Case Yiseul Oh Essay Example

and external collaborations. Despite a period of mergers and acquisitions in the industry, Lilly has successfully streamlined operations.The strategy of Lilly, a pharmaceutical company, is to focus on partnerships rather than solely on increasing its size, recognizing that size does not necessarily lead to proportional growth in capabilities and outputs. Through this approach, Lilly has surpassed larger competitors such as Pfizer and Merck, and this remains a competitive advantage in the global market. The industry is rapidly shifting due to factors like consolidations, increased generics, and patent losses in major markets. To maintain its lead position, Lilly must address these challenges resulting from globalization by expanding alliance scope in geography and function, shifting the focus of their Office of Alliance Management, and selecting, training, and promoting alliance managers. Addressing these challenges shows Lilly's ability to adapt and demonstrate leadership while building future growth potential for the company.Numerous literature has explored the drivers of success in strategic alliances within international business, given their unique characteristics. To clarify future steps for Lilly, it is helpful to look at examples of key competencies and drivers of success. According to Porter (1986), these include strategic consistency and functional capability. In these partnerships, partners leverage resources and core skills to grow joint business while specializing in their unique competitions. For instance, Lilly's partnership with the University of Toronto on centralization and marketing of insulin was successful as the university contributed its proprietary technology in the form of insulin patents, while Eli Lilly brought expertise in mass production and marketing. This pattern repeated itself with the launch of human insulin to the market in 1982. This alliance marked a first for

a pharmaceutical company cooperating with a biotech firm, demonstrating once more the benefits of strategic alliances.

By establishing partnerships, Lilly effectively combined the strengths and resources of each party to achieve a positive outcome for both. Developing and managing strategic alliances also provides the opportunity to build capabilities at various points along the industry's value chain. Leveraging resources allows companies to increase their bargaining power with customers and suppliers, foster relationships with distributors, and distribute marketing and financing expenses over a larger scale. A notable example of this approach was Lilly's partnership with Alpha Biotechnology Company, which significantly reduced the costs associated with research and development. Lilly funded Alpha's annual research efforts based on their success, which was significantly less than the average cost of drug development, saving the company significant resources. Lilly also benefited from a similar cost-cutting approach in its collaboration with Gamma Manufacturing on Pharmaceutical Delivery Systems design and development, strengthening Lilly's position in manufacturing. Knowledge acquisition is a significant factor behind the formation of strategic alliances.

Lilly's partnership with Alpha involved some conflicts but ultimately allowed Lilly to acquire significant understanding on gene technology in a shorter time-frame. Additionally, their partnership with Beta on co-promoting a new drug for diabetes granted access to knowledge on the oral diabetes market, enriching Lilly's diabetes portfolio. Through strategic alliances, Lilly can participate in different research stages and enter new markets, gaining a competitive edge through quick information exchange across cultures and regions. Strategic alliances offer benefits such as better competition against other companies in the pharmaceutical industry. Instead of merging or acquiring companies, Lilly can enhance its internal capabilities with external resources, avoiding

unnecessary size expansion that can be costly.Vertical and horizontal alliances are both important for companies to ensure efficient supply and value chain operations, as well as better distribution. However, strategic alliances can face challenges due to cultural factors and incompatible operations, causing conflicts in the partnership. An example of this occurred during Lilly's partnership with Beta Pharmaceuticals, where misalignment on strategic fit caused issues during progress. The need to share expenses between the two parties also led to contract revision and resource costs. The distinctiveness of each organization can impact how each views the importance of the partnership, leading to loss of synergy and misaligned motivations. These problems create significant barriers to future collaborative arrangements and call into question the future of the alliance (Ads, 2000).

Lilly created its own approach, called the Lilly Alliance Management Process (LAMP), to address issues in the strategic alliance process. LAMP tests potential candidates for strategic, ultra, and operational fits, and continuously evaluates them for performance and satisfaction. With LAMP, Lilly was able to simplify and streamline alliance management, leading to greater recognition as a leader in alliance practice. However, due to increased competition and globalization in the industry, there are still concerns that need to be addressed.

In international business, strategic alliances offer unique benefits including reducing costs and risks, advancing entry into new markets, and building economies of scale. Lilly has demonstrated successful alliance management in examples such as insulin production and with Alpha, but also faced difficulties with Beta.

The pharmaceutical industry is experiencing rapid globalization, which poses strategic challenges for Lilly's MOM alliance. To ensure future productivity and efficiency, key issues must be addressed, namely: 1)

expanding geographically and functionally, 2) re-adjusting focus of alliance, and 3) seceding on succession plans for alliance managers. In evaluating strategies, it is important to consider cost, risk and success potential based on history. The trend of outsourcing research services to countries like India and China has raised the need to improve procurement by utilizing MOM processes and avoiding overlap. Lilly can apply a three-dimensional fit analysis, as part of LAMP, to analyze the alignment between research centers and offshore work to ensure cultural, operational and strategic fit. A strategy for disseminating knowledge base at subsidiary affiliates is also necessary.Lilly can streamline procurement by conducting thorough research on key offshore markets, such as India and China. By focusing on a few markets, they can develop a deeper understanding of each, which they can apply to many companies in that market. This will free up resources for post-fit analysis and result in a more efficient procurement strategy. To apply the LAMP process at the subsidiary level, they must simplify and increase flexibility, as bureaucratic MOM processes may pose a problem. A lighter version of LAMP that focuses on key aspects will ensure consistency across offices while allowing for flexibility. Lilly's focus has shifted from a transactional to relational era, and as such, they emphasize alliance health and managing relationships. While there are concerns about the subjective aspect of relationship management compared to operations management, Lilly continues to prioritize relationships.

With globalization, it is advisable to focus on relationship-driven partnerships over operational ones since the perceived value of relationships differs across cultures. While internal alliance managers at Lilly may not prioritize relationship management, in Asian cultures, relationships

have a significant impact on business outcomes. Currently, Lilly strikes a good balance between the two approaches, enabling it to emphasize one over the other depending on cultural context. One way to do this is through the three-dimensional fit analysis to identify what the partner firm values most. Succession planning of Alliance Managers is also crucial to ensure long-term success in strategic alliances, as great alliance managers have been instrumental in past successful partnerships.

Successful alliance managers at Lilly were skilled at balancing different styles within their team, providing continuity and feedback, and bringing people from both sides into alignment. Effective communication skills were crucial for this relationship-focused role, making it important for Lilly to identify top performers. Industry experience and a diverse background were also valued in potential candidates. Candidates could be sought from Lilly's international subsidiaries. The Eli Lilly and Company case demonstrates both the benefits and potential problems of strategic alliances, but Lilly has shown strength in managing alliances and leveraging external resources to build internal capabilities as a top pharmaceutical company.