Market Sizing Problem help please

BCG McKinsey and Bain
New answer on Feb 10, 2020
4 Answers
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Jimmy asked on Feb 08, 2020

We are in Finland and want to sell Golf balls in US. How much money we can possible make there?

Please tell me what flaws are in my structure

My approach is:

1) calculate our target customers: US population (300M) , divide into those who can afford to play golf >100k$ yearly income, which is 10% of total population = 30M , now lets divide it by ages, given lifetime is 75 years, 2M each age range. Our customers are 40-50 y/o guys, which is 20M people (10 years * 2M)

2) calculate average ball cost, lets say 1 ball costs 3$, and we want to sell it cheaper in order to attract people, thus we sell it for 2$, which 1$ of them is cost. So, our pure profit is 1$/ball

1$ * 20m(people) = 20M $ * 3 balls a year (average person purchases) = 60M$ a year our profit

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Clara
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replied on Feb 10, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

On top of the challenges to the market sizing approach that you have followed, explained already by other coaches, you make the assumption of having the "power" to target the full market.

As a 4th step in your structure, you would need to make an estimation of how much of the overall market can you realiscally tackle, considering also the fact that you are in Finland (e.g., import taxes, cost of labour being really high, etc.)

Hope it helps!

Cheers,

Clara

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Francesco
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replied on Feb 09, 2020
#1 Coach for Sessions (4.000+) | 1.400+ 5-Star Reviews | Proven Success (➡ InterviewOffers.com) | Ex BCG | 9Y+ Coaching

Hi Alex,

a couple of comments:

  • It is not clear how you go from 30M total to 20M in the 40-50 bucket. If you assume 30M is equally divided in 75 years, each should have 0.4M people
  • You should assume the company gets a percentage of the total market, not the whole market
  • It would be better to provide a rational for the average person purchase

I agree with Vlad that you should consider B2B as well.

Best,

Francesco

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Luca
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replied on Feb 09, 2020
BCG |NASA | SDA Bocconi & Cattolica partner | GMAT expert 780/800 score | 200+ students coached

Hello Alex,

If your assumption is that only people with high income (estimated by you in 30M) play golf, then you have to use that number for the following age segmentation.

You should motivate your second assumptions, even if you want to offer a lower price, is quite impossible that you will be able to have the whole market, especially if you are a new entry in the market.

Last but not least you should also estimate the "yearly consumption" per player. THe easiest way to do it is to estimate the number of games/player, how many balls you need for each game and what is the "turnover£ of the golf balls.

Feel free to text me if you need to discuss it further,
Luca

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Vlad
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replied on Feb 09, 2020
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

Your approach does not take into account B2B sales. Each gold court has thousands of balls (used by the golf machines and people)

Best

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Clara gave the best answer

Clara

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McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut
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