Dr Reddy’s Laboratories Ltd (DRL) was one of India’s success stories in the pharma space, wherein a founder’s dream turned into a reality. It had a remarkable growth over three decades, with impeccable quality and regulatory standards, as it went on to become the number-two pharma company in India by sales. However, in the last 3 years, DRL was navigating one of the most challenging times it had ever faced for various reasons. Sales were stagnated, profits had plunged, costs had spiralled and manufacturing sites grappled with US Food and Drug Administration (FDA) issues—and more importantly, its growth strategies were not delivering results. This resulted in value erosion, reduced number of new product approvals, customers doubting the capabilities, competitors doing much better, etc. Also, it questioned whether DRL continued to be the bellwether or not for the Indian pharma fraternity as competitors raced ahead. This case highlights the global and Indian context of the pharma industry, along with details of three main competitors based on secondary data sources, and analyses the ongoing issues in DRL. Finally, it concludes by highlighting the six decision buckets and the way forward to make DRL a bellwether again in the Indian pharma industry.
This case explores the phenomenon of organization decline and the dilemma around the different paths that may be traversed by Dr. Reddy’s Laboratories Ltd. There are multiple theories of organizational decline, and mostly they encompass both the external environment and the internal aspects of the firm, including the context of decision-making. Moreover, the organization decline-and-turnaround model highlights the different causes of decline, response factor, firm action and outcomes in a unified and comprehensive manner. To that end, based on secondary data sources and the study of the phenomenon of organization decline in a pharmaceutical industry setting, this case depicts the application of one of the organizational decline-and-turnaround models. The case highlights the company’s trigger for the decline, industry structure, market dynamics, current threats, the competitive landscape along with the fall and the way forward. The case attempts to trigger discussion in the classroom on why organizations decline from their seemingly high standards and what paths can be explored during the decline to enable turnaround.
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