Starbucks
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- Prices and Price elasticity of demand.
- Supply and demand analysis.
- Productivity and Cost structure.
- Competitors and impact of new companies entering the market.
- Market structure.
- Group of final recommendations on price and production.
Again, I am looking for guides on how to tackle the above problems (what are the questions asking for and where can I find the answers. Solutions to the questions must be backed by references/sources)
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- Prices and Price elasticity of demand.
1. Price elasticity of demand refers to the responsiveness of a change in demand for a good or service to a change in price.
2. Starbucks pursues a strategy of price discrimination when the firm charges different prices for the same product.
3. Starbucks effectively charges higher prices to customers with a greater willingness to pay by serving them coffee in larger cups. The assumption in this argument is that an 8-ounce coffee is almost the same thing as a 12-ounce cup as both drinks contains the same amount of espresso. This is so because it is very difficult to make fine bubbled milk froth that is found in large cappuccinos.
4. This is the way in which Starbucks avoids the problem of price setting. If the prices are too low, the profits vanish, if the prices are too high the customers don't come in.
5. As the elasticity of demand is different at different parts of the demand curve, price differentiation is practiced by Starbucks.
- Supply and demand analysis.
1. The marginal cost of cappuccinos for Starbucks is essentially the same.
2. The major costs of staff time, space in the queue and the packaging are similar for any size of cappuccino.
3. There are price blind customers who are willing to pay a higher price for their cappuccinos. These larger drinks have a higher ...
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