2893851-Boston-Creamery-case-analysis

2893851-Boston-Creamery-case-analysis - Case Analysis...

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Case Analysis: Boston Creamery, Inc.
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Introduction : Boston Creamery is actually one of the divisions of a larger group that specializes in the Food Industry, and Boston Creamery specializes in low-end traditional activity (ice cream). Boston Creamery is a Profit Strategic Business Unit (SBU). They recently installed a new Financial Planning and Control System, and the forecast for 1973 was different from the actual results of operations. This was the first year when they could compare the forecast to the actual operating results. They need to make a forecast for 1974 that will be closer to the actual results. I. Industry Analysis and the Firm’s Strategies : 1.1 Porter’s Five Forces: Supplier Power: The two primary suppliers of key inputs are dairies that produce milk and companies that sell sugar in bulk quantities. There are many suppliers, to it is not easy for suppliers to drive up prices. These two key inputs are not unique products, so their strength and control over Boston Creamery is low, and there is little cost of switching from one to another. Boston Creamery does not have a great need for suppliers' help, and the company has many supplier 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 many different companies with the same quality, the same ingredients and the same packaging. Thus, buyers have power to choose brands. This is why Boston creamery has chosen to compete on the basis of price. There is little or no cost for 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 few powerful buyers, so the retail stores that sell to the individual buyers they are not able to dictate terms to Boston Creamery. Competitive Rivalry: The market for ice cream is mature, with companies competing for share of a market that is not growing. Thus, there are many competitors, and they offer equally attractive products, so Boston Creamery has little power in the situation. If suppliers and buyers don’t get a good deal from Boston Creamery, they’ll go elsewhere. On the other hand, companies like Ben & Jerry and Hagen Dazs have built their own niche markets for specialty and premium ice cream products, where they do something that nobody else can do, so they have tremendous bargaining strength. They set much higher prices for their patented recipes of premium and specialty ice cream, compared to the generic flavors and styles of Boston Creamery. Threat of Substitution: There are many substitutes for the ice cream products that Boston Creamery produces and markets. It is not unique. This weakens the
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company’s bargaining power. Not only do other companies make ice cream, but the recipes are mostly openly known and not a secret formula, and not a patented process. In addition, there are frozen ices and frozen yogurt that can replace ice cream as a treat or dessert. In fact, many people regard frozen
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This note was uploaded on 11/24/2011 for the course FINANCE 123 taught by Professor Hbr during the Spring '11 term at Lethbridge College.

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2893851-Boston-Creamery-case-analysis - Case Analysis...

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