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When the Aston and Magill café opened along a busy main road in Merton Park, South London, it had no immediate competitors. The 2015 opening of Waffle Jack’s on the other side of the road was the first serious competition, followed shortly by Willow Tea Rooms. It was a difficult period for Aston & Magill but, by mid-2016, the café was back ‘in the black’ (making a profit). Then came a real shock: 100 metres down the road, on the same side of the road, a ‘Costa Opening Soon’ sign appeared over large shop premises. Now the competition would really hot up.

1. The owners of Aston & Magill must decide how best to cope with the arrival of a large Costa coffee shop.

They see two main options:
- Option 1: Keep prices for their food and soft drinks unchanged, but be aggressive on the price of coffee, cutting it from £2.20 to £1.50 – far below the price at Costa
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- Option 2: Offer existing customers a powerful loyalty card, giving 25% discount of all future purchases.

Justify which one of these options the company should choose (9)

Sagot :

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