Boston Creamery, Inc, is an ice cream company that manufactures and distributes ice cream to wholesalers and retailers. In 1973, the company had installed a new financial planning and control system that compares budgeted results against actual results and be able to highlight things that needed corrective actions or commend things that resulted in a favorable overall variance. This year, the division has a favorable operating income variance of $71,700
Supplier Power:
The two primary suppliers of key inputs are dairies thatproduce milk and companies that sell sugar in bulk quantities. There are manysuppliers, to it is not easy for suppliers to drive up prices. These two key inputsare not unique products, so their strength and control over Boston Creamery islow, and there is little cost of switching from one to another. Boston Creamerydoes not have a great need for suppliers' help, and the company has manysupplier choices. The major factor is national prices for milk and world prices for sugar.
Buyer Power:
Ice cream is a generic product, which can be made by manydifferent companies with the same quality, the same ingredients and the samepackaging. Thus, buyers have power to choose brands. This is why Bostoncreamery has chosen to compete on the basis of price. There is little or no costfor each individual buyer to switch from Boston Creamery products to those of someone else. On the other hand, the company does not have to deal with fewpowerful buyers, so the retail stores that sell to the individual buyers they are notable to dictate terms to Boston Creamery.