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Hi Melis!

This is an interesting MS question! Don't forget to ask as a clarifying question if this is for British Ariways UK or global revenues, as it will drastically change the structure. I am assuming this is for UK only, but let me know if they are looking for global British Airways revenues (can become very tricky as they have few subsidies, co-operate flights etc.)

To answer such questions, I usually advice to:

1. Be "equation-driven" i.e. stucture it as Market Size = A x B x C x D x E
2. Do not over-complicate it, i.e. have between 3 and 5 components of your equation

One way to think about this specific problem is for instance:

> Daily flights x Average passengers per flights x Average ticket price x Days in a month

You could mention that this could be split upward with International vs Domestic as they have quite different dynamics, the interviewer should appreciate the comment but tell you that for now we don't go for this level of granularity.

The interviewer should be able to provide you the daily flights (in a real case the client will definitely know this data), but if not:

1. Assume large airports drive most of the traffic
2. How many flight per day per airport
3. How many flights are British Airways

Another way, maybe less intuitive, is to go with the number of aircrafts they operate and their utilization rate.

In reality, the market sizing exercise is more for the interviewer to see how you can break a big problem in smaller pieces, so you may be ask to keep breaking down the structure until he is "satisfied", so give him that :)

I hope that helps!

Benoit

Hi Abhishek,

As with all market sizing questions, you want to choose a framework or formula to begin with. In this instance, we’re probably thinking about the POS terminal market in terms of volume and price. Volume appears to be the tougher segment to think about, as you can make assumptions about price changes (e.g. it’ll only increase by inflation under a business-as-usual scenario). Make it clear to your interviewer that this is the approach you’d like to take, and then the exercise becomes about segmenting volume.

How would we do this? We can keep it broad and consider new and replacement sales. Or, you could consider different merchant segments, according to the data provided. Keep it to two/three segments to be simple. Your market size is then:

Market size = (segment 1 + segment 2 + segment 3) * price

From this framework, what information is relevant to which segment, and what other assumptions would you need?

You currently know the # of merchant accounts and # of POS transactions. If you can, use this to calculate the # of POS transactions per merchant type.

You also know the installed base of POS terminals and general macroeconomic outlook. Are we expecting more or less people to use POS terminals? Roughly how much more? If the market penetration of POS terminals is high, then growth will depend on macroeconomic factors. If it is low, or is likely to compete with other types of payment, then you have to consider how competitive POS terminals are compared to other technologies.

Hope this provides you with a first pass. Plenty of interviews are more interested in your structure and approach rather than the actual figures you come to. They may also try to trick you by over-providing you with data. Choose the relevant information and form a view, while making sensible assumptions where necessary.

Any questions, feel free to drop me a PM.

All the best,

Edmond