Dunkin’Donuts and McDonald’s McCaféhave entered the specialty coffee business pioneered at Starbucks’5,439 locations

Dunkin’Donuts and McDonald’s McCaféhave entered the specialty coffee business

pioneered at Starbucks’5,439 locations. Prices are 20 percent lower (99 cent espresso

shots versus $1.45 at Starbucks), orders are simpler (Large Mocha Swirl Latte at

$2.69 versus Venti CaffèMocha at $3.35), and the wait time is under a minute ver-

sus three to five.5 Have Starbucks Frappuccinos become an affordable luxury? Or are

espresso coffee and flavored coffee going mainstream where Dunkin’Donuts and

McDonald’s have 17 percent and 15 percent of the fast-food outlet brewed coffee

business, respectively, to Starbucks’6 percent? Which is happening in your city?

Moreover, as McCaféapproaches Starbucks’market, what customer sorting rule will

likely apply? Is there any reason to believe Starbucks will have a different strategy in

responding to Dunkin’Donuts’4,100 stores versus the several hundred McCafés

under development? Why?

2. Sony’s PlayStation 2 (PS2) dominated the game console market from 1997–2003

with 123 million units sold. Today, Nintendo’s Wii has 62 percent of the market.

Prices to achieve this spectacular growth have fallen continuously from $400 at

launch to $250. Sony’s PS3 with 20 percent market share at $1,000, then $600, and

now $399 competes in a more upscale segment of the game console market against

Microsoft’s Xbox at 18 percent market share with prices that started at $760. Initially

Xbox and PS3 tried to compete head-to-head on add-ons such as extra hand con-

troller sDunkin’Donuts and McDonald’s McCaféhave entered the specialty coffee business

pioneered at Starbucks’5,439 locations. Prices are 20 percent lower (99 cent espresso

shots versus $1.45 at Starbucks), orders are simpler (Large Mocha Swirl Latte at

$2.69 versus Venti CaffèMocha at $3.35), and the wait time is under a minute ver-

sus three to five.5 Have Starbucks Frappuccinos become an affordable luxury? Or are

espresso coffee and flavored coffee going mainstream where Dunkin’Donuts and

McDonald’s have 17 percent and 15 percent of the fast-food outlet brewed coffee

business, respectively, to Starbucks’6 percent? Which is happening in your city?

Moreover, as McCaféapproaches Starbucks’market, what customer sorting rule will

likely apply? Is there any reason to believe Starbucks will have a different strategy in

responding to Dunkin’Donuts’4,100 stores versus the several hundred McCafés

under development? Why?

2. Sony’s PlayStation 2 (PS2) dominated the game console market from 1997–2003

with 123 million units sold. Today, Nintendo’s Wii has 62 percent of the market.

Prices to achieve this spectacular growth have fallen continuously from $400 at

launch to $250. Sony’s PS3 with 20 percent market share at $1,000, then $600, and

now $399 competes in a more upscale segment of the game console market against

Microsoft’s Xbox at 18 percent market share with prices that started at $760. Initially

Xbox and PS3 tried to compete head-to-head on add-ons such as extra hand con-

troller sets. Now, brinkmanship pricing has broken out with Xbox 360 discounted

from $760 to a range of $400 to $343. Which firm is likely to blink first?ets. Now, brinkmanship pricing has broken out with Xbox 360 discounted

from $760 to a range of $400 to $343. Which firm is likely to blink first?

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