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1. Suppose that the time spent waiting for a drink at Blue Cup Coffee is longer than at Starcrocks. This means Blue Cup Coffee is "operationally inefficient" (that is, not on the cost-quality frontier). 2. Blue Cup Coffee recently hired a consulting firm that reported that Blue Cup Coffee spends significantly more money than Starcrocks on training and wages for its baristas (in "real money" terms, that is controlling for any cost-of-living differences between Metropolis and other locations around the world). To stay competitive with Starcrocks, Blue Cup Coffee probably should not reduce its expenditures on baristas. 3. Michael Butler, who writes a popular blog on strategy, recently observed that Starcrocks could, if it wanted to, change its corporate decision and install Complexo3000 machines in all of its locations worldwide. Michael Butler added that "If Blue Cup Coffee makes any money, Starcrocks will just copy Blue Cup Coffee. I suggest selling any stock you hold in Blue Cup Coffee." Michael Butler's reasoning and conclusion are probably correct.

1. Suppose that the time spent waiting for a drink at Blue Cup Coffee is longer than at Starcrocks. This means Blue Cup Coffee is "operationally inefficient" (that is, not on the cost-quality frontier). 2. Blue Cup Coffee recently hired a consulting firm that reported that Blue Cup Coffee spends significantly more money than Starcrocks on training and wages for its baristas (in "real money" terms, that is controlling for any cost-of-living differences between Metropolis and other locations around the world). To stay competitive with Starcrocks, Blue Cup Coffee probably should not reduce its expenditures on baristas. 3. Michael Butler, who writes a popular blog on strategy, recently observed that Starcrocks could, if it wanted to, change its corporate decision and install Complexo3000 machines in all of its locations worldwide. Michael Butler added that "If Blue Cup Coffee makes any money, Starcrocks will just copy Blue Cup Coffee. I suggest selling any stock you hold in Blue Cup Coffee." Michael Butler's reasoning and conclusion are probably correct.

Understanding Business
Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Starcrocks Coffee is in the midst of a major and rapid national and international expansion plan, with the goal of placing one of its coffee shops nearly everywhere in the world. In contrast, Blue Cup Coffee has decided to operate primarily a small collection of coffee shops in the large city Metropolis, whose residents are accustomed to and prioritize the finer things in life. Both chains are responding to the growing social trend of being perpetually caffeinated. Running a coffee shop requires both an espresso machine (used to make espresso coffee which is served alone or as part of a latte or cappuccino) and baristas (who prepare and serve the coffee). Baristas differ in terms of natural ability and training. As far as espresso machines, both use recently developed technological marvels. Starcrocks has decided to use a "super automatic" espresso machine that simply requires the barista to press a single button to make a coffee drink. Blue Cup Coffee has decided to use the Complexo3000, an Italian machine that is difficult to use (Requiring many small and technical adjustments by the barista over the course of the day) but which allows the very best flavors to be extracted from the coffee beans. For both Starcrocks and Blue Cup Coffee, decisions about which types of espresso machines and baristas to use are made at a corporate level and so all shops within a chain must use the same machines and types of baristas as all other shops. 1. Suppose that the time spent waiting for a drink at Blue Cup Coffee is longer than at Starcrocks. This means Blue Cup Coffee is "operationally inefficient" (that is, not on the cost-quality frontier). 2. Blue Cup Coffee recently hired a consulting firm that reported that Blue Cup Coffee spends significantly more money than Starcrocks on training and wages for its baristas (in "real money" terms, that is controlling for any cost-of-living differences between Metropolis and other locations around the world). To stay competitive with Starcrocks, Blue Cup Coffee probably should not reduce its expenditures on baristas. 3. Michael Butler, who writes a popular blog on strategy, recently observed that Starcrocks could, if it wanted to, change its corporate decision and install Complexo3000 machines in all of its locations worldwide. Michael Butler added that "If Blue Cup Coffee makes any money, Starcrocks will just copy Blue Cup Coffee. I suggest selling any stock you hold in Blue Cup Coffee." Michael Butler's reasoning and conclusion are probably correct.
Transcribed Image Text:Starcrocks Coffee is in the midst of a major and rapid national and international expansion plan, with the goal of placing one of its coffee shops nearly everywhere in the world. In contrast, Blue Cup Coffee has decided to operate primarily a small collection of coffee shops in the large city Metropolis, whose residents are accustomed to and prioritize the finer things in life. Both chains are responding to the growing social trend of being perpetually caffeinated. Running a coffee shop requires both an espresso machine (used to make espresso coffee which is served alone or as part of a latte or cappuccino) and baristas (who prepare and serve the coffee). Baristas differ in terms of natural ability and training. As far as espresso machines, both use recently developed technological marvels. Starcrocks has decided to use a "super automatic" espresso machine that simply requires the barista to press a single button to make a coffee drink. Blue Cup Coffee has decided to use the Complexo3000, an Italian machine that is difficult to use (Requiring many small and technical adjustments by the barista over the course of the day) but which allows the very best flavors to be extracted from the coffee beans. For both Starcrocks and Blue Cup Coffee, decisions about which types of espresso machines and baristas to use are made at a corporate level and so all shops within a chain must use the same machines and types of baristas as all other shops. 1. Suppose that the time spent waiting for a drink at Blue Cup Coffee is longer than at Starcrocks. This means Blue Cup Coffee is "operationally inefficient" (that is, not on the cost-quality frontier). 2. Blue Cup Coffee recently hired a consulting firm that reported that Blue Cup Coffee spends significantly more money than Starcrocks on training and wages for its baristas (in "real money" terms, that is controlling for any cost-of-living differences between Metropolis and other locations around the world). To stay competitive with Starcrocks, Blue Cup Coffee probably should not reduce its expenditures on baristas. 3. Michael Butler, who writes a popular blog on strategy, recently observed that Starcrocks could, if it wanted to, change its corporate decision and install Complexo3000 machines in all of its locations worldwide. Michael Butler added that "If Blue Cup Coffee makes any money, Starcrocks will just copy Blue Cup Coffee. I suggest selling any stock you hold in Blue Cup Coffee." Michael Butler's reasoning and conclusion are probably correct.
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