Hi,
i would like to understand why in the calculation of Mens market share after two years we use 0.95^2 instead of 1.25^2 and in Teenagers 1^2 instead of 1.1^2? Is this an error by any chance?
https://www.preplounge.com/en/management-consulting-cases/interviewer-led-mckinsey-style/intermediate/italian-beauty-company-31
thank you
Hello.
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Hi there,
Thanks for linking the case. The math here is quite tricky, but the case is correct!
Men's Market
So, for Men's market we multiply the market size ($100m) times its growth in 2 years (1.25^2). This is correct as the market grows 25% per year.
We then multiply it by .1 *.95^2 because "Market shares have been declining or stagnating in the last two years". Men's market share has been falling by 5% each year.
Teenagers Market.
The teenager market is $50M (exhibit 1) and it's growing by 10% each year (Exhibit 1). Therefore we do $50M * 1.1^2.
The teenager market share is 25% (exhibit 2) and not declining (text above the math). Therefore we mutiply the above result with 25%, or 25% X 1 (no change).
Hello!
You are correct with what you are explaning, but the 0.95 x 0.95 (which equals 0.95^2) is because it indicates that sales are decreasing by 5% yearly.
Cheers,
Clara
