GSM 7300 Module 6 Final Paper: Strategic Entrepreneurship Example

Fifty-Six Percent from One Molecule: Eli Lilly and the Strategic Entrepreneurship Problem

Student Name

Master of Business Administration, Thomas Edison State University

GSM-7300: Global Strategic Management

Mentor Name

Month Day, Year

Fifty-Six Percent from One Molecule: Eli Lilly and the Strategic Entrepreneurship Problem

Ireland et al. (2003) define strategic entrepreneurship as taking entrepreneurial actions with a strategic perspective: seeking new opportunities while exploiting current advantages. Few firms illustrate both sides more sharply than Eli Lilly and Company. Its dual-action incretin medicine, tirzepatide, sold as Mounjaro for type 2 diabetes and Zepbound for obesity, made Lilly one of the fastest-growing large companies in the world, and that success now poses the entrepreneurial question in its hardest form: how does a firm keep innovating when one breakthrough dominates its results? This final paper applies the course's frameworks in order, the external environment, business-level strategy, acquisitions and international strategy, cooperative strategy and governance, and leadership and controls, before turning to strategic entrepreneurship and a recommendation.

The Firm in 2025

Lilly's growth has been extraordinary even by the standards of a successful drug launch (Eli Lilly and Company, 2026).

Mounjaro and Zepbound together produced 56 percent of 2025 revenue, and six products each above $3 billion produced 82 percent. Mounjaro's revenue outside the United States rose from $2.6 billion to $9.3 billion in a year, so the franchise is now global. Capital expenditures rose from $5.1 billion to $7.8 billion as Lilly built or expanded plants in North Carolina, Wisconsin, Indiana, Virginia, Texas, Alabama and Pennsylvania and in Ireland, Germany and the Netherlands.

The External Environment

The general environment, the subject of the first module, is both favorable and threatening. Demographically, obesity and diabetes are widespread and growing, and the sociocultural acceptance of medical treatment for obesity has risen quickly. The political and legal segment is the main source of risk. In November 2025 Lilly announced preliminary agreements with the U.S. government to lower Medicaid and certain other prices, give Medicare beneficiaries access to discounted obesity medicines by July 1, 2026, and sell through a government direct-to-patient purchasing platform, while the agreements also give its products a three-year grace period from tariffs under a Section 232 investigation (Eli Lilly and Company, 2026). Payers abroad often do not cover obesity treatment at all. The industry environment features intense rivalry with one other large incretin maker, high buyer power from insurers and governments, and a constant threat of substitutes as new mechanisms reach the clinic.

Business-Level Strategy

Lilly competes through differentiation, in the textbook's terms, by offering medicines that buyers value for their unique effects, which allows prices above those of generic alternatives. Its differentiation rests on clinical results and on manufacturing scale, since supply shortages in 2022 to 2024 showed that being able to make a medicine is itself a competitive advantage. The firm has also added a direct-to-patient channel, LillyDirect, which delivers select Lilly medicines dispensed by third-party pharmacies. That channel lowers dependence on traditional distribution and supports lower-cost cash-pay options, an integrated move that combines differentiation with cost discipline.

Acquisitions and International Strategy

Lilly uses acquisitions mainly to buy innovation rather than scale, which the textbook lists as a way to reduce the cost and risk of new product development and increase speed to market. It paid $3.3 billion for acquired in-process research in 2024, mainly for Morphic, and $3.0 billion in 2025, mainly for Scorpion Therapeutics' PI3K-alpha inhibitor program and SiteOne Therapeutics, and it acquired Verve Therapeutics for a gene-editing program aimed at cholesterol. It also bought a Wisconsin injectable manufacturing site in 2024 for $925 million, an acquisition made to gain capacity quickly. Internationally, Lilly follows something close to a global strategy for its products, with standardized medicines and manufacturing in a few large hubs, while pricing and access are negotiated country by country.

Cooperative Strategy and Governance

Cooperative strategy is part of Lilly's portfolio. Jardiance, one of its largest products, comes from a long alliance with Boehringer Ingelheim, and Lilly relies on contract manufacturers and suppliers, including China-based suppliers of some materials, to keep up with demand. In governance, Lilly's board must oversee a capital allocation question of unusual size: how much of $20.6 billion of annual profit should fund research, plants, acquisitions or returns to shareholders, given a $15 billion share repurchase program authorized in December 2024.

Leadership and Controls

The textbook's balance between strategic and financial controls applies directly. Financial controls would reward maximizing tirzepatide's profits, while strategic controls ask whether the firm is building its next advantage. Lilly's continued increase in research spending, up 21 percent in 2025 even as revenue rose 45 percent, suggests leaders are protecting long-term investment, although research fell slightly as a share of revenue, from about 24 percent to about 20 percent. That ratio is one of the measures the board should watch.

Strategic Entrepreneurship: Exploration and Exploitation

March (1991) described the central tension of organizational learning as the balance between exploitation, refining and extending what a firm already does well, and exploration, searching for new possibilities. Exploitation produces reliable short-term returns, while exploration is uncertain and slow, so successful firms are tempted to exploit until their competences become traps. Hitt et al. (2024) make a similar distinction between incremental innovation, which builds on existing products, and novel or radical innovation, which creates new ones.

Lilly's pipeline shows both. Exploitation includes new indications and forms of tirzepatide and orforglipron, an oral small-molecule incretin submitted for regulatory review in the United States, the European Union and Japan, which received an FDA national priority voucher that could speed approval. Retatrutide, a next-generation incretin in Phase 3 trials, extends the same franchise. Exploration lies outside it: Alzheimer's disease with Kisunla, oncology with the Scorpion program, eye disease with an Adverum gene therapy in Phase 3, and gene editing from Verve. Ireland et al. (2003) argue that wealth comes from combining both behaviors under an entrepreneurial mindset and culture; for Lilly the risk is that the tirzepatide franchise absorbs the organization's attention, capital and best people.

The Road Ahead

Three forces will shape Lilly's next decade. First, prices for incretin medicines are falling as governments negotiate and competition grows, so revenue growth will depend on volume and new products. Second, patents expire; the 10-K lists compound patent dates for key products, and every franchise eventually faces generics. Third, the concentration of revenue in one class of medicines means a safety finding, a pricing shift or a superior rival could change the company's fortunes rapidly. Strategic entrepreneurship is therefore not optional for Lilly; it is the way the firm reduces a concentration risk created by its own success.

Recommendation

Lilly should commit to keeping research and development at about a fifth of revenue as revenue grows, rather than letting the ratio fall as profits rise, and direct a defined share of acquisition spending to areas outside incretins, such as neuroscience, oncology and genetic medicines, where it already runs research and commercial groups. Manufacturing investment should continue, since capacity has proven to be an advantage, but with flexible plants that can make future medicines as well as tirzepatide. The trade-off is significant. Lilly would accept lower near-term earnings growth and a smaller share repurchase program, disappointing investors who expect profits to compound at recent rates, and some exploratory bets will fail. The alternative, harvesting the franchise until its patents expire, would repeat the pattern that has humbled other single-product pharmaceutical companies.

Conclusion

Applying the course's frameworks to Lilly shows a firm that has done most things right: it read a demographic opportunity early, differentiated on clinical results and supply, bought innovation selectively, and kept investing as profits grew. The final module's lens adds the essential warning. A firm earning 56 percent of its revenue from one medicine must explore as seriously as it exploits, and its board and leaders must build controls that protect the search for the next advantage while the current one is still paying.

References

Eli Lilly and Company. (2026). Annual report on Form 10-K for the fiscal year ended December 31, 2025. U.S. Securities and Exchange Commission.

Hitt, M. A., Ireland, R. D., Hoskisson, R. E., & Harrison, J. S. (2024). Strategic management: Competitiveness and globalization: Concepts and cases (14th ed.). Cengage Learning.

Ireland, R. D., Hitt, M. A., & Sirmon, D. G. (2003). A model of strategic entrepreneurship: The construct and its dimensions. Journal of Management, 29(6), 963-989. https://doi.org/10.1016/S0149-2063(03)00086-2

March, J. G. (1991). Exploration and exploitation in organizational learning. Organization Science, 2(1), 71-87. https://doi.org/10.1287/orsc.2.1.71