Hi everyone,
I have been practicing cases a lot recently and am recently having some trouble with the best way to approach these problems. For example, "How many vending machines are there in the United States?" I have seen several different approaches to such types of questions and I was wondering what the best one might be.
Thanks in advance everyone.
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Hi,
1) First of all, there are two ways to calculate market size:
2) There are 2 ways to structure market sizing:
3) You should learn the key market sizing techniques:
4) You should learn the key tools:
5) Learn key numbers: populations, gas price, gas consumption, Boeing speed and nmber of seats, average salary, # of gates in the airport, GDP growth rate, inflation, etc.
6) Practice 10-15 cases and you'll be fine
Good Luck!
My 2 cents on market sizing questions is the following: it's not the answer but how you approach the question. Interviewers are trying to assess the way you think - how comprehensive are you? How creative are you? Are you MECE?
There is an infinite number of ways of approximating the size of a market - but is the way you approach the questoin logical and practical? Can you support your reasoning as to why you've segmented the market the way you did? What are the assumptions you're making?
Not quite the answer you were hoping for but I hope it's helpful nonetheless.
One way to answer this question could be the following:
1) Think about what kind of vending machines exist and clarify which ones are in scope (only for snacks or also cigarettes, ticket machines etc.)
2) Try to analyze for each vending machines where they are usually located (i.e. for snack machines, they are usually placed at airports, train stations, metro stations etc.)
3) Estimate the number of vending machines for each of the given locations - example: XX snack machines per airport - you can come up with this number by estimating the number of gates per airport and multipy it by the number of machines per gate (assume an average size of the locations, e.g. do not overcomplicate it by differentiating too much - different sizes of airports)
4) Estimate the number of locations in the US (i.e. the number of airports, train stations, metro stations) and deduct the number of locations that may have no vending machines (e.g. assumption 80% will have them)
Hi Vlad, Thanks for your response. I am okay with market sizing questions such as "Estimate the market for electric toothbrushes in Germany." But this particular type of question, where it seems to involve something like gas stations or vending machines, give me more trouble.
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