Starbucks Investment Decision

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Question: Does it make sense for Starbucks to invest $40 million to add more labor to the North American company-­‐operated stores? In order to answer this question, please do a break-­‐even analysis on this decision following steps (1)-­‐(5) below using numbers given in the HBR case “Starbucks: Delivering Customer Service”, and then summarize your findings along with other reasons you may have to support your recommendation on this $40 million investment decision. Format: 1-­‐2 pages (2 page max), single-­‐space with 12 pts font in Times New Roman. (Note: by “store” in question (1)-­‐(5), it refers to North American company-­‐operated store in FY2002) (1) If Starbucks were to make this investment, how much money will be allocated to each North American company-­‐operated store (assume each store gets equal amounts)? a. $40,000,000/3,496=11,441.65 investment per store (2) How much does a HIGHLY SATISFIED customer worth more than that of a SATISFIED customer per year? Over their lifetime?

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