LUNDBECK KOREA: MANAGING AN INTERNATIONAL GROWTH
ENGINE
SYNOPSIS
In 2005, Michael Andersen, vice president of Lundbeck, needed to decide what to do with one of his most
promising subsidiaries, Lundbeck Korea. Over its short lifetime, under the leadership of the country
CASE OBJECTIVES
1. To compare and contrast the strategic priorities of senior managers at the local, regional, and global
level in an MNE, and to consider how these goals and strategies vary across cultures and MNE
hierarchy;
3. To understand how reporting structures can be used to balance the demands between corporate
headquarters strategy and local integration.
5. To explore ethical decision making in a multinational (cross-cultural) situation.
POSITION IN THE COURSE
This case can be used in international strategy or cross-cultural management courses. If used in an
TEACHING APPROACH & LEARNING OBJECTIVES
1. I usually begin the class by having the students break into small groups to consider the main strategic
priorities of each of the three managers (Andersen, Jun, and Rajar). Especially for students at the
2. The second objective is to have students explore Lundbeck’s value chain to understand the tensions
between the need for global efficiency versus local responsiveness. Lundbeck, as a player in the global
pharmaceutical industry, is an example of firm that is able to exploit advantages from global
efficiencies. For example, the research & development and manufacturing of drugs are incredibly
3. The third objective of the case is to consider what type of organizational structure would best fit
Lundbeck Korea given its local situation and position in Lundbeck’s organizational mentality. This is
the decision focus of the case. What should Andersen do with Lundbeck Korea?
4. Finally, this case provides an opportunity for students to explore ethical decision making in a
multinational (cross-cultural) situation. There are several examples in the case that raise possible
ethical issues. After having taught this case several times, I have found that a useful discussion is to
have students consider whether each example is an acceptable ‘cultural practice’ or a ‘real ethical
1. What priorities will the local, regional, and headquarters managers have? How will their backgrounds
and positions in the company influence their concerns?
What type of organizational mentality does Lundbeck have? Why has this mentality developed? Does
SUPPLEMENTARY READING
C. A. Bartlett and P. W. Beamish, Transnational Management: Text, Readings and Cases in Cross Border
Management, 6/E, Irwin McGraw-Hill, Burr Ridge, Illinois, 2011.
P. W. Beamish, A. J. Morrison, A. C. Inkpen and P. M. Rosenzweig, International Management: Text and
Cases, 5/e, Irwin McGraw-Hill, Boston, 2003.
ANALYSIS
1. What priorities will the local, regional, and headquarters managers have? How will their
backgrounds and positions in the company influence their concerns?
Jun: Jun’s priority is to increase revenue for Lundbeck Korea — that is what his team will be rewarded for
doing. He understands what it takes to get that done in Korea. He believes that he “gets” Korea and that
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strategic drivers. In terms of strategy, he does not believe that he needs to be constrained to Rajar’s
regional interpretation of the Lundbeck strategy. For, example, he has a plan to ultimately capture
maximum rents on both Cipram and Lexapro.
Andersen: Andersen has a somewhat different set of priorities. Beyond wanting to support both Jun and
Rajar’s goals — increasing revenue and developing the corporate brand — Andersen also wants to raise
the profile of the markets that he is managing. He considers Korea to be the market with the most
2. Which functional areas in Lundebeck’s value chain require global integration, and which
require local responsiveness? Do you believe Lunbeck’s reporting structures balance these
requirements?
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In the top left-hand corner are production, research & development, and product testing. In terms of these,
Students should consider what Lundbeck has gained and lost in terms of global integration and local
responsiveness by having its manufacturing and research & development centralized. Going through this
exercise will help them understand Lundbeck’s organizational mentality.
Gained
3. What is the value of having a regional division? Should Andersen separate Lundbeck Korea
from Lundbeck Asia?
This case allows student to explore the importance of reporting structures on the day-to-day management
of international subsidiaries. If Andersen decides to move Lundbeck Korea out of the Asia group, it will
have an immediate impact on Korea and the rest of Asia. Andersen also needs to balance long-term
strategy with the immediate competency of his current managers. Is Korea ready to be independent and is
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After students have considered Lundbeck’s need for local responsiveness versus global integration, they
will most probably come to understand that the nature of Lundbeck’s business allows them to some degree
to separate functions into local and global. The next question becomes whether Lundbeck Korea warrants
more autonomy or whether the localized functions are better handled at the regional level.
The determination of which countries can be folded into regional units comes from an assessment of the
level of heterogeneity of the geographic markets. Managers can assess heterogeneity along a number of
dimensions of national institutional environments. Are the markets geographically proximate to one
4. Can you devise a win-win-win solution, one which meets Andersen’s needs and does not result
in either Jun or Rajar leaving the company?
As Andersen, how, if at all, will you be able to retain both Jun and Rajar? Their organizational and
industry knowledge and past performance means both managers are valuable and may be very difficult to
replace.
In reality, this would be a hard sell. Jun would be given a promotion at the expense of Rajar. It would
probably be very difficult to sell a loss of control and power as furthering Rajar’s career. Rightly or
wrongly, he would very likely see this as a vote of non-confidence and a potential limitation on his ability
to grow within the corporation.
5. Do you believe that this case raises substantial ethical questions? If so, what are they and how
would you handle these questions?
In Chapter 4 on ethics in International Business, C. Hill and T. McKaig (2012) provide a several
philosophical approaches to ethical decision making. I find that this list is reasonably exhaustive and thus
Using these approaches, students can go through the potential ethic issues in the case and consider how
they would approach these issues.
Possible ethical issues in the case include:
WHAT HAPPENED
In the fall of 2005, Andersen gave Jun the independence he sought. Under the leadership of Jun, Lundbeck
Korea has continued to be very successful. Its revenues are more than 100 times what was forecasted in
KEY TAKEAWAYS
1. Organizational goals develop over time and depend on the situation in which the manager is
embedded. Jun wanted to focus on maximizing revenue for Korea; Rajar was concerned with aligning
3. Understanding a firm’s mentality is helpful in understanding the firm’s international development. A
question for managers is whether the firm’s mentality fits its environment and capabilities. We can
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Exhibit TN-1
PRIORITIES OF MANAGERS AT LUNDBECK (COUNTRY, REGIONAL, HEADQUARTERS)
Rajar
Andersen
Jun
Maximize
revenue in
Korea
Implement
Lundbeck’s
strategy (though
with conflicting
priorities)
Increase focus on
Korea at HQ to
expand Lundbeck’s
integration strategy
Consistently manage diverse
locations, while growing the
region
Effectively manage costs
Influence opinion leaders
In Korea
Develop the
Lundbeck brand
Transfer knowledge to subsidiaries
Create mechanisms for
accountability (reporting)
Big Picture – Korea’s
fit within the rest of
Lundbeck Asia and
globally
Long-term – Korea’s
fit into Lundbeck’s
organizational and
product goals
Manage the transition
for licensing agreements
to wholly-owned
subsidiaries
Create new sources of
revenue for Korea (e.g.
Ebixa)
Maintain a network to
share knowledge and best
practices with other
Asian managers
Fit in well with local
business practice
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Exhibit TN-2
HISTORY OF LUNDBECK IN ASIA
Lundbeck initially entered Asia by creating licensing agreements. There are pros and cons of entering into
the region through licensing.
Pros
Choosing an ownership mode is a balance between the amount of resources committed to the foreign
market, and the level of control over foreign activities. Here we are looking at an MNE in Asia that moved
from licensing relationships to joint ventures and wholly owned subsidiaries. Exhibit TN-2B shows how
various ownership structures (including licensing, joint ventures and wholly owned subsidiaries) balance
resource commitment with control.
Lundbeck in Asia can change its ownership structure from licensing relationships to joint ventures and
wholly owned subsidiaries under the umbrella group of Lundbeck Asia. This will involve a much heavier
investment.
By doing this it can:
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Exhibit TN-3
APPROACHES TO FOREIGN MARKET ENTRY
LUNDBECK’S MIX IN 2005
Place the following into the chart in the appropriate position in terms of Lundbeck.
i. Research and Development
ii. Production / Manufacturing
iii. Product Testing (drug trials)
iv. Pricing
v. Government Relations
vi. Marketing
vii. Sales & Promotion
viii. Product Mix (e.g. promoting Lexapro over Cipram)
Low
Low High
Need for National Differentiation and Responsiveness
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Exhibit TN-4
GLOBAL INTEGRATION VS. NATIONAL RESPONSIVENESS
Evolving Mentality:
International to Transnational
• Multinational Perspective: Overseas markets a portfolio of
local opportunities; managed as a decentralized federation
• International Perspective: Leverages its domestic
capabilities worldwide; managed as a coordinated federation
• Global Perspective: Views world as a single unit of
analysis; operations managed centrally
• Transnational Perspective: Simultaneously responds to
local needs, global demands, and cross-border learning
opportunities; managed as an integrated network
Source: C. A. Bartlett and P. W. Beamish, “Expanding Abroad: Motivations, Means, and Mentalities” (Chapter 1), in C. A.
Bartlett and P. W. Beamish (Eds.), Transnational Management: Text, Readings and Cases in Cross Border Management, 6/E,
Irwin McGraw-Hill, Boston, 2011.
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Exhibit TN-5
GLOBAL INTEGRATION VS. NATIONAL RESPONSIVENESS
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Exhibit TN-6
DECISION CONSIDERATIONS
Global Integration
Local Responsiveness
Specialization
Products
• Ensure that Lundbeck Korea is introducing the
newest products that are most important to
Lundbeck.
Control
• Emphasis on cost effectiveness and ensuring
compliance with directives.
• Lundbeck Korea is a small and relatively new
organization that needs strict oversight to
ensure that it conducts its business in a way
that is ethical by global standards. Expenses
should be monitored and audits done to ensure
decisions conform to standard Lundbeck
practices. The last thing Lundbeck needs is a
division that becomes so unique that it is
uncontrollable from headquarters.
• Part of building a global brand is to ensure that
the brand is consistent and recognized in every
country.
Developing Local Staff
• Specialization means that the staff at Lundbeck
Korea should mirror the competencies of the
Lundbeck. This has been achieved.
Opportunity Seeking
• Use Lundbeck’s focus on specialization to go
after local opportunities that require a blend of
Lundbeck’s competencies with local expertise.
Speed
Coordination
• Lundbeck has well-defined objectives for the
entire group. Care should be taken to facilitate
good communication channels so that
Lundbeck Korea is always in sync with
Lundbeck’s strategy.
slows the Korea subsidiary’s development. It
needs freedom to pursue strategies that fit its
Fit to Environment (Overcome Liability of
Foreignness)
• Take advantage of a deep understanding of the
local marketplace to respond quickly to
stakeholder concerns.
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Exhibit TN-6 (continued)
the Korean subsidiary could have had increased
Integration
Knowledge Transfer
• Communicate with headquarters.
• Transfer parent core competencies to
subsidiary.
• Promote corporate culture.
• Take advantage of global management
knowledge.
• Lundbeck Korea has been around for much less
time than the other Lundbeck operations in the
Asia region. By cutting itself off from the rest
of Lundbeck in Asia, Lundbeck Korea risks
becoming isolated. The Lundbeck operations
in the Asia region would benefit from growing
together. It is risky to cut off such a new
subsidiary from its source of learning.
Local Expertise
• Developed networks among partners, clients,
and regulators.
• Lundbeck Korea has learned all it can from
Lundbeck Asia. While Lundbeck Asia was
helpful in getting Lundbeck Korea started,
Lundbeck Korea has little in common with the
rest of Lundbeck Asia, and thus little left to
learn.
• The markets are different, the cultures are
different, the government regulations are
different, and the strategies should be different.
• Consider the examples of the benefits of
cultural sensitivity (the car); differing business
practices (the role of social activities and
networking in business); global versus local
ethics (the giving of gifts); and the managing of
government relations (Ebixa example).
Results
• Lundbeck Korea’s results should be judged in
light of its contribution to Lundbeck’s
priorities:
– Distributing and marketing the newest and
most innovative products.
– Streamlining and reducing cost by using
resources most effectively,
• Lundbeck Korea is a profit center and is
measured by results. It has proven that it can
add value. Jun has also concentrated on
growing the business in a way that maximizes
revenues.
• The launch of Ebixa is an example of using
local expertise to achieve unprecedented
results.
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Exhibit TN-7
HOFSTEDE’S CULTURAL DIMENSIONS FOR KOREA AND ASIA
Korea
Asian Countries
Power Distance Index (PDI) that is the extent to which the less powerful members of organizations and
institutions (like the family) accept and expect that power is distributed unequally. This represents
inequality (more versus less), but defined from below, not from above. It suggests that a society’s level of
inequality is endorsed by the followers as much as by the leaders. Power and inequality, of course, are
extremely fundamental facts of any society and anybody with some international experience will be aware
that ‘all societies are unequal, but some are more unequal than others’.
Individualism (IDV) on the one side versus its opposite, collectivism, that is the degree to which
individuals are integrated into groups. On the individualist side we find societies in which the ties between
individuals are loose: everyone is expected to look after him/herself and his/her immediate family. On the
collectivist side, we find societies in which people from birth onwards are integrated into strong, cohesive
in-groups, often extended families (with uncles, aunts and grandparents) which continue protecting them in
exchange for unquestioning loyalty. The word ‘collectivism’ in this sense has no political meaning: it
refers to the group, not to the state. Again, the issue addressed by this dimension is an extremely
fundamental one, regarding all societies in the world.
other. The assertive pole has been called ‘masculine’ and the modest, caring pole ‘feminine’. The women
in feminine countries have the same modest, caring values as the men; in the masculine countries they are
somewhat assertive and competitive, but not as much as the men, so that these countries show a gap
between men’s values and women’s values.
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Exhibit TN-7 (continued)
Uncertainty Avoidance Index (UAI) deals with a society’s tolerance for uncertainty and ambiguity; it
ultimately refers to man’s search for Truth. It indicates to what extent a culture programs its members to
feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel,
Long-Term Orientation (LTO) versus short-term orientation: this fifth dimension was found in a study
among students in 23 countries around the world, using a questionnaire designed by Chinese scholars. It
can be said to deal with Virtue regardless of Truth. Values associated with Long Term Orientation are
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Exhibit TN-8
PRESSURE TO CREATE GEOGRAPHIC DIVISIONS
Size of Regional Market
Small
Large
Similarities of region
to other geographic
regions.
Homogeneous
Low
Moderate
Heterogeneous
Moderate
High
Source: A. Delios, P. Beamish, and J. Lu, International Business: An Asia Pacific Perspective, Pearson Education South
Asia Ltd, Singapore, 2010, p. 266-267.