Research On The Vertical Integration Effects Of Kangmei Pharmaceutical Industry

The strategy of enterprise integration has always been an effective means for resource optimization and reorganization and the expansion of the company's scale.Since the reform and opening up in 1978,many companies have begun to aware of the advantages of vertical integration in saving transaction costs,improving efficiency,and so on,so most have begun to expand the scale of operations through vertical integration.In recent years,the Chinese medicine industry has ushered in a period of policy dividend promotion and development.But due to the industry characteristics,traditional Chinese medicine industry,especially Chinese medicine yinpian,industry concentration is very low,it is difficult to improve,therefore,traditional Chinese medicine industry in recent years are taken vertical integration behavior.However,vertical integration may also have some anti-competitive effects such as market blockade and price discrimination,and the frequent vertical mergers and acquisitions of most enterprises does not constitute the attention of antitrust authorities.Therefore,this article research question is based on the sig pharmaceutical industry of the whole industry chain integration to analyze the effects of vertical integration,mainly is to reduce the transaction cost,improve efficiency(transaction cost theory),or got market power(the theory of industrial organization).This article selects Kangmei Pharmaceutical as the case object and studies its effects for vertical integration.This article first uses event research method to analyze the wealth effect of mergers and acquisitions and horizontal competitors,in order to test the effectiveness of transaction cost hypothesis and market force hypothesis for the effects of vertical integration.Subsequently,based on two theories,the specific analysis of the cases was conducted.Based on transaction cost theory,this paper analyzes three aspects:synergy effect,asset specificity and financing cost.Based on the theory of industrial organization,this paper separately analyzes the market forces of upper,middle and lower reaches from Kangmei Pharmaceutical.The study found that:(1)The results of the event research method show that the CAR trend of mergers and acquisitions and horizontal competitors is more significant for the market force hypothesis;(2)the results of the transaction cost index analysis show that the performance of the business synergy effect?financial synergy effect and asset specificity are relatively Significantly,other indicators,such as management synergy,cost and financing costs,are not significant,indicating that the results do not support transaction cost theory;(3)Market force indicator analysis results show that The upstream monopolizes 75%of the Chinese herbal medicines trading market.The middle reaches of the industry are the industry leaders of the Chinese Herbal Pieces.The gross profit margin has been higher than the average level of the industry.The downstream has continued to conduct pharmacy trusteeship and layout of smart pharmacies.The results show that Kangmei Pharmaceutical has gained huge market power and has monopoly potential.In general,kangmei pharmaceutical has been more effective in increasing market power.Through the study of the vertical integration cause of Kangmei Pharmaceutical,it can be found that the company can reduce transaction costs through vertical integration.At the same time,however,there are also incentives to increase market forces and form monopolies.To a certain extent,it provides decision support for regulators and broadens the usefulness of accounting information.