i would like to present to you another market sizing question where I had problems with myself.
Any criticism or suggestions on what I maybe forget are greatly appreciated. My country is Germany.
Basic starting points:
- I would ask if with cement industry the only think of my concern is building houses or industrial buildings.
- I assume the interviewer answer with yes, therefore I would suggest to structure my case as follows:
(Calculate no. of houses build per Year in Germany * factor for industrial buildings) * Avg m^3 of cement needed for building * Price per m^3:
Calculate no. of hh build:
- No. of people living in germany : No. of people living in a household = No. of Hh 82 Mio : 2 = 42 Mio. Hh (correct is 41 btw)
- No. of Hh : No. of Hh per House = No. of Houses in Germany 42 Mio. Hh / 2 = 21 Mio. Houses ~ 20 Mio. Houses
- House in Germany : Replacement Rate for houses in germany = Houses build per Year 20 Mio Houses / 80 years = 250'000 Houses / year (Is this replacement rate a good estimation in your opinion?)
- No. of Houses build per year * factor for every industrial building = buildings build in germany each year 250'000 H/y * 1.2 = 300'000 H/y (1.2 seems fine to me, since industrial building would be like every 10 house in my opinion but doubles in size (factor = 1 + 1/10 * 2 ))
Calculate Avg m^3 per House (had problems with this one):
- New houses have very thin walls, so I estimate a wall is 25cm thick. Since we have 4 walls we can calculate with one wall with thickness of 1m.
- Average measures of a wall: 15m in length * 12 m in height. Therefore we have 15 * 12 * 1 = 180 m^3 for the walls of the house
- Cement used for floors is 15m*15m*3 (3 floors + basement) *1/3m = 45*5= 225 m^3
- Therefore we have ~400 m^3
Prize per m^3: estimated on 200 Euros per / m^3 (thought process is that you then need 80'000 euros for building a houses foundation which seems reasonable)
Therfore we have:
300'000 Buildings * 400 m^3 * 200 €/m^2 = 24'000'000'000. 24 Billion Euros.