Dairying — running a dairy farm to produce milk profitably — depends on four broad factors working together: breeding, selecting and breeding cows/buffaloes with a high genetic potential for milk yield; feeding, providing a balanced, nutritious diet suited to the animal's stage of growth or lactation; management, covering proper housing, hygiene and health care/disease prevention; and finally processing and marketing, so the milk produced is safely processed (e.g. pasteurised), stored and distributed to reach the consumer.
Improving a herd's genetic quality is done chiefly by two contrasting approaches. Inbreeding is the mating of closely related individuals of the same breed over several generations — as close breeding (mating very closely related animals, such as parent-offspring or siblings) or the somewhat less intensive line breeding (mating animals within the same ancestral line, though less closely related). Inbreeding has two main advantages: it increases the homozygosity (genetic purity) of desirable genes, allowing a superior trait to become fixed and expressed consistently across a herd (a "pure line"), and it helps expose harmful recessive genes, which can then be identified and eliminated from the herd through selective culling.
Outbreeding, by contrast, is the mating of unrelated animals, and covers three levels of increasing genetic distance. Out-crossing mates unrelated individuals within the same breed for one or a few generations, improving the breed's traits without introducing a different breed. Cross-breeding mates a superior male of one breed with a superior female of a different breed, deliberately combining desirable traits of both breeds (for example, combining high milk yield from one breed with disease resistance from another). Interspecific hybridisation goes further still, mating a male and female of two different but related species — the mule, born of a male donkey and a female horse, is the classic example — to combine desirable traits of the two parent species in a single hybrid offspring. Outbreeding is generally used to counter the reduced fertility/vigour that can result from too much inbreeding, and to bring together the best traits of two distinct genetic backgrounds.
A breed is a group of animals related by common descent that share similar general appearance, features, size and body configuration, distinguishing them from other members of the same species and making them recognisable as a distinct biological unit for breeding purposes. The overall objectives of animal breeding are, in short, to improve the yield and desirable qualities (growth rate, milk yield, disease resistance, etc.) of livestock across generations, using the inbreeding and outbreeding methods described above as the tools to achieve this.