You've run a coffee shop all season. Now step out from behind the counter and read it like an analyst: what shaped your market, what your team did, and how it turned out.
Learning objectives. After this week you can (1) apply structure, conduct and performance to your own market; (2) compute the HHI; and (3) build a season scorecard, including your return on the opening bank.
Remember this: structure shapes conduct, and conduct drives performance. Put a number on each.
1) Structure, conduct, performance
Structure is the shape of the market: how many sellers, how concentrated, how different the products. Conduct is what firms do: pricing, investment, positioning. Performance is the result: profit, share, efficiency. Every week of this course fits in one of the three boxes. Relocation lets a class shop enter your street mid-season, so your structure can change.
2) Measuring concentration
HHI = the sum of each firm's market share (in %) squared
Four shops with 32%, 28%, 22% and 18%: HHI = 1,024 + 784 + 484 + 324 = 2,616. Above 2,500 is highly concentrated, 1,500 to 2,500 moderate, and under 1,500 unconcentrated. A 60/40 duopoly scores 5,200; ten equal shops score 1,000.
3) Your season's demand curve
Every price change was an experiment. Compare two stretches that differ in price but match in day of the week, weather and events. Lattes at $4.50 averaged 310 cups; at $4.95, 270. Against the averages, quantity changed −40 ÷ 290 ≈ −13.8% and price 0.45 ÷ 4.725 ≈ +9.5%. Elasticity ≈ 13.8 ÷ 9.5 ≈ 1.45, elastic. MR at $4.95 = 4.95 × (1 − 1 ÷ 1.45) ≈ $1.54, just above a $1.20 MC latte, so $4.95 sat close to the profit-maximizing price.
4) The season scorecard
Season Return = (Latest Bank − $25,000) ÷ $25,000 × 100
A shop with $34,400 in the bank is up $9,400: 9,400 ÷ 25,000 = 37.6%. One-shot purchases come out of the bank too, so a team that bought a machine holds capacity the cash figure misses. Add season ATC (total expenses ÷ total cups) against your average price for margin per cup, and count the stocks you built, like regulars and a second machine.
Quick self-check
(a) Three shops split a market 50/30/20. HHI? (b) Your Bank ends at $31,000. Season return? (Answers: 2,500 + 900 + 400 = 3,800, highly concentrated; 6,000 ÷ 25,000 = 24%.)
Common mistakes
- Narrating instead of analyzing. Put a number behind every claim.
- Comparing dirty data points. A rainy Monday against a busy Saturday measures weather.
- Grading on cash alone. Count the stocks you built, too.
This week in the arena
Read the Bank on your latest Daily Report and work out your season return on the $25,000 you opened with. Then pick the one number from your season that best explains it, and trace it back: was it structure, your team's conduct, or the luck of the days?