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Investment and Technology Upgrade of Milk Powder Producers: A Comparative Study of Chinese and Dutch Firmsb

Li Dai and Peng Zhou

The purpose of this paper is to analyse the feasibility of investing in a new milk powder factory, based on a case study of leading domestic producers in China and Netherlands. A key issue is the cost of the project, but a high cost does not mean it is not economically feasible, nor does a low cost guarantee the investment. Instead, systematic indicators should be used to associate the cost with profitability, returns to assets and corporate strategy. Limitations: It is worth noting that the case study here is based on the latest financial reports of the companies, so the conclusions might be subject to the special conditions of the particular company in the particular year. Therefore, wherever possible, all recent financial reports available are used to provide robustness check. Another limitation of this case study is that there is no way to extract more detailed cost information other than that disclosed in the published financial reports. To obtain an absolute estimate for the costs of building the factory, private information should be exploited elsewhere.