Chapter 4 | Gas n’ Go Case

SITUATION &
SOLUTION
Business Economics | ENTREE 20 | Syndicate 2 | June 2021
Prepared By:
Elvera N. Ayu Farrah A
Makki Oktira D Calvin FA
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Christian
Fristine Henny Maranatha
Sihotang
Ameylia Rachmalita FW
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Situation
Gas ’n Go
gas station and convenience store
 Gas ’n Go’s Strategy
Key
takeaways
Promotion
Condition: Strategy: Public response about the
Result:
soda’s discount is good
PAST

No Offers special Increase overall revenue

discount on of store and gas station
competitors soda
The promotion also
promote another
product’s sales

The Problem: Promotion Strategy: Result:

NOW

Permanently
Competing Cut the price of soda, Revenue declining
Competitors best selling item
Solution
01 Measure Elasticity

By using historical promotional sales data for ‘Fourth of july celebration’ indicates
that consumer demands on soft drinks in henry store is elastic.

when demand is
price elastic, a
reduction in price
causes total revenue
to increase

Analysis
Henry think that by cutting down the price, he will get higher total revenue

Problem: Henry forget that in the calculation of price elasticity of demand, other
factors beside price held constant.
02 Other Factors

Competition :
His competitor can also cut their soft drink price to compete with him. The “price
war” among 3 stores can leads the combined demand for soft drink in that area
become more inelastic.

Timing :
The fourth of july promotion happened in summer, when the sales of soft drink
increase anyway without the help of special promotion

Future Expectation :
If in the past the discount is “limited”, now it is permanent. People won’t rush to
buy the product anymore.

Result
Henry didn’t separate the effects on unit sales of price from all the other non price
determinants of demand.

Because of that, he had overestimated the degree of responsiveness by his customers to

his price reduction.

Hence, the price reduction in soft drink didn’t solve Henry problem.
LESSON LEARNED
In the real world, conditions are changing all the time,
and it is important to factor these changes
into the analysis.

The entry of additional suppliers into the market

was all part of the economics of running
a successful business. Having competitors is inevitable.

Before reducing the price of a product, it is better to

analyze the elasticity and demand change per interval
price.
THANK YOU