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Internationalization is the process of planning and implementing products and services so that they can easily be adapted to specific local languages and cultures, a process called localization . The internationalization process is sometimes called translation or localization enablement. Indian pharmaceutical firms are internationalizing by acquiring small firms as well as setting up their subsidiaries, in order to access resources, move up value chain and enter new markets. The leading Indian pharmaceutical firms show that high-risk strategy of acquisitions and direct foreign entry can yield rich dividends, provided it is backed up with superior technology savoirfaire in the targeted niches. The mainstream perspective in international business assumes that firms will internationalize on the basis of a definable competitive advantage that allows them to secure enough to cover the additional costs and risks associated with operating abroad. Dunning (1981; 2001) draws together elements of previous theories to identify ownership, location and internationalization (OLI) advantages that motivate internationalization. Ownership advantages are firm-specific factors such as superior proprietary resources or managerial capabilities that can be applied competitively in a foreign country (Barney, 1991). Location advantages can account for decisions to invest in foreign countries that offer superior market or production opportunities to those available elsewhere or opportunities to secured valued inputs. Internationalization may accrue to firms that can reduce transaction costs by investing abroad so as to undertake transformation or supporting processes more effectively that that can be achieved through market transactions. The benefit of internationalization advantage depends on ownership capabilities and in general this has been a dominant explanation for the emergence of internationalization by firms.
skills needed to obtain approvals for its products under Para 2 of the Abbreviated New Drug Applications (ANDAs) scheme in the US. In the case of Ranbaxy joint ventures, acquisition and organic route have emerged as key part of Ranbaxys internationalisation strategies. Ranbaxy began with joint ventures in developing countries first and then in other developed countries. This has proved an importance source of learning for operating in international markets. At the heart of strategy was sequential expansion; first prioritise market in overseas country, then export in that country or form joint venture to understand dynamics, then set up infrastructure and finally start expanding. RANBAXY GLOBAL STRATEGIES: In India, the Drug Price Control Order (DPCO) was introduced in 1970 to ensure adequate availability of essential drugs at reasonable prices through direct control over drug prices by the Indian government. About 22 drugs and their formulations were under price control. The DPCO was amended in 1979 increasing the number of drugs under price control to 347. These price controls limited the growth opportunities for Ranbaxy, and encouraged the company to expand abroad. Ranbaxy's journey towards globalization began in 1975. The company initially concentrated on selling bulk drugs and intermediates in the overseas markets. However, the gross margins in exporting bulk drugs were as low as 10% in the overseas markets, and at times, this was insufficient even to cover the cost of overseas sales and distribution (Refer Table I for the details of gross margins in global pharmaceutical industry in 1999). Parvinder once said to his colleagues who had doubts about the feasibility of succeeding in Western markets, "Ranbaxy cannot change India. What it can do is to create a pocket of excellence. Ranbaxy must be an island within India..."
Ranbaxy in the US
Ranbaxy entered the US in 1993-94 with its 100% subsidiary - Ranbaxy Pharmaceuticals Inc. The company managed its operations with a small team for a period of four years. The team worked to gain understanding of the market and what the company would need to do to gain a foothold in the market, gaining in-depth knowledge about FDA approvals, regulatory processes and the functioning of American markets. The company concentrated on developing its own infrastructure in the US rather than depending on its partners. Emerging opportunities in the US generic markets were used by Ranbaxy as its launch pad for establishing operations in the country. Between 1995 and 1998, the company filed 16 abbreviated new drug applications (ANDA). The company acquired Ohm Labs, a generics company with experience in FDA approvals and formulations, in 1997. This helped form a base for Ranbaxy's foray into the US generics market. In 1998, Ranbaxy started marketing its products. In fiscal 1998, Ranbaxy's US operations incurred annualized losses of US$ 2.5 billion...