Dunkin Donuts and McDonalds McCaf have entered the specialty coffee business pioneered at Starbuckss 5,439 locations. Prices

Dunkin’ Donuts and McDonald’s McCafé have entered the specialty coffee business pioneered at Starbucks’s 5,439 locations. Prices are 20% lower (99 cent espresso shots versus $1.45 at Starbucks), orders are simpler (Large Mocha Swirl Latte at $2.69 versus Venti Caffè Mocha at $3.35), and the wait time is under a minute versus 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’s 6 percent? Which is happening in your city? Moreover, as McCafé approaches 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?