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Market size vs Market trend. Which one is more important?

Anonymous A

During imterview, I was asked by the interviewer to have an opinion on "whether the market size is more important or the market trend?" Please share your point of view and will be gald to discuss with anyone who's interested in this question as well :)

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Vlad replied on 04/10/2018
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi,

Several points here:

First of all size / trend is the most common trap in the cases. Candidates often forget asking about the size / trend and get the wrong conclusion. Always ask for:

  • Size of the market and its growth rate
  • Size of the segments and their growth rates
  • Shares of the competitors and their growth rate
  • Revenue of the company and the growth rate

It's absolutely critical to discipline yourself to get the information about the size and the growth together!

Answering your specific question - both are important but growth may be more important in immature industries (e.g. the start of the telecom market when penetration was low, or ridesharing market when Uber just launched.) In other words, growth may be more important when you are creating the new market / submarket

Best

Currently non-active expert
Expert
replied on 04/10/2018

Hey anonymous,

My opinion is that on most of the cases it's really difficult to have an interesting and insightful view of the market without looking on both (any of them isolated seem quite weak to me!)... actually the only few exceptions I can think of is very mature industries (where market size might be more important if you already believe you have a good instinct about trend) or very new ones (where market size is still very reduced, but what actually drives future perspectives are the trends)

Anyway, I would be also quite interested in hearing others' perspectives.. and especially in knowing from which company did you get such (weird?) question?

Best

Bruno

Anonymous B replied on 04/11/2018

I agree with the above. I think if I was to get the question and they directed me to pick only 1- I would highlight market growth trends as being more important.

Nobody wants to get on a sinking ship; a market that is growing has endless possibilities and I would think it would be unlikely for a consulting firm to advise a client to enter for example a shrinking market. They would more likely advise the client to shift towards a new market that has more promising signs eg Uber aren’t try to build and sell traditional cars, but rather enter the autonomous car market.

So many variables makes this difficult. I’m sure the interviewer was just trying to stress test you as there isn’t one correct answer IMO and more just to hear you think and communicate variables.

Cheers!

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