Market Sizing Framework Walkthrough- Bain Style
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- เผยแพร่เมื่อ 4 ส.ค. 2019
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Market sizing frameworks allow a business to know if a particular market would be appropriate to expand into. The capital expenditure required to expand into a new market is high, and exposes the company to a lot of risk. Therefore, extensive work by consultants to determine those risks and opportunities is an important step for companies to take.
From a firm perspective, they want to know if you understand how to build a framework for this type of business problem, and appropriately defend your assumptions used to build your market sizing framework. If you're able to do that, then you stand a good chance to do well in your case interview. Listen to Jenny Rae and guest Matt Plumber, as they do a market sizing framework walkthrough.
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Timestamps:
00:37 Question prompt.
01:15 Prompt note taking.
01:42 Clarifying questions about the prompt.
01:58 Building Framework
02:58 Clarifying assumptions
04:05 Walkthrough of data
07:04 Walkthrough of the math
08:05 Understanding what the data represents
09:48 Strategic assessment
10:50 Interviewer assessment of framework
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JUST the content I’ve been looking for!!!
Lamps are not the primary source of illumination in emerging countries. Apartments are fit with tubes and bulbs into wall sockets. Lamps are bought for decor by the upper-middle class, and hence the market size would be the top X% income earning households * 2 lamps at most for the decor. Valuable video though - informed me of the process followed by management consultants.
Flixzone is a scam don't search for it
what the f*ck
yes
I think the lamp remplacement rate and the new construction houses rate... Are the key factors to consider beside corporate, house holders and rural segments. That will significantly shif all the numbers.
0:16 wouldn't you say?
0:34 i would expect nothing less.
0:46 Bain-style 1st round interview. probably more targeted at undergrad.
0:54 a strategy case that wrapped with mostly a math questions.
1:07 Direct to Consumer, D2C: 直接面對消費者: 指商家在自行研發產品後，不經過傳統的經銷商、平台或者中間商，直接將自家產品從官網送到消費者處
1:17 flat-packed 平裝的(furniture), Ikea
1:28 market entry case. to Mexico.
1:30 from a logistical standpoint. 立場
1:34 they're interested in sizing the market specifically for their lamp segment.
1:45 what's the market size and market share that they have in US at this point?
1:51 fragmented market, industry monopoly 獨佔
3:25 Mexico market is a, i think, a broader residential market at this point. Particularly because there's likely to have some under-developed areas.
3:28 more corporate furniture or more industrial furniture.
4:07 why don't you walk through some data would be.
5:15 the number of children in a household is likely to be higher there than in the states. i might say, around 2.5 as a household number.
6:12 the household size might be a bit smaller than the US size. I don't know 5 is a probably a rough estimate of how many lamps you would find in a household.
6:20 i reserve the right to disagree with you later.
7:05 then shall i run through the math?
8:20 or it would match our revenue estimates?
8:33 if we enter a new market, there's likely to have some established players.
8:54 but what if we think on market size and do on a per year basis?
9:07 what's the frequency of replacement in lamps?
9:52 what's your strategic assessment of these?
11:00 you are very receptive to the pushback.
11:30 identifying why you're asking the question.
I like this video !!! thanks a lot!
Really cool stuff. But if lamps are the first preference when comes to illumination in Mexico, I doubt so? I would have told the interviewer that we can approach based on the household income as not every household needs a lamp- maybe some a household earning $50k per year will buy 2 lamps and based on its move ahead of the calculation. Another approach would be may for every 10 tubes and blub one lamp will be purchased in Mexico and do reverse engineer we will get the market size of the tube and blub market in Mexico and 1/10th of it will Lamp market.
For a new company getting a 5% share in new country is not at all possible, at most I will go with a 1% market share unless you have a backing big retail store like IKEA in that country which will sell exclusively all your lamps.
Where can I find all the strategy frameworks
I've a question... Why did he consider just 2.5 for households? Wouldn't be the right way to add the parents to this number? Tks.
What about people who live alone, i think thats why he took 2.5
2 for couples and 3 for family with children...avg 2.5....that's why he said estimate.
Why 2.5 for pop size and not 4.5? J looked it up and it’s 3.7
I would consider not the replacement rate but the rate of re-furnishing the home.
It was ok....however, ensuring the scope for the term 'lamp' should be initial stage of market sizing. If he's talking about table lamp, decoration...those are luminaire. Lamp is a general term for source of light. I don't know how many of rural population can afford those.
I do not want to have her as my interviewer. She's tough cookie, lool. I like her though she asking right in-depth questions. Very good video
i know it is kinda off topic but do anyone know of a good place to stream newly released movies online?
@Clayton Spencer Flixportal :D
@Noel Dakota Thanks, I went there and it seems like a nice service =) I really appreciate it!
@Clayton Spencer Happy to help :)
I think the assumption that 100% of all households in Mexico owning lamps is too ambitious.
How about lamp alternatives such as lightbulbs? And wouldn't a difference between urban and rural / richer and poorer households play a role in lamp ownership? If we're going to 'average out' the lamps per Mexican household to be 5, is it representative of the rich : poor ratio?
For the American lamp numbers, it feels like a stretch saying that each room has 1-2 lamps. Furthermore, there might be rooms or entire households that do not rely on lamps.
Example: a 5-room 2 bedroom apartment would include a kitchen and bathroom. Does it make sense that 1-2 lamps are in those rooms as well?
I might be a bit too nitpicky. But then again, some interviewers are pretty nitpicky and would challenge assumptions a lot
comparing US to mexico would not be right. for instance in india, lamps are mostly limited to urban, and that too mid and upper middle class. So we need to segment mexico to urban and rural, and then pick a number. thats too nitpicky, but will be a better guess
He said there are average 2.5 childen and only took 2.5 persons per household, but he should have taken 4.5 people
Instead of beginning analysis at Mexico's population and multiplying that across household and other variables, shouldn't we only consider total number of homes and multiply that across number of lamps per home and spending for each? A lamp is not something that people carry where they go like a cellphone, it's a pretty immobile asset that stays in the home. Does that make sense?
Yeah. I was thinking about the same.
That's literally what he did
Calculations need to be explained in my opinion as the majority of the viewers are learning through this case.
3:17
Where did the 5% come from? (500M x 5%)
He assumed that they could take 5% of the market share
Why is it 2.5 per household ?
it's just an estimation of people # per family
What an odd assumption to make about lamps in residential settings versus in industrial / corporate settings when market sizing for Mexico. Smh
Of course, market sizing ignores customer preferences (do they want the lamps our client offers?), can our client supply them to Mexico from the US (transport, regulation, customs), or do they need to set up a plant locally, and in either case, it might not even be profitable to do this (also in terms of time and mgmt attention).
Also, he quickly cut huge markets (business, industrial, government, infrastructure) + private (segment into students, home-owners, retirees, etc). Why do we have 10% in the US (can we even win with the same strategy in Mexico?). How about distribution, we are making multiple assumptions that we can sell into MX, the same as we are doing in the US.
Market sizing is great for when you have no data to estimate, but it's just a castle in the sky exercise. However, the dynamic between the two was great
replacement rate and broken rate
Great additional point. I think both can be categorised under average product life cycle which takes into account how long a lamp typically lasts.
Should have asked whether this assumption was a valid one to make before creating your framework 3:10
Why did he divide it by 2.5. I mean he said let say each family has 2.5 children but he forgot about the father and mother.
Shouldn't it be 4.5?
2. He considered total population, Mexico don't have rural population? Or they are rich enough to afford lamps that too in a quantity of 7. I guess not!
By this way if he would have calculated the numbers for India or china, it would be the best business to get into.
By in all it was good.
I want to reiterate this question!!! I don't know why he considered just the kids 2.5 and not the parents (+2). Then it would be considered 4.5
10:56 “I like you”. Yeah we could all see that Jenny 🙄
Great Video. Just a quick observation... I'm supposed to come into an interview armed with knowledge of:
1. Populations of ALL the world's countries (lol)
2. Number of households in each of these countries (lol)
3. Number of lamps (and other stuff I could be asked about) in these households (lol)
4. Price of lamps and every other random stuff people buy (lol)
5. Exchange rates for 180 currencies (lol)
I want to know in what context exactly this approach would be practical in helping a client. I understand a key part of an advisor's job is research but what client would want information off the top of my head without due research? I'd be really worried if they took my answers seriously. If that isn't the approach with actual cases, why would you adopt it for an interview? I'm confused. Very confused.
As an instance, consider the fact that I'm Nigerian (Africa). How would I possibly know (or 'estimate' off the top of my head) the population of Mexico (North America)?
How could I possibly estimate the number of lamps in Mexico when I'm not an expert/authority in the furniture sector? Consultants aren't even always typically industry experts. I appreciate the work they do but this interview approach needs a complete overhaul. You'll be missing out on a number of good hires because... "they don't know the number of lamps in Mexico". NB: How many fishes are there in the Gibraltar Waters? Sigh... Give me a fucking break.
The interview is not looking to assess whether or not you possess this vast amount of worldly knowledge. It is meant to probe a candidate and understand HOW they go about tackling a problem given the unknown metrics that are inherent to the question. How you respond under pressure, how you solve an issue, how you respond to feedback, etc. It's never about reaching a perfect number in the end.
We just published this article about figures to know for your case interview here: managementconsulted.com/statistics-to-know-for-case-interview/
This performance fell short, many mistakes & wrong assumption and the interviewer didn't catch those as well.
130/2.5= 130×2/5=260/5=52≠50
its recommended to do approximations in market sizing cases, which he did
There is an error in the math, 2.5 = 5/2
He is trying to estimate the number of lamps needed for each household, so he needs to convert the population into households. The calculation he used is (130 mil.) population * (1/2.5) households/population = household estimation (by assuming that each household contains approximately 2.5 people).
Yes. And just to clarify: he had the number 2.5 which is equal to 5/2. And since he want to divide 130M by 2.5, he could either divide that 130M by 5/2, or multiply 130M by 2/5 (inversion).
@@cain2280 2.5 rooms to be precise
there's so much more details he could've went into but he's clever so he chose a simple case. She's just making herself look stupid by picking on the exact details, and missing the point of it being un-researched assumptions.
The guy clearly reverse-engineered the part on MX population