Market sizing question: Private security market in USA ($)

How would you approach this case?

2.0k

I was not aware of this. I didn’t want to share my approach and influence the resolution of the case.

I would assume that private security agents, can work for the A) privates but also for the B) businesses like stores/cinemas…

A) Number of agents for private sector

I would start from the #households in USA 360M/3~120M

Then I would segment the population per social classes, in 5 classes assuming that the distribution can follow the Gaussian curve:

Upper class 10% ~12M

Middle Upper class 20%

Middle Class 40%

Middle lower class 20%

Low class 10%

At this point I would assume that the security service is used only from 1% of the upper class segment, considering that USA doesn’t suffer of a high crime rates in the upper class areas.

Upper Class 1% ~ 120k

Considering that the security service works 24/7, I need to multiply for the number of shifts 3.

#of security agents in the private sector~360k.

B) Looking at the second part I would divide equally the population across the country geographically in 3 areas, West-Coast/Centre/East-Coast and I would assume that the ratio people to number of stores is different.

West 1/1000 ~120M/500 ~240k

Centre 1/1000 ~ 60k

East 1/500~ 240k

Let’s assume we have in USA 540k stores. Of these one every 5 stores will hire a security guard.

540k/5~108k~100k

Let’s take into consideration the shifts *3 à 100k*3~300k

#security agents in USA~ 360k + 300k~660k

Questions about market size are frequently asked in case interviews in consulting because they require a blend of logic, mathematics, and common sense. They can be asked as standalone questions or as part of a larger case. Applicants who are familiar with market sizing questions can really perform here. What Are Market Sizing Cases?If you're applying to top consulting firms like McKinsey, BCG, or Bain, you're unlikely to escape a market estimation case. Market sizing cases are considered "back-of-the-envelope" calculations because they can be done on the back of an envelope. Despite the name, it's not just about estimating market sizes; other estimations may also be asked for.For example, if you're discussing a British clothing retailer's growth strategy, you could calculate on an envelope how large the online clothing market is and what percentage of the market the retailer already penetrates. If you perform these calculations quickly, the conversation with the client stays fluid, leaving a good impression.You can receive the question about market size as a standalone case (although this is less common) or as part of a more comprehensive problem, such as market entry. The good news: There's no right or wrong answer when it comes to the question of market size. The interviewer is less concerned about the specific number you come up with for the market than the approach you took to arrive at that number. Why Are Market Sizing Cases Commonly Used in Consulting Interviews?Market Sizing Cases are used to test your quantitative and logical abilities. The interviewer wants to ascertain whether you work well with numbers and if you can make informed assumptions and deal with ambiguities. Questions about market size aren't just about the size of markets; they also involve other types of estimations, such as the number of golf balls in a jumbo jet. As you may have noticed, math is crucial in tackling these questions since you don't have a calculator to rely on. Most importantly, you need to be comfortable dealing with large numbers like millions and billions as well as percentages. More on that later. How Do You Best Approach Market Sizing Cases?Now that we understand the theory behind Market Sizing Cases and their relevance to your case interview, let's take a closer look at the process.Segmentation – The Key to Market Sizing CasesIf you've done some reading on case interviews before delving into market sizing questions, you might have come across areas where segmentation is necessary. Segmenting data is a crucial skill you must master as both a candidate in a case interview and in your later career as a consultant. Segmentation generally refers to dividing a larger whole into smaller parts or segments. The principle you need to understand to do this correctly is the MECE principle.MECE stands for "mutually exclusive, collectively exhaustive." Simply put, segmenting a group of data according to the MECE principle means forming subgroups that do not overlap but collectively cover the entirety of the data, meaning no data is missing. An example useful for market sizing questions is dividing a country's population into age groups (as different age groups often behave differently).Below is a breakdown into Group 1 in the age range 0 to 14, Group 2 in the age range 15 to 64, and Group 3 for everyone over 65: Note that none of the groups overlap, so no age is counted twice, but also no age is overlooked. Now that the population is correctly segmented, we can treat each group differently. If we had divided the population of the United Kingdom into the aforementioned groups, we could estimate clothing expenditures per person in these groups in online retail. Common sense suggests that expenditures per person in the 0-14 age group are lower than in the 15-64 age group. We can justify this estimation by noting that the majority of 0-14-year-olds do not purchase their clothing online.