Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
expert
Expert with best answer

Francesco

100% Recommendation Rate

3,467 Meetings

16,895 Q&A Upvotes

USD 449 / Coaching

3

Market Sizing - Number of cars sold in Malaysia per Year

Hello.

I am trying to understand Market Sizing.

If I look at the problem at hand and try to follow similar logic presented in The Placement Concept, my estimation is not even close to reality.

Here is what I have been trying to do:

  • Number of people per household (4 people)
  • Population (33 Million)
  • Number of households (8.25 Million)
  • Cars per household (avg 2 Cars)
  • The average lifetime of a car is 10 years

The number I am ending up with is around 1.65 Million cars sold per year. This is too high when compared with the real number.

Is there a better way to approach the placement concept?

What am I doing wrong?

Hello.

I am trying to understand Market Sizing.

If I look at the problem at hand and try to follow similar logic presented in The Placement Concept, my estimation is not even close to reality.

Here is what I have been trying to do:

  • Number of people per household (4 people)
  • Population (33 Million)
  • Number of households (8.25 Million)
  • Cars per household (avg 2 Cars)
  • The average lifetime of a car is 10 years

The number I am ending up with is around 1.65 Million cars sold per year. This is too high when compared with the real number.

Is there a better way to approach the placement concept?

What am I doing wrong?

(edited)

3 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Book a coaching with Francesco

100% Recommendation Rate

3,467 Meetings

16,895 Q&A Upvotes

USD 449 / Coaching

Hi Anonymous,

as mentioned by Elias, the fact that you don't get the exact number is not a major problem in a market sizing so far that you are not an order of magnitude above or below the real number - your structure and logic are more important.

In terms of your structure, there are a couple of things that you are not considering that could strengthen it:

•​ Cars are not only bought by households, but also by businesses. This additional point doesn't change much the final numerical result but shows business acumen

•​ There is no justification for the number of cars per household. This is probably the main reason why you get a number which is too large, as segmenting by income in three different groups can lead to a lower number. A possible segmentation could be the following:

  • 10% rich household --> 3 cars
  • 70% mid income household --> 1 car (assuming one parent has a car and the other a motorbike/alternative vehicle)
  • 20% poor household --> 0.5 cars (assuming 50% with 1 and 50% with 0)

Which gives a total of 1.1 cars/household.

I want to emphasize again that the actual final number is not particularly relevant - what is more important is that you provide a structured justification for the assumptions and logic.

Best,

Francesco

Hi Anonymous,

as mentioned by Elias, the fact that you don't get the exact number is not a major problem in a market sizing so far that you are not an order of magnitude above or below the real number - your structure and logic are more important.

In terms of your structure, there are a couple of things that you are not considering that could strengthen it:

•​ Cars are not only bought by households, but also by businesses. This additional point doesn't change much the final numerical result but shows business acumen

•​ There is no justification for the number of cars per household. This is probably the main reason why you get a number which is too large, as segmenting by income in three different groups can lead to a lower number. A possible segmentation could be the following:

  • 10% rich household --> 3 cars
  • 70% mid income household --> 1 car (assuming one parent has a car and the other a motorbike/alternative vehicle)
  • 20% poor household --> 0.5 cars (assuming 50% with 1 and 50% with 0)

Which gives a total of 1.1 cars/household.

I want to emphasize again that the actual final number is not particularly relevant - what is more important is that you provide a structured justification for the assumptions and logic.

Best,

Francesco

This is very helpful. Thank you very much. I took this number "(avg 2 Cars)" from a quick search (source: https://smemagazine.asia/average-two-cars-per-household-in-malaysia/). This is from 2017. Unfortunately, the latest demographic data are not yet available. BUT, my original approach was very similar to the approach you shared. I got an average of 1.2 cars per household. — Mike (Mustafa) on Oct 19, 2018

Hi Anonymous,

Market Sizing IS NOT about coming up with the right number, but a plausible way to A number. That way needs to be mathematically correct and based on realistic, defendable assumptions.

That being said, I believe you overestimate the number of cars per household. According to Wikipedia, Malaysia has 361 motor vehicles per 1000 people (data from 2010 though), so if your household size is correct, that would be about 1.4 motor vehicles per HH. Cars probably make up the largest part of all motor vehicles (motorcycles, which are very popular in south-east Asia are not counted in motor vehicles), so a realistic figure is maybe 1.2-1.3 cars per household. If you use 1.2 cars/hh, you end up with just under 1 mln cars per year.

(Quick googling showed me that currently there are about 70k cars being sold monthly, which is about 800k per year, which to me is pretty close to the 1 mln calculated)

But that does not really matter - your way is pretty plausible and your assumptions are not totally off the map, so you should be ok.

Cheers,

Elias

Hi Anonymous,

Market Sizing IS NOT about coming up with the right number, but a plausible way to A number. That way needs to be mathematically correct and based on realistic, defendable assumptions.

That being said, I believe you overestimate the number of cars per household. According to Wikipedia, Malaysia has 361 motor vehicles per 1000 people (data from 2010 though), so if your household size is correct, that would be about 1.4 motor vehicles per HH. Cars probably make up the largest part of all motor vehicles (motorcycles, which are very popular in south-east Asia are not counted in motor vehicles), so a realistic figure is maybe 1.2-1.3 cars per household. If you use 1.2 cars/hh, you end up with just under 1 mln cars per year.

(Quick googling showed me that currently there are about 70k cars being sold monthly, which is about 800k per year, which to me is pretty close to the 1 mln calculated)

But that does not really matter - your way is pretty plausible and your assumptions are not totally off the map, so you should be ok.

Cheers,

Elias

(edited)

Hi Elias. I actually got the figure from here (https://smemagazine.asia/average-two-cars-per-household-in-malaysia/) "avg 2 cars per household. However, I would like to highlight couple of things. There seems to be a drop in the number of cars sold in Malaysia. As of 2017, a little over 500,000 cars were sold, according to (https://paultan.org/2018/01/23/vehicle-sales-performance-in-malaysia-2017-vs-2016-a-look-at-last-years-biggest-winners-and-losers/). One thing that was off the mark for me was the estimation of number of cars in circulation. I am not sure where you got the figure of 800K. That is actually closer to reality, as you mentioned. Initially, I went with 1.2 cars per household exactly. I appreciate your comment. It is a great advice. — Mike (Mustafa) on Oct 19, 2018

I am not sure if this will help, but does every household buy two cars? Assuming every household is just the same might be the problem.

Plus, as you said a car has an average life of 10 years, then a small percentage of people (who bought a car 10 years back) would buy a car this year. But there are other people who don't wait till 10 years to buy a new car. Weighing them might too work.

If you want to go deeper, then you could exclude the youth that believes more in cabs (and sharing) than buying a new car.

I hope this helps.

I am not sure if this will help, but does every household buy two cars? Assuming every household is just the same might be the problem.

Plus, as you said a car has an average life of 10 years, then a small percentage of people (who bought a car 10 years back) would buy a car this year. But there are other people who don't wait till 10 years to buy a new car. Weighing them might too work.

If you want to go deeper, then you could exclude the youth that believes more in cabs (and sharing) than buying a new car.

I hope this helps.

Hi Rohit, that's why you work with averages - there are some households with 0 cars and some with 4 or 5 or 20. ON AVERAGE every household has 2 cars (although that figure may be too high). Same thing with the average lifespan of a car. Some people change cars every year, some every 5, some drive a 30 year old car... Again, ON AVERAGE a car is used 10 yrs. Both are pretty valid assumptions for such a case. Breaking out separate groups in such a general question just adds to the number of assumptions you need to take and doesn't contribute anything to the accuracy of the solution. It would be different if the question were "how many luxury cars are sold in Malaysia each year". Then you would probably need to break down the population. — Anonymous on Oct 18, 2018 (edited)

Related case(s)

Oliver Wyman case: Full Electrons Ahead

Solved 103.1k times
Oliver Wyman case: Full Electrons Ahead Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise them on how to adjust the product offering.
4.6 5 6562
| Rating: (4.6 / 5.0)

Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise ... Open whole case

Bain Case: Old Winery

Solved 71.4k times
Bain Case: Old Winery You have inherited the “Old Winery” from your grandfather, a winery that has been family-owned for five generations and can be dated back to the 16th century. Half of the eleven hectares are used to grow white grapes, the other half to grow red grapes. They are grown in a conventional way, i.e. they are not organically farmed and certified. The vine stocks are in a good condition regarding age and care. Overall, the only ¼ of the harvest is made into wine by the winery itself; the rest is sold. Your grandfather never wanted to change the image of the winery and left the managerial and administrative task to a young and energetic wine-maker. Due to the not so well-known brand, the demand for the “Old Winery” wine is currently rather low. You do not intent to run the winery operatively, given your limited knowledge of winemaking, but find the idea of owning a winery exciting. Your plan is to give the winery some fresh impetus.
4.4 5 1946
| Rating: (4.4 / 5.0)

You have inherited the “Old Winery” from your grandfather, a winery that has been family-owned for five generations and can be dated back to the 16th century. Half of the eleven hectares are used to grow white grapes, the other half to grow red grapes. They are grown in a conventional way, i.e. the ... Open whole case

Roland Berger Case: Onlinestar

Solved 50.8k times
Roland Berger Case: Onlinestar Onlinestar, an online retailer of furniture and garden products (core business), has grown significantly in recent years as a result of an expansion of its product portfolio. The company mainly imports goods from Chinese manufacturers but also operates its own production of cat lavatories (special business) in Eastern Europe. The company sells its goods via Amazon and eBay, and recently via an online shop on its website. Despite this development, the financial ratios have deteriorated in recent years. In particular, the gross profit margin decreased significantly. Combined with a significant increase in shipping costs, this led to a negative result for the first time in the recently ended fiscal year and a resulting strained financial situation. Against the background of expected stagnating sales for the current financial year, short-term action is required. The board of Onlinestar asks you for an analysis of the reasons for the negative result as well as a derived recommendation for action. As a consultant, you should bring in your knowledge in online trading and develop solutions. In addition, the management board would like to receive a sales and gross profit plan from you for the current financial year.
4.3 5 1059
| Rating: (4.3 / 5.0)

Onlinestar, an online retailer of furniture and garden products (core business), has grown significantly in recent years as a result of an expansion of its product portfolio. The company mainly imports goods from Chinese manufacturers but also operates its own production of cat lavatories (special b ... Open whole case

Nutripremium

Solved 70.9k times
Nutripremium Nutripremium is a very well-known premium nutrition food company in Europe (€1 billion revenue last year). It is based in Spain and has an excellent market share not only in its home country but also in Portugal, France, Italy and Germany.  Nutripremium has two main lines of products: Vitamin-supplements for pregnant women Concentrated dehydrated aliments and vitamin pills for sick patients (with Diabetes or Cancer). The CEO of Nutripremium thinks that the market in Europe is starting to get saturated and wants you to analyze the Chinese market. What are the key areas you would explore to determine whether this is a good idea?
4.5 5 2283
| Rating: (4.5 / 5.0) |

Nutripremium is a very well-known premium nutrition food company in Europe (€1 billion revenue last year). It is based in Spain and has an excellent market share not only in its home country but also in Portugal, France, Italy and Germany. Nutripremium has two main lines of products: Vitamin-su ... Open whole case

Children vaccine

Solved 63.0k times
Children vaccine Beyer, one of the biggest pharmaceutical companies in the world, just invented a very reliable vaccine against Chickenpox, a disease that affects children in the age from 2 to 16 years. Beyer came to you wondering what their potential sales in Europe in the first year would be if they launched this product next year. They are only interested in the overall sales revenue as they already know that the vaccine can be sold for a profit. This is more meant to show them how big the volume they have to supply is and what the revenue would be.
4.4 5 2292
| Rating: (4.4 / 5.0) |

Beyer, one of the biggest pharmaceutical companies in the world, just invented a very reliable vaccine against Chickenpox, a disease that affects children in the age from 2 to 16 years. Beyer came to you wondering what their potential sales in Europe in the first year would be if they launched this ... Open whole case