LC Coffee is a chain of coffee shops specialized in imported coffee of different flavors. LC is considering starting operations in a small linear city of 1 km in length where there are currently no other coffee shops. In the city the inhabitants are evenly distributed, so that there is one inhabitant per meter, with a total of 1000 inhabitants in the city. In LC's expansion strategy, the first decision is how many stores to open in the city assuming there is no threat of entry from any other competitor.

The following information is of interest. LC belongs to an international chain that regulates the price of each coffee sold, which is 4 euros. Each inhabitant of the city is willing to buy a coffee a week as long as they do not have to travel more than 150 meters. The fixed cost of opening each store is 600,000 euros and each store that opens in the city is expected to be operational for a period of 20 years. On the other hand, it is estimated that the operating costs for each coffee served are 1 euro.

PART I:

How many stores should LC Coffe open in the city?

In what locations (specific location of the city)? Justify your answer adequately.

What profits would each of the stores obtain during its 20-year useful life?

What is the minimum number of weekly coffees that each location should sell to be profitable? For this question assume there is o threat of entry of other competitors.

PART II: A new competitor arrives in the city with the situation of LC stores that you reached in question 1. This new competitor is CS Coffee, it has the same operating and opening costs as LC and is going to sell the coffee at the same price, 4 euros.

In which locations should CS open?

How many stores should CS open?

What profits would each store have?

How many profits would each LC location have?

PART III: If LC had been aware of the threat of entry from CS from the beginning (i.e after opening any store), how many stores and in what locations should LC have opened? What profits would each store get?