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Market Sizing: How many X are there?

Anonymous A asked on Sep 12, 2018

I stumbled upon the tipical how many gas station are there in paris question?

I generally understand how to solve market sizing questions, however, I struggle with questions such as how many gas stations or mc donalds restaurant etc.

The solution proposed by prep lounge to solve it via demand seems to take a lot of time and I'm trying to use a different approach. However, I don't get the same result anyway. It says in the solution that there are about 200 gast stations, however, the real number in paris is only about 60.

I'm trying to solve this question by using the supply side: divide the population by how many people per gas station are there. How many people per gas station = People per quarter(district) divided by amount of gas stations per quarter(district). I assume there are 2.2 M people living in paris and there are 20 districts (these are actually the real numbers), also I assume that I have 1.5 gas station per district. However, my final result is something like 7 which is obviously wrong. What am I doing wrong?

Best,

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Vlad replied on Sep 12, 2018
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Hi,

First of all marketsizing is not about geting the true numbers but rather about your approach. So if your marketsizing results are different from the numbers that you can google - it doesn't really matter. What matters is how you make the assumptions and justify them to the interviewer.

Secondly - your approach is good as well. Most probably you've uinderestimated the number of gas stations per disctrics / did not include the surbubs with gas stations for the trucks.

Best!

Elias
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updated his answer on Sep 13, 2018
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Totally agree with Vlad - it's not at all about the true number, as long as your result is within the realm of possibility. If you say there are 7 or 70,000 gas stations in Paris I would question your judgment. But saying 120 or 300 and basing that on a solid set of assumptions is totally fine.

If I was the interviewee, with this specific case, I would actually try to steer the conversation into a different direction - how the number is changing due to the changes in urban transport (public transport, ride sharing, e-mobility...). Because that is a strategy discussion. Trained monkeys can count gas stations, and elementary school children can do the math for your assumptions. But only smart people can have a thoughtful strategy discussion. If you're face to face with the right interviewer, that might score you some points. If he just wants you to do basic math, then you can still go back to doing that...

BTW: Paris, in particular, is tricky, because the 2.2 Million refer to Paris "inter muros", so the actual city. The agglomeration is of course vastly larger, so much of the supply for the city might just be outside of the walls of the city (cheaper real estate, lower taxes etc.). Just like you don't have that many gas stations in Manhattan or the City of London...

(edited)

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