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4

Market Sizing: How do you estimate world GDP? What would be the different ways to estimate

4 answers

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Best Answer

Hi there,

For Market Sizing, you will need to adopt a top-down or bottom-up approach, depending on the date you have at hand. In some situations, the top-down or bottom-up approaches are equivalent to approaching the problem through demand Vs supply!

In this situation, and if you do not have any data, you can assume an average GDP per country size & region. You can either classify the world countries in categories (developed, developing and third world) or you split them by continent. Then, you can ask (or take assumptions) about the average population (or % of the world's population) and you multiply it by an average GDP per person based on where they live.

I hope this helps, please do not hesitate to reach out to me should you have any question.

All the best,

Mehdi

Hi there,

For Market Sizing, you will need to adopt a top-down or bottom-up approach, depending on the date you have at hand. In some situations, the top-down or bottom-up approaches are equivalent to approaching the problem through demand Vs supply!

In this situation, and if you do not have any data, you can assume an average GDP per country size & region. You can either classify the world countries in categories (developed, developing and third world) or you split them by continent. Then, you can ask (or take assumptions) about the average population (or % of the world's population) and you multiply it by an average GDP per person based on where they live.

I hope this helps, please do not hesitate to reach out to me should you have any question.

All the best,

Mehdi

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Hi there,

I agree with Udayan. To start, you should already just know the GDP (and populations) of the 8-10 largest countries in the world.

You can either use the US + China and recognize they're about 50% of world GDP or add the top 10 together and realize they're probably about 70-80% of world GDP (80/20 rule).

It's actually a pretty straightforward market sizing when it comes down to it!

Hi there,

I agree with Udayan. To start, you should already just know the GDP (and populations) of the 8-10 largest countries in the world.

You can either use the US + China and recognize they're about 50% of world GDP or add the top 10 together and realize they're probably about 70-80% of world GDP (80/20 rule).

It's actually a pretty straightforward market sizing when it comes down to it!

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Hi Anonymous,

In reality it depends which data you have at hand.

Conceptionally it's always good to be structured and consider both a bottom-up and top-down approach and have an explicit rationale which option to better choose and start with.

However, it often makes sense to use both approaches simultaneously as kind of health-check and see where the numbers get you. If both lead to the same ballpark of results, good - if not, than you need to go back and see what causes it.

Hope that helps - if so, please be so kind to give it a thumbs-up with the green upvote button below!

Robert

Hi Anonymous,

In reality it depends which data you have at hand.

Conceptionally it's always good to be structured and consider both a bottom-up and top-down approach and have an explicit rationale which option to better choose and start with.

However, it often makes sense to use both approaches simultaneously as kind of health-check and see where the numbers get you. If both lead to the same ballpark of results, good - if not, than you need to go back and see what causes it.

Hope that helps - if so, please be so kind to give it a thumbs-up with the green upvote button below!

Robert

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Great questiom - 2 easy methods below

  • Assume a reasonable GDP per capita ($15,000 for example) and multiply it by the world population (7B) to get an estimate - 105T in this case
  • Another would be to take a GDP number you know (lets say USA at $20T) and assume that it is x% (so 15% in this case) - now divide 20 by .15 to get $133T as global GDP

Best,

Udayan

Great questiom - 2 easy methods below

  • Assume a reasonable GDP per capita ($15,000 for example) and multiply it by the world population (7B) to get an estimate - 105T in this case
  • Another would be to take a GDP number you know (lets say USA at $20T) and assume that it is x% (so 15% in this case) - now divide 20 by .15 to get $133T as global GDP

Best,

Udayan

(edited)

Hi Udayan, for the first approach how to answer - how did you come up with the GDP per capita. In other words, is there a way to calculate this number from scratch. GDP in general is consumer spend + Government spend+ Net Exports + Investment. Do we have to use all these to come up with the number? — Anonymous A on Oct 12, 2020

Hi - it is more of an educated guess. I know that lower income countries have somewhere around $5k and higher somewhere near $50k but lower income countries have a much higher population — Udayan on Oct 12, 2020

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