Study On China Dairy Company's Selection Of Backward Integration Pattern After "Melamine Incident"

Our country is liberalizing the economic policy to reduce the entry barriers of diary companies in the process of China's reform and open-up. The fast development of the national economy accelerates the growth of diary industry into which huge profit margins attracts a lot of capital to enter and makes the quantity and scale of China's diary company grow sharply. The majority of dairy companies adopt the developmental pattern of first establishing market and then building factory to seize the market quickly. Under the dual promotion of national policy and the enterprise's developmental pattern, original milk production organization pattern mainly by scatter breeding is created in China diary industry. This pattern has promoted China to be the world's third-largest dairy country behind the U.S. and India. At the same time, these diary companies neglect the raw milk's construction and hide big dangers for enterprise development. With rapid diary industry development, the growth of original milk output can't catch up with the outspread of dairy company's processing capacity, the contradictions of the problem of original milk's quality and the mixed benefit-based relationship between diary companies and dairy farmers increasingly stand out, and the present original milk's production pattern increasingly can't support the fast and sustainable development of China's dairy company, which restricts the development of the whole China's diary industry. In addition, the "melamine incident" in 2008 shows if China's dairy companies want to go towards long term development, they must attach more importance to the raw milk's construction. This paper will be based on the integration theories to analyze the reasons why dairy companies carry out backward integration and put forward two alternative patterns which will be evaluated then.