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Anonymous A

on Mar 04, 2022

Global

Question about

Calculate market share

During the case, I calculated that if the company wants to sell 50M, they need to basically capture ~13% (50 / 382) of the market size. However, during the case debrief, I kept wondering if I should do the calculation differently by adding the 50M to the denominator since the revenue is additional to the existing 382M. That would give us 50 / (382+50) = ~11%. What is wrong with the second calculation?

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Top answer

Ian

Coach

on Mar 04, 2022

Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

Hi there,

I understand your logic here, but fundamentally you're assuming that the market grows by 50M.

Your additional sales didn't just “appear”! Rather, they were “stolen” from other competitors.

Just remember, the market size is the market size. If you're going to sell x units in that market, the marker size doesn't change just because you entered (Unless you create demand like Tesla or Apple did). Rather, you're taking a % of the existing pie :)

Pedro

Coach

on Mar 04, 2022

Bain | EY-Parthenon | Former Principal | 1.5h session | 30% discount 1st session

Since baby clothing is not exactly a new category and is a basic need, it is unlikely that you will create additional demand just from getting in the market… you will be taking market share from other players. So the first option is the correct one.