Market Sizing Framework Walkthrough- Bain Style

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

[allisterbarretto]

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.

[centoria]

JUST the content I’ve been looking for!!!

[judyl.]

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:
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.

[nextgroup]

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.

[andreyb.decarvalho]

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.

[kevinrrodriguez]

Why 2.5 for pop size and not 4.5? J looked it up and it’s 3.7

[excelminutes]

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.

[jaym]

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

[watchonwrist]

I would consider not the replacement rate but the rate of re-furnishing the home.

[achalarora]

I think while sizing the market - two other things can be considered. Growth of the lamp market which means Total market size would be the Replacement Demand + Growth-based demand. Second thing is we can probably add 20% to residential demand as a proxy for institutional demand

[lorenzofongponce]

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

[santhosh]

Where can I find all the strategy frameworks

[Abhishek-kgjr]

Calculations need to be explained in my opinion as the majority of the viewers are learning through this case.

[Rakshay]

He said there are average 2.5 childen and only took 2.5 persons per household, but he should have taken 4.5 people

[karthikmenon]

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?

[lars]

Should have asked whether this assumption was a valid one to make before creating your framework 3:10

[asingaraju]

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.

[silasroberts]

10:56 “I like you”. Yeah we could all see that Jenny 🙄

[LeRoosteroo]

What an odd assumption to make about lamps in residential settings versus in industrial / corporate settings when market sizing for Mexico. Smh

[Sickkkkiddddd]

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.