Transformation at

Eli Lilly & Co.

 Company History

● Founded in 1876 by Eli Lilly

Started as a family business
Generated $11,000 in sales its first year
1905: sales increased to over $1 million
1917: largest capsule production factory in the world
1952: company went public
Mid 1980's Lilly starts global expansion
1992: world leader in manufacturing antibiotics, insulin and
diabetic care
Expansion options
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 “
Identification of the Problem
● Manage the increases of cost and time with the
development of new products
● Ensure maximum product return from global diverse
market
● Conflicting Focus
● Coordinating Employees

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Objectives
▪ Provide basic details about Eli Lily and company
▪ Map out appropriate techniques to maximize the company’s
management appraisal and profile management
▪ Determine relevant advantages and disadvantages of each
presumed technique
▪ Propose the scheme deemed to provide the highest
efficiency if applied to the system

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 SWOT Analysis of ELR
STRENGTHS:
● Similar company culture
● Red Book Values
● Both national leaders in drug production
● Positive association with pharmaceutical
imports
● Large distribution channels
● Good marketing schemes
OPPORTUNITIES:
● India's middle class over 200 million people
● Growing demand for better healthcare
● Pharmaceuticals still strong industry
● India became World Trade Organization
member in 1995
● Foreign Direct Investment increase
WEAKNESSES:
● Late presence in Indian market
● Uncertainty of patent protection
● Companies driven by different focuses
THREATS:
● Large corporations entering generic
drug market
● Increase in chronic therapies
● High employee turnover rates
● Government regulations
● High cost of R&D
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Analysis of the Problem
● Balance of Innovation and Consumer
Satisfaction
● Tensions Among Internal and External Affiliates

Recommendations
● Address Team Isolation Analysis and
● Expand Trustradius
● Understand Factors Impacting Sense of
Community
Recommendations
● Find Balance Between Exploration and
Exploitation
Recommendation
Buy out 50% Ranbaxy shares

▪ Have same distribution channels

▪ Invest more in innovation and development of new drug
▪ Balance innovation and customer satisfaction
▪ Able to keep brand name
▪ Address team isolation
▪ Expand trust radius
▪ Understand factors impacting sense of community
▪ Find balance between exploration & exploitation

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What are some of the
strongest and weakest
action being taken by John
Lechleiter and his senior
executive team is taking to
confront the YZ crisis?

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 Stronger actions:

➔ Involving the board members in its decision making

This action will:

● Create transparency and willingness to work for better decision making and risk
management
● Build confidence in management

Weaker actions:

➔ Taking costs out of the system

➔ Going outside the company for different molecules

These actions will:

● Affect in a negative way considering that they will easily go out of their financial target

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 Did Eli Lilly pursue the right strategy to
enter the Indian market?
It was a right strategy.Ranbaxy was the second largest pharmaceutical company that
manufactures bulk drugs
and generic drugs in India, with a domestic market share of 15 per cent. It had
established broad distribution network, and it was the second largest exporter of all
products in India. Ranbaxy’s capital costs were 50 per cent to 75 per cent lower than
those of comparable U.S. plants.
The timing was perfect to enter the Indian market. During 1970s, the Patents Act 1970
and the Drug Price Control Order (DPCO) was issued and India was opening its drug
market.
There was possibility to conduct cheap clinical trials in India

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 What is Lechleiter trying to achieve through the
organizational alignment. Do you think it is going to work?
Project Omega -Business Realignment

· -Lechleiter decided to 1.Had 5 new business areas which focused on a

reinvigorate the company’s R&D particular area or market, with president as his head
by replacing the current and different financials
Organizational structure with a
2.Create a development center of excellence to
more flexible & agile structure
increase speed and efficiency of new products
They wanted to move
3.Created a Global service organization with key
towards decentralization &
functional areas to drive increased quality and
create more decision-making
decreased cost
roles – This would improve
productivity, effectiveness, 4.Tall structure slowed the decision-making process
speed and reduce gap between therefore they adopted decentralization
the company and become more
customer focused

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 What is Lechleiter trying to achieve through the
organizational alignment. Do you think it is going to work?
Project Omega -Business Realignment

4. Allocating operational expenses to the 7. Long term earning would be tied to

different business areas to make them earnings per share so that recipients
equally responsible for the costs and could see long term connection with the
problem solving company’s performance

5. One Lilly Compensation to reduce talent
hoarding. Uniform compensation would
make it difficult for one area to succeed at
the expense of the other
6. Innovation metrics would be used
8. Not fall below 20$billion sales, 3$
billion net income , 4$ billion cash flow
9. Company would eliminate 5500
positions for cost cutting

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 Risks involved in Realignment
· No guarantee that the restructuring goals ·· Increase Bureaucracy while allocating
would be met operational expenses to the different business &
reduce speed of work
· Uncertainty about details of the plan like
how to handle cost restructuring & headcount Decoupling compensation would reduce
reductions incentives from some business areas

· The investors had to continue believing in

the Lilly’s ability to succeed

· Some R&D members showed reluctance as

they lost their powers due to realignment

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Thank You
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