EY-Parthenon UK Case: Horse MRI Machines (Market Sizing)

The interviewee should lay out the approach they would take to sizing the UK horse scan and associated MRI machine maintenance market in the UK.

• Good candidates should think about how to segment this market early on in the interview (competition vs. leisure) and all candidates should be encouraged to think about an appropriate segmentation
  • Candidates might (reasonably) suggest calculating the market based on the number of veterinarians however the interviewer should guide candidates to calculate the market by the number of horses
  • Once candidates have identified the need to calculate by number of horses, interviewers should guide candidates to segment the scan volume by competition and leisure; and that the business revenue is driven by scan volume (not installation of machines)
• Once the candidate has identified that the market should be calculated by the number of horses, the interviewer should prompt them to think about a triangulation approach
• Strong candidates will suggest a method of triangulation, to calculate the market size from a supply perspective
  • For example, the possible number of scans supplied per year based on the number of qualified MRI-certified veterinarians in the UK who have access to a facility with an MRI machine

The following is a suggested solution to sizing the UK horse scan and associated MRI machine maintenance market (see below diagram)

Calculation of the UK horse fee scan market

• No. of UK horses x (% addressable competition segment + % addressable leisure segment) x fee per scan, where
• % addressable market in each segment = % of competition / leisure horses x % of incidence of lameness x % referral for MRI scans

Calculation of the MRI maintenance market

• No. of MRI scanners x annual maintenance fee

The interviewee should calculate the UK horse scan fee market. They will need to estimate the UK horse population and make assumptions about the relative size of the competition vs. leisure segments as well as the incidence of lameness and MRI referral rates for each. As interviewees will be making assumptions to calculate the market size, the calculated market size may vary.

 Information that can be provided to candidates:

• The candidate can assume a US horse population of 10m horses

• The candidate should be encouraged to come up with sensible methods to estimate the U.K. horse population
• The candidate can be provided the U.S. horse population of 10m and prompted to use the relative US/UK human population as a proxy to calculate the UK horse population
• Candidates may require prompting that the equine/human ratio in the U.S. is different from the U.K (approx. 2x smaller) due to greater open space and ranching

Estimation of UK horse population

• With the provided US horse population of 10m and a US human population of 300m
• The US horse to human ratio is 1:30
• Assuming a UK horse-to-human ratio of 1:60 (assuming a lower ratio given greater space in the US and greater horse ownership, ranching, etc.)
• UK horse population: UK population of 60m x horse to human ratio 1:60 = 1m

UK Competition horse scan MRI referrals

• Horse population 1m (as above) x assumed proportion of horse population in competition 20% = 200,000
• Racing horses assumed to have a higher incidence of injury due to racing but also a higher rate of referral to scans given economic incentive
• 200k horses x 20% incidence of lameness x 10% referral to MRI = 4,000 scans p.a.

UK Leisure horse scan MRI referrals

• Horse population 1m x assumed proportion of horse population in leisure 80% = 800,000
• Assumed lower incidence of injury but also lower referral to scans
• 800k horses x 5% incidence of lameness x 1% referral to MRI = 400 scans p.a.

UK horse scan fee market size

£400 per scan (provided per the business model diagram in question 1) x total horse MRI scans (4,000 + 400) = £1.8m

• Good interviewees will structure the answer coherently and generate reasonable assumptions
• They will draw out the relevance and impact of assumptions and potential opportunities to test assumptions
• They will also complete the calculation accurately and proactively correct any mistakes without prompting from the interviewer

The interviewee should lay out the approach they would take to sizing the UK horse scan and associated MRI machine maintenance market in the UK.

• A suggested framework for identifying assumptions to test would include (1) materiality of the assumption (2) level of confidence in the assumption and (3) availability of data to test the assumption
• A key assumption to test in the suggested market approach is the horse to human ratio

→ Good interviewees will create a sensible framework or testing assumptions and identify a reasonable assumption as an answer