Market Sizing in IB interviews: how many cars go through X street in Madrid between 8 am and 9 am

Hi Javier,

Usually there's more than one "good" approach to a market sizing question. The approach I would take for this one would be:

- First determine the length of the street and how many lanes are there - this could be provided by the interviewer or could have to be determined by you (based on assumptions and/or knowledge of the area - typically these questions focus on well-known/famous sites). For this example, lets assume it's 1km long.

- How long is a car on average - the rationale here would be to understand how many cars fit on the street if it is completely full (remember the number of lanes). Lets assume its 2m.

- So now we know that if the street is 1km long and each car is 2m long, 500 cars fit on the whole street. It would make sense to adjust this number as there will be traffic lights, zebra crossings etc. So lets assume these factors account for 20% of the street. Therefore, you would only have 400 cars.

- Determine average speed - if you assume this is the busiest period of the day and a car travels at a slow speed of 10km/h, it will take a car 10mins to do 1km. Hence, 400cars x 6 (6 x 10mins = 1hr), you can have 2400 cars passing in 1 lane in 1 hour.

- Multiply the number of cars by the number of lanes - assuming its one of the city's main streets, if it has 4 lanes, there are 9600 cars going through this street per hour.

Remember:
- Ask questions to clarify what is being asked - a usual question will be to determine what is meant by "size". Does the interviewer want volume or a $ value?

- I usually ask for 1min at the start of the question to think about my approach. I then list down what factors I will consider/calculate to get the market size and validate this with the interviewer.

- always clarify what are your assumptions. Make them clear to the interviewer.

- Try and use simple numbers - i.e. round numbers

- Jot down additional considerations you should mention at the end - e.g. maybe we could use a different approach that considers buses or trucks.

Hope this helps. Good luck!