(Answered) In 2004 starbucks announced that it will increase prices at

Finance

In 2004, Starbucks announced that it will increase prices at its stores before the end of year. Analysts expected prices to rise by 4% to 5%.

According to Starbucks prices went up to adjust for increases in dairy products and rents.

(1) From the case in 2004, explain the logic for a price increase from Starbucks' perspective.

(2) Can you discuss the effect of operating leverage on why Starbucks had to close about 600 stores in 2008.

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