Alle Fragen zum Tag estimation - Consulting Q&A - PrepLounge.com

Hello! I would follow these steps:

• Population calculation: if it´s not given, stimation based on your knowledge of other european cities.
• Different evacuation ways: cars, trains, buses, etc. How many people can each of those transportation means evacuate? (e.g., not everyone has a car, there are limited buses and trains, etc.)
• Bottlenecks: the total capacity of those transportation means is the "ideal" scenario in which there are no issues such as traffic jams, etc.

Always bear in mind that here there is not a right or wrong answer, and they are not looking for a candidate that only deviates X% from the solution they have calculated. What is being tested here is you ability to synthetise, be creative, estimate, etc.

Hope it helps!

Cheers,

Clara

Hi,

I would split Spain into 3 buckets and allocate % of the area:

1. Urban areas
2. Rural areas
3. National parks / uninhabited areas

1. Urban - you take an average size of the block and find out the number of roads between them (e.g. total Urban length from East to West of 1000km, each block is 1 km, thus 1000 roads from E to W. Same with S and N)

2. Rural - you just assume much lower density than in Urban (e.g. 50x lower)

3. National Parks - will be even lower

Best

Hi,

I would split into buckets and try to understand a trend in each of them:

Demand

• Lack of internal resources (lack of researched volumes, extraction capabilities, higher costs)
• Private consumption (Climate - heating and cooling, car ownership and usage, etc)
• Industrial consumption (Growth and structure of the economy)
• Alternative energy resources (Availability and adoption)

Supply

• Oil&Gas resources availability (volumes, quality)
• Cost of extraction (Labor, Taxes, Licenses, Technology)
• Cost of transportation (Location, supply chain infrastructure, taxes and quotas)

Externalities

• Regulatory organizations (e.g. OPEC)
• Conflicts in the Middle East
• Trading and speculative demand

Best!

It seems to be a standard market sizing that you can tackle starting from total american population, as suggested by others.

If you want to impress you interviewer, once that you have done your estimation, propose to do a sanity check of the result following a bottom up approach. One way could be to list the K-12 schools of your town, calculate the ratio schools/population and apply this ratio to the national population.

Hope it helps,
Luca

I think this particular question is not designed to reach an accurate result. There are simply too many assumptions involved, and their errors add up. Instead, the question tests whether the candidate can logically develop a reasonable approach to this problem, and should be treated as such.

Hi,

It's easier to:

1. Segment New York into blocks using the number of streets and avenues.
2. Calculate separately the area of the parks
3. Assume a certain number of trees per block and separately for the parks
4. Multiply and sum up

Best

Hi Mirko,

Below is one potential approach to the solution :

- Number of trains per hour (assume this is based on frequency of service), you can also adjust for time of day (rush hour vs other times vs post 9pm etc.) – for now let's say there are 10 trains per hour

-How long the trains in the subway run (Lets say 16 hours)

-Number of drivers per train (let’s assume 1 for this exercise)

- How long it takes to do one loop – let’s assume 1 hour in each direction and 0 turnaround time

- Duration of shift (let's say 8 hours) – so we need at least 2 drivers for the whole day per train assuming a 16 hour day

Now : 10 trains per hour going each direction, given that the loop takes 2 hours to complete, you need 20 the trains at all times. Each train however needs 2 drivers per day given the shifts – so you would need 40 drivers in a day per line under the assumptions laid out above

Of course you can add many complications to this such as time of day, turnaround times, breaks for drivers etc. that will impact your answer

Hi,

1. Define the time it takes for a single person to pay
2. Define max number of people paying in a singly cashier line per shift
3. Multiply by the average utilization of the cashier line
4. Multiply by the number of lines
5. Multiple by the av check based on your personal experience
6. Multiply by the number of months, adjusting to seasonality

Best

1. You can use 5m. With all the assumptions you are going to make, this first approximation is not important. I recommend asking the interviewer something like "Can I use 5m to facilitate the calculation?". 99% of the interviewers will not only let you go with it but also appreciate the simplification.

2. In every market sizing, you should always consider all the possible sources of revenue/ways of using the product. In this case, you should first of all divide in 2 the problem, in order to investigate all the milk consumption:

• liquid milk
• milk-based products: dairy products (cheese, yogurt, butter...), ice cream, chocolate, biscuits...

Now you can start to assess the first bullet. Your solution scheme is pretty good, maybe the numbers are too high. I would have added some details, to transform it in a great answer. E.g. when you mention the segment of people who do not drink milk you can make some customized examples (lactose intolerants, infants, some people on diet, vegans, ...). I think this segment is quite larger than 20% (maybe something like one third?), but here you do not need extreme accuracy, so 20% will be considered fine as well. Use common sense.

Completed the first sizing, you should go with the second bullet. It is more complex since all the market mentioned should be treated separately. You could ask the interviewer whether you can make a top-down estimation (like considering the whole point counting three times the first bullet). This is a very strong assumption and you will certainly lose a lot of accuracy, but at this point, the interviewer will have already assessed your problem-solving skills and common business sense, but at the same time, you do not miss any part of the problem. You can say something like "a further effort should be spent to address all the market, starting from its bigger missing parts, like dairy products and industrial milk-based products".

Best,

Antonello

Hi Anonym,

there are many different ways to calculate that. Depending on whether the question is used as a whole case or is only part of a case, you can solve it in different levels of detail.

A pragmatic solution could be the following:
Market size of ATMs = Number of ATMs / Lifetime of an ATM * Price of an ATM

Number of ATMs: Number of ATMs in your district * (inhabitants of your country / inhabitants of your district)

Lifetime of an ATM: Make an educated guess and explain it well. For example, you could explain that ATMs should always meet the latest security standards and thus only last 7 years due to rapid technology development.

Price of an ATM: Make an educated guess and explain it well. For example, you could explain that ATMs should always meet the highest technical standards and thus cost as much as a small car.

If you have further questions, do not hesitate to contact me.

Best regards
Marco-Alexander

To add to Deepti's answer -Saudi Araba is a huge tourist destnation so be sure to factor that into your calculations as well

I would approach this as a strategic invesment decision as follows:

The maximum price I would pay for the bridge = Incremental yearly profit generated by the bridge x the break even period you have as a target (in years)

I would disaggregate the profits into it's drivers:

- revenue would be mapped to the money you generate from the toll on the bridge, which can be mapped to the number of cars crossing the bridge each day.

- costs woule be mapped to maintenance, upkeeep and repairs etc

I would size the market to generate revenue (assuming we know the toll price) and ask for data on costs. Given the calculated profit generation - you multiply by the target break even period in years and this is the maximum price you should pay to meet your target (e.g. if you want to break even on the investment in 5 years and the bridge will generate $50M per year in profits, the maximum price you should then pay is $250M).

Hope this helps! :)

Got a similar case at McKinsey some time ago - I actually asked the same question here : https://www.preplounge.com/en/consulting-forum/atypical-case-4501

Hi Anonym A,

this is one of the more difficult estimation questions, because you have only few reference points.

I would first determine how many international companies there are in Dubai and how big they are. Based on this, I would calculate with a relative share how many expats there are. You can then estimate how many of them need a SIM card.
Important: Not everyone who needs a SIM card in Dubai buys it locally in Dubai.

Best regards
Marco-Alexander

Hi,

I would go with

1) Number of people in the world 7.5B

2) Segment them into (non flyers ~85%, occasional flyers 14%, frequent flyers 1%)

3) Multiply with number of flights (no flyers, occasional flyers 4, freqeunt flyers 10)

4) Multiply with hours per flight (5 hours)

5) Divide by hours per year (365 *24= 8760)

6) Multiply with share of flight time that you are actually not in the air (i.e. on the runway) - let's say half an hour out of 5 - so multiply with (4.5/5)

So the the whole equation looks like:

7,5 * (0,14*4*4/8760+0,01*10*4/8760) * (4.5/5) = 2,542,808-> ~2.5 Million people in the air right now.

You will note that it is quite hard to come up with very accurate estimates in 2) 3) and 4) but probably easier than trying to estimate number of airports and number of flights per airport.

Hope this helps.

John

Hi,

it really depends. If your assumptions are a little of on each step of the estimations you can get quickly to 5-10X the true market size. I think you would only fail if you made completely unlogical/ unrealistic assumptions and would not revise them when the interviewer asks. E.g. when estimating the size of the app market in a developing country, assuming that 50% of people have an iPhone.

Tough to say without a concrete example. But I always recommend to learn some of the key figures for your market e.g. number of inhabitants, number of households, average income, age distribution, etc. to be on the safe side.

Best,

John

Hi,

You should make the following assumptions:

• Peak, non-peak hours and total operational hours
• # of planes landing and taking off during peaks and non-peaks
• Max # of passengers per plane and avg occupancy rate

Best