In 2017 the Two-Invoice System policy will evolve from last year’s pilot to full implementation, large enterprises will descend the channel while small and medium-sized agents will be eliminated, some through mergers or acquisitions, and others through repositioning. Under this trend, the industry will go through three major directions: horizontal acquisition, vertical extension and transformation.
In the horizontal acquisition, large-scale commercial companies that are capital-abundant and well-established with wide-ranging coverage will continue to merge and integrate regional channels, and build the channels to become providers of supply chain integration program. Their performance growth will be significant.
Vertical extension can be divided into three types: First, manufacturers channelize their own downstream, that is, large-scale enterprises to acquire dealers; Second, the business-oriented enterprises establish upstream manufacturing capabilities, that is, acquisition of upstream technology by distribution enterprises; Third, distribution companies add downstream service operation, extending towards terminal portion. Longitudinal extension allows companies to have more discourse on the upstream and downstream, thereby enhancing corporate profitability through synergies.
Transformation refers to the change of business models between medical device manufacturing enterprises and distribution channel companies, for example some medical device distributors are turning into CSO under the mandate of reform.
In short, overall distribution channels are gradually integrated through mergers and acquisitions, extension, and transformation. It represents the trend of further direction for distribution companies under the Two-Invoice System.
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