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Spartak
on Feb 23, 2020
Global
I want to receive updates regarding this question via email.

I came across market sizing case. The question is: "How many freight trucks are there in US?”. How will you approach it?

My initial approach was: Number = Total weight of transported goods / truck capacity. Then the issue is to estimate the total weight of the transported goods by freight trucks.  

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Vlad
Coach
on Feb 24, 2020
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

You can:

  1. Calculate the total number of cars in the US (# of households, cars per household)
  2. Add the certain % of commercial vehicles (police, service vehicles, etc)
  3. Assume the ratio of freight trucks / cars you see on the roads based on personal experience

Best

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Samuel
on Feb 23, 2020

Hi Spartak, 

I think the best thing to deal with an open-ended market sizing case like this is to first bound the problem. Identify the major industry driver for the use of freight trucks and clarify with your interview: "I know there are X, Y, Z use of freight trucks, based on A, B, C, is it okay if I estimate the #freight required for the transportation of consumer goods?" If your interview rejects every attempt of yours to bound the problem, then you may want to approach it differently. 
All Marketing questions are best solved by first understanding whether it is a demand-driven question or a supply-constrained case.

Are the #Freight trucks in the US so readily available that the demand for it can be matched by the supply of freight trucks? You could argue yes/no. I would say no because if supply is made to always match demand, then you might have to account for all major demands for freight trucks. Besides, arguing for yes is just going to complicate the estimation because now you have to account for all major demands for freight trucks. So this may not be best solved through the demand-driven approach. 

It is supply-constrained if the demand for it does not automatically drive up its supply. For instance, the demand for American Visas in my country does not drive up the supply of AmE visa at the embassy (else we would have all left our country lmao).

You can argue that this case is supply-constrained. Else how would you make a case for supply chain management? 
Now settling for the supply-constrained approach, you can now say #Freight trucks in US/year is the function of production capacity of factories in US/year + #Freight trucks imported/year + the #Freight trucks available from the previous year. (Assuming that damaged trucks are not part of the equation). Something like that. That should be manageable and should help you get to a realistic number. 

Another approach is to use relative thinking. Compare the #cars on a typical highway to the plausible #frieght trucks on a typical highway/week multiplied by a correction factor (to account for freight trucks making multiple trips a week).

Make sure to cross-check your answer.

Estimation cases were always a pain in the ___ for me until I found FirmsConsulting. If you want to more details on the demand/supply approach I summarized above, you can find it here:  

  1. https://www.firmsconsulting.com/podcasts/demand-side-estimation-myth/
  2. https://www.firmsconsulting.com/podcasts/math-and-estimation-case-guidelines/
  3. https://www.firmsconsulting.com/complimentary-videos/market-sizing-estimation-cases/
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Spartak
on Feb 23, 2020
Thank you for your complete and exhaustive answer!
MB
on Jul 12, 2022
The links you provided to the estimation cases doesnt work. Do you have updated ones ?
Ian
Coach
on Feb 24, 2020
Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

Hi Spartak,

Sorry but this is all wrong.

When you approach these problems you need to think about how to break it down logically. There's no "right" answer but there are overly simple or wrong answers.

You need to think about things you can reasonably deduce...then from a series of steps where you make accurate-enough estimates, you get to the answer.

How in the world will you accurately estimate the total weight of transported goods?

For example, you can probably estimate how many cars are in the US (based on population), then approximate freight as a %. 

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Questions about market size are frequently asked in case interviews in consulting because they require a blend of logic, mathematics, and common sense. They can be asked as standalone questions or as part of a larger case. Applicants who are familiar with market sizing questions can really perform here. What Are Market Sizing Cases?If you're applying to top consulting firms like McKinsey, BCG, or Bain, you're unlikely to escape a market estimation case. Market sizing cases are considered "back-of-the-envelope" calculations because they can be done on the back of an envelope. Despite the name, it's not just about estimating market sizes; other estimations may also be asked for.For example, if you're discussing a British clothing retailer's growth strategy, you could calculate on an envelope how large the online clothing market is and what percentage of the market the retailer already penetrates. If you perform these calculations quickly, the conversation with the client stays fluid, leaving a good impression.You can receive the question about market size as a standalone case (although this is less common) or as part of a more comprehensive problem, such as market entry. The good news: There's no right or wrong answer when it comes to the question of market size. The interviewer is less concerned about the specific number you come up with for the market than the approach you took to arrive at that number. Why Are Market Sizing Cases Commonly Used in Consulting Interviews?Market Sizing Cases are used to test your quantitative and logical abilities. The interviewer wants to ascertain whether you work well with numbers and if you can make informed assumptions and deal with ambiguities. Questions about market size aren't just about the size of markets; they also involve other types of estimations, such as the number of golf balls in a jumbo jet. As you may have noticed, math is crucial in tackling these questions since you don't have a calculator to rely on. Most importantly, you need to be comfortable dealing with large numbers like millions and billions as well as percentages. More on that later. How Do You Best Approach Market Sizing Cases?Now that we understand the theory behind Market Sizing Cases and their relevance to your case interview, let's take a closer look at the process.Segmentation – The Key to Market Sizing CasesIf you've done some reading on case interviews before delving into market sizing questions, you might have come across areas where segmentation is necessary. Segmenting data is a crucial skill you must master as both a candidate in a case interview and in your later career as a consultant. Segmentation generally refers to dividing a larger whole into smaller parts or segments. The principle you need to understand to do this correctly is the MECE principle.MECE stands for "mutually exclusive, collectively exhaustive." Simply put, segmenting a group of data according to the MECE principle means forming subgroups that do not overlap but collectively cover the entirety of the data, meaning no data is missing. An example useful for market sizing questions is dividing a country's population into age groups (as different age groups often behave differently).Below is a breakdown into Group 1 in the age range 0 to 14, Group 2 in the age range 15 to 64, and Group 3 for everyone over 65: Note that none of the groups overlap, so no age is counted twice, but also no age is overlooked. Now that the population is correctly segmented, we can treat each group differently. If we had divided the population of the United Kingdom into the aforementioned groups, we could estimate clothing expenditures per person in these groups in online retail. Common sense suggests that expenditures per person in the 0-14 age group are lower than in the 15-64 age group. We can justify this estimation by noting that the majority of 0-14-year-olds do not purchase their clothing online. 
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