Market sizing: How much do cinemas in Bangkok earn per month

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Edited on Aug 14, 2020
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Kiga asked on Aug 26, 2019

How much do cinemas in Bangkok earn per month?

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Rakan
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updated an answer on Aug 26, 2020
Associate at Kearney, with 6+ years of industry experience and an entrepreneurship backbone. Passionate about coaching & feedback

Hi Kiga.

Great question. I'd like to offer some tips on the appraoch towards market sizings in general.

(0) Clarification - step 0 is clarifying what is being asked. This must be done in every case and for any problem. (a) The question is not yet clear as to whether they want the size of all cinema earnings in Bangkok or on average how much would one cinema earn per month. (b) it does not clarify what is meant by "earn". Earn could mean revenue or profits. (c) thinking more rigorously, one could ask what the culture is like towards movies and cinemas in Thailand. Cinemas might be a common outing experience for people in the US but it is less so in places like certain countries in Europe. KSA for example did not even have any cinemas until the past few years. This question can help you guage the logic behind the numbers you end up with.

(1) Structure - before diving into this, figure out the structure of the problem (ex: here you have two structures: (a) figuring out how many screens can supply the market and (b) figuring out earnings and where earnings come from (seating tickets, F&B - food and beverage, advertisements etc...).

(2) Formula - before laying out and communicating numbers, figure out the formula to the sizing calculation. For example, to figure out the # of cinemas in bangkok: # of screens per 100,000 X population size / 100,000. Once you define this formula, you then make assumptions and calculations to figure out the components. For the second structure it could be: (a) # of seats per screening room X occupancy rate X # of screen plays per day X average seat price X number of rooms on average at each cinema business X the earning ratio (profit ratio); + (B) % of people that buy food and beverage concessesions X # of people per screening room X # of screening times per day X # of rooms per cinema business X average price for a food and beverage concession package X the earning ratio on F&B concessions; + (c) ads played per screening view X average advert cost X # of screen plays per day X # of rooms per cinema business X earning ratio on an ad. Then all the figures must be done on a monthly basis and must be multiplied by the total # of cinemas in the city.

There are many ways to go about this, but most importantly is how you structure it, figure out the formula and then plug numbers and make assumptions.

(3) The Question - pay close attention to the words in the question, and don't forget what is being asked. Often times people become forgetful of the question and words as they are entrenched in the mathematics of it. In this case, they asked for earning not revenue (at least clarify whether they are synonymos because in finance earning means profits, although in normal circumstances people may use them interchangeably), and they asked for a monthly figure not an annual one. Second of all, they asked for the earning of the cinema, which goes beyond seating tickets but if you are deep in the maths figuring out seating calculations, you may forget all the other ways they make money (ads, concessions, etc...)

(4) The Market Size - don't over stress about getting "the right number". Focus on the number being realistic but what really matters is how defendable and convincing your logic is regarding points 1 and 2 in the aforementioned. As such, caveat that you will round numbers and use easy ones to facilitate your calculation.

Most critical areas to focus on: (a) having good assumptions; (b) having excellent math calculations and (c) applying logic to your numbers and outcomes. If you end up with a number that does not make sense, that's not a problem. What is a problem, is not realizing the number does not make sense and not going back to figure out where you could have gone wrong.

Lastly (5) Expectations - an A+ candidate will always absolutely ace market sizing questions. But that does not mean that you cannot ask for help during the interview. If you are stuck, seek guidance from the interviewer. One thing that is underrated and undercommunicated is that the interviewers are also assessing whether or not they would like to work with you. If you work well on solving problems together, that could be a positive note. This also depends on the firm and office.

(edited)

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Rakan

Associate at Kearney, with 6+ years of industry experience and an entrepreneurship backbone. Passionate about coaching &
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