Market Sizing in IB interviews: how many cars go through X street in Madrid between 8 am and 9 am

Javier asked on Feb 13, 2018 - 2 answers

Hi there, I have been recently asked a market sizing question during an IB interview. I am not really into consulting preparation, but it seems interviews for both sectors are increasingly similar so...here I am, trying to practice my Market Sizing skills (whatever it takes).

The question, which got me clearly unprepared, was as follows:

"Please calculate how many cars go through X street in Madrid between 8 am and 9 am"

Yes, that´s all. It may seem so easy for those of you with a solid background in case interviews, but this one got me rejected from one of the biggest Investment Banks in Europe.

So, given my obviously-non-existing problem-solving abilities, I need to ask for help (I just cannot find a convincing way of structuring this question, even though I am practicing other market sizings that seem much more easy to me).

I would be more than grateful to anyone willing to give me any tip about this one, since I have not identified any similar market sizing (probably due to my lack of preparation).

Again, thank you!!! any comment is more than welcome

2 answers

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Anonymous A replied on Feb 13, 2018

Hi Javier,

Usually there's more than one "good" approach to a market sizing question. The approach I would take for this one would be:

- First determine the length of the street and how many lanes are there - this could be provided by the interviewer or could have to be determined by you (based on assumptions and/or knowledge of the area - typically these questions focus on well-known/famous sites). For this example, lets assume it's 1km long.

- How long is a car on average - the rationale here would be to understand how many cars fit on the street if it is completely full (remember the number of lanes). Lets assume its 2m.

- So now we know that if the street is 1km long and each car is 2m long, 500 cars fit on the whole street. It would make sense to adjust this number as there will be traffic lights, zebra crossings etc. So lets assume these factors account for 20% of the street. Therefore, you would only have 400 cars.

- Determine average speed - if you assume this is the busiest period of the day and a car travels at a slow speed of 10km/h, it will take a car 10mins to do 1km. Hence, 400cars x 6 (6 x 10mins = 1hr), you can have 2400 cars passing in 1 lane in 1 hour.

- Multiply the number of cars by the number of lanes - assuming its one of the city's main streets, if it has 4 lanes, there are 9600 cars going through this street per hour.

Remember:
- Ask questions to clarify what is being asked - a usual question will be to determine what is meant by "size". Does the interviewer want volume or a $ value?

- I usually ask for 1min at the start of the question to think about my approach. I then list down what factors I will consider/calculate to get the market size and validate this with the interviewer.

- always clarify what are your assumptions. Make them clear to the interviewer.

- Try and use simple numbers - i.e. round numbers

- Jot down additional considerations you should mention at the end - e.g. maybe we could use a different approach that considers buses or trucks.

Hope this helps. Good luck!

"a car travels at a slow speed of 10km/h, it will take a car 10mins to do 1km" - are you sure about this number? — Christian on Feb 13, 2018

Thank you so much Mr.Anonymous A, thank you for taking the time to answer (you really helped me) Had good references about this website, have just confirmed. I have seen here that a tree structure should also be used when facing any market sizing question, do you agree? It may be difficult to fit in some cases I guess...Again, thank you;) — Javier on Feb 14, 2018

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I second the approach above. Very clean and easy to defend.

Thanks for sharing!!! Always nice to have a second point of view:) — Javier on Feb 14, 2018

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