering a new market (Hofstede, 1991) and they may choose to enter a market they can relate to and work amid with little compromise. This all leads to

confusion as to what decisions firms will make based on the products they manufacture and market. Thus, the final sub-question:

Q4: How does the choice differ between Brand Name and Generic firms when considering psychic distance, market size, market potential or other reasons as a deciding factor for choosing a new foreign market and the way it will be entered?

Essentially, the fourth question is aimed at the trends of brand name and generic

pharmaceutical firms choosing a foreign market and whether any exist at all. While it is predicted that there will be great differences between generic and brand name

pharmaceutical firms with regards to the establishment chain, it is unknown whether psychic distance, geographical distance, or market potential will have an effect on the choices made by firms.

The next chapter, chapter two, is on the methodology of this case study. Often case studies are criticized; therefore great attention to detail has been taken in this section. The following chapter of this paper will consist of a literature review of relevant theories of internationalization and discuss the reasoning behind the use of the Uppsala model. This will be followed by a discussion of the Uppsala Model, psychic distance, Hofstede data, and criticism to all of these areas. The results are explained in chapters four, five, and six and consist of an analysis of the domestic conditions of each market to gain a better understanding of how the cultures in question differ from others. The last section of each of these chapters gives a brief overview of the country findings. The conclusion, chapter seven, addresses the main and sub- question’s and works to draw conclusions on the development of the Uppsala Model.

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Chapter 2: Methodology 1. The Type of Study

Most studies published today are empirical studies (Yin, 2003; Gill and Johnson 2002).

Yin (2003) and Gill and Johnston (2002) are clear to point out that studies that stray from the empirical nature of social sciences are constantly criticized for, among other things, their validity. Yin (2003) was very clear in the beginning of his book on designs and methods of case studies that, “Regardless of the type of case study, investigators must exercise great care in designing and doing case studies to overcome the traditional criticism of the method,” (Yin, 2003:1).

This study is designed to build new theory. More importantly it is designed to build new theory on the existing theory of the Uppsala Model as well as analyze the theory. While many social scientists feel that case studies should only be conducted for exploratory purposes, Yin (1981a, 1981b) points out that they can be used for descriptive and explanatory purposes that challenge theories as well. In this section I will review the methodology that was used for the case studies of this paper.

a. Building and Expanding Theory

As stated earlier, this paper is composed of nine individual case studies where information was gathered on each firm that aids in answering each of the four sub questions. The first and second sub-questions will be answered using a case study protocol and a simple database to collect data on the progress of the firms

internationalization process (Yin, 2003). The protocols can be seen in Appendix I. These protocols helped in collecting the correct data needed for this study while filtering out unnecessary data that could compromise the study. Additional qualitative data used for this study was recorded in notebooks and is presented in chapters four through seven.

Data was collected in a longitudinal manner (Yin, 2003) of an unspecified period. Data collections started as early in the companies’ histories as sources allow and ended at the end of 2005. Data was collected from annual reports⁴, company archives, company web pages, the internet, third party databases such as Datamonitor and firm specific questions⁵ sent to representatives of each company.

While Yin (2003) recommends that case studies include a combination of data collections that include in-person interviews. Speaking with company representatives over the phone or though email is acceptable as well. Additionally, once data was collected, results were formed to answer sub-questions based on product type (grouping data of generic firms and brand name firms) and country type (developed and developing countries).

Sources of data were also used to aid in answering sub-questions based on psychic distance and the establishment chain. Geert Hofstede’s Cultural Dimensions based on

4 All firms selected for the study were based on the availability of data such as annual report, archival material and public information.

5 Although this method was not successful.

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five dimensions (described in chapter three) was used as a measurement tool for psychic distance. Each country was ranked in regards to the distance from the host countries score. For example, the US scored forty in the power distance index, their score is set to zero and forty is subtracted from all other score. Negative scores were multiplied by negative one to make them positive numbers. It was not important for the study to see in what direction countries differed. The goal was to measure the distance of the

differences. Countries were then ranked by their computed scores and then by

alphabetical order where there was a tie. It is important to note that the fifth dimension does not cover all countries as mentioned earlier. The dimension was applied where applicable. Additionally, averages of the total scores from each country were collected and ranked in the same way described above. Countries with a score closest to zero would ideally be the closest to the host country of the study (India, Japan, US) in term of psychic distance. The next section describes the companies and countries chosen and the reasons behind them.

2. The Companies Chosen

Choosing countries and firms was a difficult task that took careful consideration. The decision for which countries to use in this study was ultimately based on the firms available in each country. However, the countries were also chosen for their unique qualities: India – a developing country with a strong industry, Japan – the highest regulated domestic industry and the second largest in the world, and the US – the largest industry in the world.

In relation to the companies chosen, listings were found to be extremely large.

Directories such as Virtual Library Pharmacy (2006) contain hundreds of pharmaceutical companies from all over the world, many of which are not multinational firms.

Datamonitor provided an excellent source for narrowing the search. Datamonitor’s company profiles provided the important qualitative and quantitative information needed to decide if a company was appropriate for the study. Additionally Datamonitor compiles reports on companies that have accessible information and are willing to share

information publicly (Datamonitor, 2006).

The final decision of which countries and companies to undertake in the study were made based on the criteria listed below.

Companies must be from at least 3 different countries.

One country group must be a developing nation and one developed.

Companies should be both large and small (financially and globally).

Companies must be of a variety of brand name and generic produces.

Companies must be established for at least 10 years.

Companies must have at least one foreign subsidiary.

Companies must consider their selves a global/multinational operation.

Companies must have established sales in at least ten foreign countries.

Companies must have publicly available information.

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These criteria were established through trial and error on the pilot study as well as insights gained from Eisenhardt’s (1989) paper on case studies – Building Theories from Case Study Research. Choosing cases is one of the biggest challenges of theory building according to Eisenhardt (1989) and Yin (2003). Cases that are of extreme and opposite situations can help in aiding researchers to make conclusions that are “transparently observable” and lead to finale conclusions that can be applied and extended to general theories of internationalizations as well as niche field such as the pharmaceutical industry and internationalization (Eisenhardt, 1989).

The decision of case study companies came down to nine companies from three different countries that all meet the above criteria. All but one company was chosen from those available from Datamonitor. Another developing nation would have been ideal; however, countries such as China or Brazil do not have companies that meet the above criteria.

The following companies were chosen from India:

Ranbaxy Laboratories Limited, India’s number one pharmaceutical company and one of the top ten generic manufacturers in the world.

Dr. Reddy’s Laboratories Limited, India’s number two pharmaceutical company.

Orchid Chemicals and Pharmaceutical Limited, a small developing company with tremendous global reach for its size.

The following companies were chosen from Japan:

Daiichi Pharmaceutical Company, Limited, Japans second largest pharmaceutical company and a global leader in research.

Kissei Pharmaceutical Company, Limited, a smaller brand name

pharmaceutical firm with growth potential and well positioned in the market.

Ono Pharmaceuticals Company, Limited, one of the largest pharmaceutical firms in Japan and a leader in research globally.

The following companies were chosen from USA:

Valeant Pharmaceuticals International, a medium sized firm with many failures and successes in global development.

West Pharmaceuticals Services, Inc., the world leading provider of pharmaceutical devices with a large global presence.

Bentley Pharmaceuticals Inc., a small company with great growth potential and a strong global presence that has made may positive strides in the industry.

As stated earlier, the rational behind focusing on one specific industry is that it reduces overall generality that may not apply to any specific industry. Eisenhardt pointed out that

“specification of this population reduces extraneous variations and clarified the domain of the findings as large corporations operating in specific types of environments”

(Eisenhardt, 1989, p. 537). Additionally, an analysis of each company studied will include a cross-case comparison. This form of cross-case comparison will allow us to

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look at the data in multiple and divergent ways (Eisenhardt, 1989). The next section of this chapter gives insight to the possible outcomes of the firms and research questions.

a. Possible Predicted Outcomes.

This study is based on a previous unpublished study conducted by the author and a colleague. The previous study (Hopper and Wasiak, 2005) was based on two of the three Indian companies and dealt with many different facets of internationalization and

correlations to a firm’s internationalization process. Many problems were worked out, most data was scrapped, and additional data has been added to the companies from the previous study. While the previous study was not a complete success it did provide indications of possible outcomes in this present study.

In regards to differences between generic and brand name firms; through the pilot study it was indicated that generic firms have additional stages of internationalization that most brand name firms do not (marketing offices – usually handled within a sales subsidiary).

In regards to differences between developed and developing countries; the pilot study further indicated that firms from developing countries tend to keep R&D facilities at home as it can be just as effective at a significantly lower cost. Firms from western developed countries such as the US and Germany spend fifteen percent or more of

revenues on R&D while Indian (developing country) firms spend about one-fifth that cost for the same quantity (Duncan, 2005).

In view of the sub-question relating to psychic distance; the outcomes are mixed and I feel will depend on market conditions at the time each firm began entering foreign markets. Hofstede data indicates that cultural difference add risk to a firms venture and should be closely monitored in tough economic conditions that elevate risk (Geert- hofstede.com, 2006). Additionally, criticism of psychic distance, such as Nordstrom’s (1990) argue that the world has reached a state of globalization and consequently the effects of psychic distance have decreased.

The main research question is looking for additions and changes to the Uppsala model in relation to the pharmaceutical industry. Any new finding divulged from the sub-questions will lead to answers of the final question. In compiling all the information, firms will be analyzed at different levels (individual cases analysis, country level analysis, product level analysis, and overall analysis) leading to a final analysis. At each level, new and different information will be collected to answer the main question. If no differences are found, the study will indicate that no differences exist. However, it is certain that new differences and correlations will be found that build on existing internationalization theory; especially in relation to the pharmaceutical industry.

The next section of this chapter contains the details of the data collection and how it was interpreted for the results of the paper.

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3. Data

Data collection was given immense attention and the details of the data were considered an important aspect of the methodology behind this study.

a. Sources and Criteria

The data was collected from a variety of sources all of which were available online or through email correspondents. While email corresponds were the only source of primary data (and were not successful), the main sources of secondary data were the companies’

annual reports. Some companies only provide annual reports for up eight years prior to 2005. However, many companies had 10-K⁶ annual reports available up to ten years prior to 2005. Other sources of information included:

Press releases (most companies have extended archives available online).

News reports (many firms provided articles published in the media about them).

Websites (a great source of random but interesting information).

Various Reports (companies usually included reports of presentation events and milestones of the company like an acquisition or foreign expansion).

b. Translation

The data that was collected was not controlled in any manner as this is a case study.

Additionally I have worked to manipulate the data as little as possible, as I have taken an ex-post facto design strategy (Cooper and Schindler, 2006). Any information that was questionable as to the meaning was documented as questionable. Further, in situations where the data was hard to classify, the date was recorded in a lesser manner. See the following example for further details:

A company might state that in 2004 they expanded business into Russia and did not clarify that they had only established representation or have gone further and stated that they established a marketing office. While this could possibly mean that a marketing office was established, I would not give the benefit of the situation and instead would record it as having representation in Russia.

A company starts up a foreign subsidiary with no prior documentation of a representation in that company. Through discussions with colleagues and a professor at this university during the pilot, it was determined that I would have to assume that that company had at least prior representation in the foreign country. The company would be documented with establishing representation the same year as the establishment of the subsidiary.

6 Companies that are publicly traded on US stock exchanges are required to file 10K annual reports which give detailed information about the company’s business activities for the year.

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Additionally, the year date for the establishment of representation would be marked with an indication that it could be an earlier date.

A company might state that they conduct business in the following countries and have representation in all of them. However, there is no indication if these foreign representations were established in the year of the document.

Situations such as this would be further investigated. Usually establishment dates were found. However, in situation where no other date was found, the representation was marked with the same date of the document first

mentioning the account. Additionally the data would be marked to indicate that the establishment date may be earlier.

The data issues presented many question as indicated above. This study also faces many limitations which are mentioned in the final section of this chapter.

4. Limitations

This study was met with many limitations. First, psychic distance was calculated using Hofstede data only. The study from which Hofstede data is composed dates back to the 1970’s IBM survey. Although the data has been updated on occasion and new

information and dimensions were added, the data is still rather old. However, many companies in this study started their internationalization process in the seventies or eighties so this limitation can also add a positive element to the study. Ideally, a survey of the rankings of psychic distance by global business managers from the US, Japan, and India would have been ideal as indicated by Dow (1990). However, this option was unrealistic due to time restraints and lack of capital for the study.

Second, the companies picked in the study were not random. In fact, most firms are seen as giving this study a successor bias. Although this is recommended for case studies, some researcher feel that this can affect the results of the study as indicated in a list of criticism by Yin (2003). Yin (2003) also points out that multiple case studies help to build stronger results; in this case, this study is composed of nine individual case studies.

The criteria set to pick firms can also be seen as limiting as firms should ideally meet the criteria to some extent if they want to use the findings in this study. Thus, the

applicability of the results may be seen as a limitation.

Last, while there are many other limitations to a case study in general, as well as this study, I would like to point out one final limitation. Data in this study was intended to be from a well rounded group of resources of both primary and secondary data. This was accomplished for secondary data that was gathered from many different resources.

However, the collection of primary data was not successful

While there are many limitations as mentioned above, I am still confident that the findings presented in the following chapters can be used in aiding companies in the pharmaceutical industry through the development of their internationalization processes.

Additionally, this study can aid those in academic fields with further research of the internationalization process.

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The following chapter, chapter three, provides a better understanding of the topic and gives a detailed analysis of relevant literature for this study.

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Chapter 3: Literature Review

The concept of international business theories and a global environment are relatively new. However, businesses, whether private or publicly held, have been involved in trading across boarders for centuries. The Romans, for example, established trade routes throughout Europe, the Middle East, and Northern Africa. Later, after conquering over two-thirds of the world by the eighteenth century, the British Empire had established companies and routes in every continent. Today, while the Roman and British Empires have collapsed and many countries have grown, the global market place has become extremely competitive with new players (firms) and new fields (markets).

1. Internationalization Theories

The business landscape has changed in the last century and the field of social science has taken notice. The Internationalization of the firm is a complicated process that involves many different elements which vary greatly between industries (Pedersen). Many theories on the topic of internationalization have been developed in various fields of social

science and are intended to have a level of transparency between industries (Pedersen).

For this study, the focus will be within the theory developed by Johanson &

Wiedersheim-Paul, 1975 and Johanson & Vahlne, 1977 – the Uppsala model. This approach to internationalization sees the firm first established in its domestic environment and gradually works to become a fully fledged multinational firm.

Knowledge is cherished and seen as something that is earned over time. The Uppsala model assumes that the drivers of decisions are mostly internal motives from within the firm. Decisions are also seen to be based on motives in addition to the financial benefits of entering a foreign market. While this theory is based on four Swedish firms, Johanson

& Vahlne (1977) later assumed universality of the model in all markets and industries.

The Uppsala model provides room for growth as it sees decisions as radical and diverse while still staying focused on the firm. Additionally, Johanson & Wiedersheim-Paul, (1975) and Johanson & Vahlne (1977) provide a challenge in testing the universality of the Uppsala model. The pharmaceutical Industry is dynamic and changing, as mentioned earlier, and gives a perfect opportunity to apply the Uppsala model. Also, the Uppsala model’s non-rational view of decision making can aid in providing answers to the changing global business environment of the pharmaceutical Industry.

While this paper will focus on the Uppsala model, it is important to note that other widely used internationalization theories exist. Additionally, it is important to discuss why they were not used for this study. Of the five most dominate theories of the

internationalization of the firm; the Eclectic Paradigm, or OLI model, is the most wide ranging and transparent theory (Pedersen).

The Eclectic Paradigm was first presented by John Dunning in 1976 at a conference (Pedersen) and later discussed in articles by Dunning (1979, 1988, and 1995). As stated, the Eclectic Paradigm is stuck somewhere in the middle of all other theories and it looks at the process of the internationalization of firms as rational decisions as well as newly

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developed decisions based on learned behaviors of the firm. It also sees the firm as an organization that is driven to make decisions based on the drive of management goals (internal) and the pull of external factors such as new or evolving markets.

Strandskov (1995) classified the other four main theories of internationalization to encompass the Eclectic Paradigm to give a better understanding of the model as well as to show how other theories are meshed within the Eclectic Paradigm model. Below is Strandskov’s classification system:

Figure 3.1: A classification of internationalization theories

Driver/ Decision Type Rational decisions Organic decisions Internal A Micro-economic perspective

E.g. Transaction Cost Theory

A Learning Perspective E.g. The Uppsala Model External An Industry Econ. Perspective

E.g. Positioning Theory

An inter-organist Perspective E.g. Network Theory

Within this diagram, the eclectic Paradigm lies somewhere in the middle and

encompasses even more than these theories offer. For the purpose of this paper, my focus will not be based on the Eclectic Paradigm as the goal of the paper is to give a

narrow/niche view of the internationalization of the firm in one industry.

In addition, the focus of the paper will not be on Williamson’s (1985) and Anderson &

Gatignon’s (1988) Transaction Cost Theory. This theory has been exploited and much is known about the aim of the transaction cost approach – internationalization driven by a company’s internal forces (management) based on rational planning leading to rational decisions (financial). Basically, Transaction Cost Theory sees internationalization as a way to increase the wealth of the firm; in-turn the unit of analysis becomes the

transaction and not the firm. This paper will work to keep the focus on the firm within an industry.

The focus of the paper lies within the pharmaceutical industry. Porter’s (1980, 1986) Positioning Theory approaches internationalization with an industry perspective.

Positioning Theory assumes that the firm has all the necessary knowledge contacts needed for the environment and therefore applies better to a firms latter stages of

development as well as a firms that works in a cooperative environment with other firms in the same industry (Strandskov, 1995). Pharmaceutical firms tend to be very cut-throat within their industry and are usually involved in legal actions with one another (see annual reports of all firm in this case study). Like the Transaction Cost Theory, Positioning Theory is based on the firm making rational decisions (financial) that are generally predictable. As this theory looks at the rational view and is better used to explain later stages on internationalization, this theory will not be the focus of this paper.

Like the Positioning Theory, the Network Theory sees internationalization as a strategy based on relationships and resources. Again, relevant knowledge about the firm’s foreign

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environment is assumed. This theory differs from the previous two mentioned in that its decisions of internationalization are based on radical organic decisions. For example, a domestic oil firms chooses to move into Bolivia for additional resources that it can provide to customers elsewhere in the world and not necessarily for the financial benefits of Bolivia. Basically, Network Theory understands that firms will always choose the best financial decision as well as other reason such as resources; however, the theory also turns the unit of analysis away from the firm and focuses on the resources.

While the Network Theory may not be suitable for the study of this paper due to its lack of focus on the firms, the Uppsala Model does. An analysis of the Uppsala model will be described in further detail in the next section.

2. Analysis of the Uppsala model

In 1975 two Swedish researchers, Jan Johanson and Finn Wiedersheim-Paul, wrote a paper on a case study of four Swedish firms and their internationalization process. They made several observations that indicated that Swedish firms tend to take the

internationalization process in gradual steps rather than massive and instant foreign ventures in foreign markets. The amount of resources committed and the degree of commitment by the firm is seen to correlate as a firm’s growth in a foreign market as it progresses slowly over time. As resources increase through this process of slow

integration, the firm’s commitment increases and its ability to liquidate foreign resources becomes increasingly limited (Johanson & Vahlne 1977). “Thus, as a rule, vertical integration means a higher degree of commitment than a conglomerative foreign investment,” (Johanson & Vahlne 1977:27).

Although the firms⁷ examined in the case studies varied in times of establishment, the internationalization process of each firm was gradual and slow. Firms that were established later were somewhat quicker to internationalize and the process was somewhat faster. However, these firms still faced the process as a learning experience and gradually progressed from their domestic market to the foreign markets on their way to becoming multinational firms.

Johanson and Wiedersheim-Paul (1975) felt that even though the case study was on Swedish firms, the same principals of their findings could be applied to other countries with similar size domestic markets. They also believed that the attitudes within the firm were the drivers of the process. If management saw the firm as an international entity than the behaviors of the firm would reflect the same. While the main point of their research was not to explain why firms started exporting to other countries, the authors agree that answers to this question might not be rational and will vary from firm to firm.

The goal was to answer where firms should start exporting. Ideally firms would start with neighboring countries that are closest to them and eventually spread their presence to other areas of the globe. Johanson and Wiedersheim-Paul (1975) wanted to track the patterns that the selected companies chose in hope of aiding firms looking to

internationalize in the future.

7 Sandvik, Atlas Copco, Facit and Volvo

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Johanson and Wiedersheim-Paul (1975) examined two different pattern of the process of internationalization. The first pattern is geographical distance, as mentioned above, and is the process of entering foreign markets that are geographically closest to the domestic market. The second process was a fairly new concept termed psychological distance and ignored geographical distances. Psychological distance or psychic distance is a concept defined as “factors preventing or disturbing the flow of information between the firm and markets. Examples of such factors are differences in language, culture, political systems, level of education, and level of industrial development,” (Johanson & Wiedersheim-Paul, 1975:308). The lower the levels of disturbances, the more knowledge the firm has about the foreign market and, in turn uncertainty avoidance risk is lowered. For example, the United Kingdom and Australia are on opposite ends of the earth and if a UK firm sees the process in terms of geographical distance than Australia would be their last market to enter. However, if the UK firm sees the process in term of psychic distance, the Australian market would be one of the first places to start as both countries share a common or similar language, culture, political systems, level of education, and level of industrial development.

Psychic distance is most import in the earlier stages of internationalization. More specifically, psychic distance is most important in the first stages of the establishment chain (Johanson & Wiedersheim-Paul, 1975). The establishment chain is incorporated into the Uppsala model as a stepwise extension of the firms operations in a foreign market and is broken into four exaggerated parts as follows:

1. no regular export activities

2. export via independent agent/representative 3. sales subsidiary

4. production and manufacturing in a foreign market.

(Johanson & Wiedersheim-Paul, 1975:307)

These stages are fairly self-explanatory. The first stage means there is no commitment to foreign exports on the firm’s behalf. The second stage relates to the firms first

commitment in a foreign market. This is where psychic distance is tested for validity. It is important to mention that a representative or agent can mean many things. Often firms will hire an independent local sales representative that additionally represents other foreign companies in the area. Others will set up contacts with distributors in a foreign market that will aid in promoting products locally. The possibilities are endless but control and commitment are limited in the second stage. The third stage, sales subsidiary, is the first stage where the company gains full control of the information channel and can direct the type of information that is sent to the market. Commitment is high in the third stage. The final stage, production and manufacturing in a foreign market, represents the most commitment in the establishment chain and usually relates the least to psychic distances and more so to rational financial decision making (Johanson & Wiedersheim- Paul, 1975).

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Additionally, as firms progress through the establishment chain and move into more countries, correlations between psychic distance and decisions of internationalization diminish (Johanson & Vahlne, 1977). Gaining knowledge of foreign markets alleviates the need for familiar places. “Very generally, the knowledge relates to present and future demands and supply, to competition and to the channels for distribution, to payment conditions and the transferability of money, and those things vary from country to country and from time to time,” (Johanson & Vahlne, 1977:27). The above statement relates to foreign risks. These risks can be controlled to a certain point by the gained knowledge of a foreign market through learned experiences while moving through the establishment chain also know as experimental knowledge (Johanson & Vahlne, 1977).

Uncontrollable factors such as tariffs, non-tariff barriers and transportation cost that affect the final stage in the establishment chain, production and manufacturing in a foreign market, have brought the Uppsala model and Johanson & Wiedersheim-Paul (1975) measurements of psychic distance under negative scrutiny. Johanson &

Wiedersheim-Paul (1975) do not disclose their measurement of psychic distance nor do they find a correlation in their results. In the follow up paper to the Uppsala model by Johanson & Vahlne (1977) there is less mention of psychic distance and again it was not defined in detail how it was calculated.

Dow (2000) provides a critical review of the Uppsala model and the bases of how they calculated psychic distance. Dow found that Johanson & Wiedersheim-Paul (1975) measurements of psychic distance where evaluated and ranked based on their own knowledge. Dow argues that if they would have taken careful consideration of foreign country rankings, they would have found a relevant correlation between psychic distance and market decisions. Dow’s analysis of psychic distance is based on rankings developed by a ten-person panel of professional experts. The professionals involved were Australian managers and the study was for Australian firms only. The results provide a strong correlation between psychic distance and may indicate that Johanson & Wiedersheim- Paul many have become careless in their decisions. These results indicate that additional testing of the Uppsala model is needed.

Johanson & Vahlne (1990) address some of the criticisms they have received in the past related to their model. One of the biggest issues to the model relates to the earlier stages of internationalization when the firm in question lacks market knowledge. Nordstrom (1990) argues that the world has become homogeneous and as a consequence, psychic distance has diminished. This is inline with the Network Theory presented earlier which takes an inter-organist perspective seeing the knowledge shared within an industry and decisions are driven by external forces. Johanson & Vahlne (1990) agree with Nordstrom (1990) on the bases that environmental changes such as the means of supplying and transmitting information is less fragmented in markets that have an increasing emphasis on R&D. Johanson & Vahlne (1990) agree that the model may be less effective in the later stages of internationalization in R&D intensive markets.

Other criticisms of the Uppsala model include the assumption that it is not applicable for service industries. Johanson & Vahlne (1990) point out that many different studies

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assume that psychic distance is not applicable to the service industry as service firms are not governed by cultural distances. The results of studies that examined psychic distance are split. This paper will not examine service firms, however it will work to test the other criticisms mentioned. The next section will include an introduction to Hofstede data and its relation to and examination of psychic distance.

3. Analysis of Hofstede Data

Psychic distance, as mentioned earlier, is the distance between two countries languages, cultures, political systems, levels of education, and levels of industrial development,”

(Johanson & Wiedersheim-Paul, 1975). All of these factors intertwine with one another as well as influence each other. One could argue that the dominate factor is culture and that culture encompasses all of the other factors mentioned above. Hofstede (1991) takes this position.

Hofstede (1991) sees cultures as a type of human software that is developed at three different levels. “Culture is learned, not inherited. It derives from one’s social

environment, not from one’s genes,” (Hofstede, 1991:5). Hofstede distinguishes culture from human nature on one side and from personality on the other and states that it lies somewhere in the middle (see figure 3.2). Human nature is seen as a world phenomenon of traits that are inherited and can be see when looking at one’s basic physical and psychological function. He sees culture as a national phenomenon of learned events such as the traits mentioned above (political systems, languages, etc.). However, it is

acknowledged that a person’s decisions in their cultural environment will differ and this is where personality comes into play. These traits can be seen as both inherited and learned.

Figure 3.2: Three Levels of Uniqueness in Human Mental Programming

Specific to individuals

PERSONALITY

Inherited & learned

Specific to groups

CULTURE

^Learned

Universal

HUMAN NATURE

^Inherited

Source: Hofstede (1991:6)

While trying to predict an individual’s personality can be a daunting and somewhat unrealistic task, culture, in this perspective, can be predicted as it is seen as collective programming in the individuals of a nation in question. When dealing with individual outside of a firms domestic market, “negotiations are more likely to succeed when the parties concerned understand the reasons for the differences in view points,” (Hofstede, 1991:7). This insinuates that parties must know more that just the languages, religion, or political system; they must know why things are the way that they are. Knowing that your domestic market is different on one or more levels can help a firm understand the

difficult decisions and opportunities that they will face when entering a foreign market (Hofstede, 1991). This can be reworded with that same meaning by replacing the words difficult decisions and opportunities with the term psychic distance. Further, these differences can be broken down into a multidimensional system.

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Hofstede (1991) provides five dimensions that help to define a nation’s culture. These dimensions are rated on a scale of one to 100. They are as follows:

1. Power Distance Index (PDI) is “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally,” (Hofstede, 1991: 28). A high score represent a high level of distance between leaders and subordinates.

2. Individualism Index (IDV) measures the differences between cultures possessing either individualistic or collectivistic characteristics. “Individualism pertains to societies in which the ties between individuals are loose; everyone is expected to look after himself or herself and his or her immediate family;” collectivism on the other hand pertains to, “societies in which people from birth onwards are

integrated into strong, cohesive in-groups, which throughout people’s lifetime continue to protect them in exchange for unquestioning loyalty,” (Hofstede, 1991:51). A high score represent a high level of individualism in the nation in question. Further, collectivism is the norm in societies of the world where individualism is seen as the exception (Hofstede, 1991).

3. Masculinity Index (MAS) is the measure for the degree of masculinity or femininity for a nation’s culture. “Masculinity pertains to societies in which gender roles are clearly distinct,” (men are tough and focused on success whereas women are to be modest and concerned with quality of life), “and Femininity pertains to societies in which social gender roles overlap (both men and women are supposed to be modest tender and concerned with quality of life),” (Hofstede, 1991:82-83). These term are not absolute (a man can behave in a feminine way and vies-versa); they are merely terms derived from society (Hofstede, 1991). A high score indicates masculinity dominates in society.

4. Uncertainty Avoidance Index (UAI) is “defined as the extent to which the members of a culture feel threatened by uncertain or unknown situations,”

(Hofstede, 1991:113). This can be expressed through stress, the need for predictable situations and among other things the need for rules/laws. In this situation a high score indicates a culture that feels threatened by uncertain and unknown situations.

5. Long Term Orientation (LTO) is the latest dimension added and is based on the Chinese Value Survey (CVS). The CVS was created to alleviate the data set of westen bias and was conducted on 23 countries (21 of which are included in the data). LTO is, “a measure for the degree of long-term orientation in a country’s culture,” (Hofstede, 1991:261) and refers to the teaching of Confucius, a Chinese philosopher. A high score indicates a strong commitment to persistence, ordering relationships by status and observing this order, valuing thriftiness, and having a sense of shame/guilt (Hofstede, 1991:165).

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When examining these five dimensions it is important to realize that they are based on the statistical analysis of a questionnaire given to IBM employees in 57 countries and regions as well as the CVS administered in 23 countries consisting of answers from college students. Hofstede stresses, however, that “the culture of a country – or other category of people – is not a combination of properties of the average citizen, nor a model personality. It is, among other things, a set of likely reactions of citizens with a common mental programming,” (Hofstede, 1991:112). Theses five dimensions should also be looked at as a likely response of a citizen of a particular nation. In this way, one can use these dimensions to determine the psychic distance of a foreign market.

In the past Hofstede data has been criticized for it use of psychic distance. Dow (1990) criticizes the dimensions as a measurement of psychic distance. Dow feels that they do not take into consideration the differences in language, religion, education, legal systems, or levels of development for a nation. Additionally, Dow also criticized Johanson and Wiedersheim-Paul’s (1975) measurement of psychic distance (as mentioned above) as it was constructed by Johanson and Wiedersheim-Paul them-selves. “The content validity of either instrument is doubtful when the scale is used as the sole measurement of psychological distance,” (Dow, 1990). Dow suggests that Hofstede data, when used as a measurement of psychic distance, should be combined with other measurements such as geographical distance. While this study will use solely Hofstede data as the measurement of psychic distance, geographical distance will be taken into consideration as a possible explanation of the study.

Additionally, Hofstede (1991) indicates that culture is developed through differences in language, religion, education, legal systems, or levels of development for a nation. For example, the culture of China is of great concern for change as the level of development changes and could lead to a decrease in masculinity index. Further, as China’s political environment evolves from a communistic to democratic nature one would expect the countries individualism index to increase as capitalism emerges. Again, these factors of psychic distance can be seen as elements that affect culture.

While this chapter has laid the foundation of relevant literature for this study, the next part of the paper, Part Two: Results, presents the results of the study in relation to the main and sub-questions stated at the end of chapter one.

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- Part Two: Results -

The results presented in the next three chapters are given in a manner to help readers gain a better understanding of the firms studied by examining the operation of each firm and their domestic industry. The operations of a firm and the products they produce as well as their domestic industry can give insight into how a firm may react in a foreign country.

Additionally, each firm includes a section on the analysis of the data collected in relation to the elements of the Uppsala model. Each chapter concludes with a summery of the findings in that country which will lead to further analysis that will be conducted in the conclusion of this paper.

Again Hofstede data (Hofstede, 1990) is used in each section titled Hofstede data to measure psychic distance. Countries are listed for each dimension. The first country listed is closest to the host country (India, Japan, or the USA) in that dimension and is followed by the next closest countries. All dimensions were compiled for each host country and the mean results are in the Averages section. The Average section is used as the measurement of psychic distance. While some countries are not in the top ten for the Averages section, they may be listed in the top ten of one dimension of Hofstede data. Therefore, all dimensions are included in the tables in the next sections and chapters.

The information in chapters four thru six are from the specific firms sources which include, annual reports, 10K reports, and company internet webpage’s which include special documents such as memos to shareholders and press releases. Information that is not from the firm is cited with an alternative source. All sources are listed in the back of the paper in the references section.

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Chapter 4: India 1. Domestic Industry Review - India

The pharmaceutical industry of India generally consists of generic manufacturers. The generic pharmaceutical sector of Indian is one of the fastest growing sectors in the global market. In 2003 alone, the growth rate was three times that of brand name drugs and made up 30% or more of the total pharmaceutical sales in some of the world largest markets – USA, Germany, UK, and Canada (Class, 2005). Although India’s

pharmaceutical industry is advanced in many aspects, the county’s development can be seen as both a hindrance and a benefit.

One of the greatest expenses for the global pharmaceutical industry is research and development (Ranbaxy, Dr. Reddy’s, and Orchid Annual Reports, Bartlett and Ghoshal, 2000). To survive in the declining production of new patents, generic firms will need to increase R&D facilities and funds (Class, 2005). “The successful organizations will be those that recognize the need for change early and start to plan their campaign of response accordingly,” (Class, 2005:238). India is a developing nation and home to a generic pharmaceutical industry that realizes the need for R&D and can conduct research at a relatively lower cost that is equal in quality to that of a developed nation.

In the following sections of this chapter, three pharmaceutical companies based in India’s domestic market will be examined and analyzed in regards to their international

development.

a. Ranbaxy Laboratories Limited

i. Company Overview: Ranbaxy Laboratories Ltd was founded in 1961 in Gurgaon, India and manufacturers pharmaceuticals and active pharmaceutical ingredients. The company first went public in 1973 and has been listed and de-listed on many different domestic and foreign stock exchanges. Today, the company employs over 9000 people around the world and prides itself on establishing a multicultural workforce. Ranbaxy is the largest pharmaceutical company in India (Datamonitor, 2006) and reached annual sales of over US $1.1 billion in 2005. Ranbaxy is a generic pharmaceutical company with the plans to become a brand name research and development company in the near future. Currently the company ranks among the top ten generic manufacturers in the world.

The company claims to be one of the few firms operating in India to understand the importance of research and development (Ranbaxy.com). Ranbaxy currently has a budget of seven percent of revenues for research and development with a goal of increasing expenditures to nine or ten percent in the near future. Costs are especially low in India and education ranks high in India making a research environment that is state-of-the-art at relatively lower cost than, for example, a firm operating in the US. Research has remained a vital point of the company’s business strategy and long term goals. The company currently employs over 1100 scientist who are involved in ground breaking research and discoveries.

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Ranbaxy recently made a new discovery for a novel drug delivery system of the brand name drug Ciprofloxacin. The company out-licenses the drug delivery system to the maker of Ciprofloxacin, Bayer AG. While the company could market the drugs generic version with the added discovery, Ranbaxy has chosen to focus on areas of business that they can currently capitalize on.

While the company has grown tremendously in the past, their plans for the future are even greater. Ranbaxy has set goals to be among the top 5 generic pharmaceutical firms in the world by 2012. Additionally, they have set a goal to exceed total sales of US $5 billion by 2012. Beyond this time, Ranbaxy plans to move toward the goal of become one of the worlds greatest brand name research oriented pharmaceutical companies in the world. The next section of this paper will discuss Ranbaxy’s initial internationalization process.

ii. Data Analysis – Ranbaxy Laboratories Limited: Ranbaxy’s internationalization process is a topic of discussion in many articles. Bartlett and Ghoshal (2000) found that Ranbaxy took a slow and incremental manner in expanding operations globally. They found that the company felt that they were too far from their international competitors in technological innovation to enter developed countries. The company took a slow

approach until market and industry knowledge was acquired to allow the firm to enter competitive and developed markets.

Upon further analysis of the early stages of development of Ranbaxy, it is evident that their progression correlates with the Uppsala model and how firms move slowly in the initial internationalization process (Johanson and Wiedersheim-Paul, 1975). Ranbaxy started their foreign operations in 1977. Their progress was slow until the early 1990’s.

Before this time Ranbaxy’s operations were active in just five countries as shown in table 4.1 below and in the appendix.

Table 4.1

Ranbaxy Ltd. – India

Country 1 Operations Market Off. Subsidiary Manufacture R&D facility

Nigeria 1977, 2 1987 1996

Thailand 1983, 2 1983

Malaysia 1984, 2 1984 1987

Cameroon 1987, 3 1987

China 1990 1993, 2 1995

Hong Kong 1992 1992

UAE 1993, 3

NL Antilles 1993 1993

S. Africa 1993 1993

Myanmar 1993 1997

1. Ranked according to the starting date of operations, than marketing office, than subsidiary, than manufacturing facility, than R&D facility, than alphabetically to country's name.

2. Established as a joint venture with a local partner.

3. Earliest date I found information on the country. It is important to note that presence could have been earlier.

4. Acquired a local company.

5. Closed.

6. Region mentioned as place of business, no information on specific countries was found for this date.