Question: Estimate the number of gas stations in Dubai.
To calculate the number of vehicles that need refuelling per day, how would you segment and breakdown the population? Given the wide income inequality in the city from extremely high net-worth individuals to a large population of blue-collar workers.
In addition to this, there are numerous taxis and Uber cars in the city - often times these drivers don't represent a household and the ratio of cars to people in this bracket is 1-to-1.
Please also provide some other valid assumptions that would have to be made for an accurate guesstimation. Additional steps to workout the answer would be super helpful.
Thanks in advance!
Estimate the number of gas stations in Dubai
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Answering your questions (which may differ from how I would perform the estimation; your approach is not incorrect, but it is overly complex).
How to segment the population
You almost gave the answer. You segment according to income / net worth level. In other words, segment for example in 4 quartiles and use a different ratio of cars per family for each segment
Number of Taxis and Uber
You need to estimate the capacity of a Taxi/Uber in number of trips; and then the number of trips per day (you can take the previous income-based segmentation and apply a certain number of trips per week for the top2 segments).
Divide the number of trips per day (you'll need to convert the number from week to day) by 1 taxi capacity (theoretical capacity of a taxi * usage rate) and by the average capacity utilization and you'll get the number of taxis.
# of Taxis = # of daily trips / (daily capacity of a taxi * % usage rate of a taxi)
# of daily trips = number of people in top2 income segments * average number of trips per week / 7 days of the week (or 6 days)
daily capacity of a taxi = hours a taxi operates / average length of a trip
One alternative… is to consider what % of trips you do in Uber vs. in your own vehicle. To me, it's something like 5%, considering only the top quartile. So, instead of considering the estimation above in terms of number of vehicles, I would consider instead this 5% which refers to additional fuel needs (5% * fuel needs of top quartile segment).
Now let me digress a bit. When you look at this number (which in my opinion is already an overestimation), you come to realize this will represent something like 2% of the fuel consumption… IT DOESN'T MOVE THE NEEDLE. So you were going to put a huge amount of effort to estimate something that only represents 2% of the total consumption. This is something you should avoid.
Instead you could consider the impact light commercial vehicles (the best way would be, once again, consider them as a % of passenger vehicles, e.g. 5-10%, without any segmentation, but acknowledging they probably consume 2-4x the fuel of passenger vehicles as they are heavier and have higher usage rate).
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To solve this estimation, you need to estimate the total fuel consumed (in liters) in Dubai by light vehicles and divide by the capacity (in liters) of an average gas station and adjust by the utilization rate.
Since you would already be using this “capacity estimation” as the first layer of your structure (and this is something that requires significant amount of effort to estimate), I would avoid replicating this structure at lower levels unless really necessary for a meaningful estimation, otherwise you will be taking a very long time. Since your were going to do this for something that would only represent 2-5% of total fuel, I am suggesting to use a more simple route.
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Hello,
Estimating the number of gas stations in Dubai can be approached systematically by breaking down the problem into simpler, more manageable parts. Here's a step-by-step method to achieve this:
- Estimate the Population of Dubai: Consider both residents and business travelers/tourists.
- Estimate the Number of Cars in Dubai:
- Household Cars: Estimate the proportion of households that own a car.
- Taxis: Account for taxis used by households without cars (that can afford it) and those used by business travelers and tourists.
- Determine the Average Number of Cars Served by One Gas Station:
- This involves researching or estimating the average number of cars a gas station can handle daily.
- Calculate the Number of Gas Stations:
- Divide the total number of cars by the average number of cars served by one gas station.
Finally, consider other relevant factors that might influence the number of gas stations needed, such as:
- The presence of electric cars that don't require gas stations.
- The availability of home delivery services for car fuel.
- Additional demand from cars coming from neighboring areas like Abu Dhabi or Sharjah.
By following these steps, you can derive a more accurate estimate of the number of gas stations in Dubai.
Remember putting an exact number on each estimation is quite challenging what the interviewers care about is you being able to think in a structured manner and make assumptions that are reasonable.
Hope this helps!
Best,
Hani
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Hi there,
I would be happy to share my thoughts on your question:
- First of all, it would be good to see your proposal first so that I can give you feedback on it.
- Moreover, please keep in mind that most strategy consulting firms have not used stand-alone market size estimations for a long time. While this does not mean that it never happens, this type of case study question may not be very meaningful for both the candidate and the interviewer, as only a few skills are being tested. That being said, simpler market size estimations can still be part of a case study.
If you would like a more detailed discussion on how to best prepare for your upcoming interviews, please don't hesitate to contact me directly.
Best,
Hagen
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