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Anonymous A
on Nov 12, 2019
Global
I want to receive updates regarding this question via email.

Market size for the computer hardware businesses in the UK

Is this approach good?

To calculate revenue generated from computer hardware business in the UK last year, I would split into personal and business.

Personal:

  1. Split population into age groups
  2. Find proportion of that age group that would own computer hardware
  3. Use replacement rate to find computer hardware that year
  4. Times by average price of laptop?

I'm not sure how to calculate business. My guess is that I would need to take into account peripherals and services but how would one start this?

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Top answer
Antonello
Coach
on Nov 12, 2019
McKinsey | NASA | top 10 FT MBA professor for consulting interviews | 6+ years of coaching

Hi,
it is a good approach. I would also add the difference between laptop and desktop: while for laptops you can perform your arguments, for desktop I would treat it as a household problem. 

For business PCs, you can make a strong assumption - if interviewer agree - like: I would consider as many PC for business (school, hospitals, professionals, companies, etc.) as for personal use. Otherwise, try to make assumptions about the percentages of people working in service sectors (and that need business PC).

You can then add a percentage for accessories and other service correlated to HW (e.g., insurance, assistance)

Best,
Anto

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Udayan
Coach
edited on Nov 15, 2019
Top rated Case & PEI coach/Multiple real offers/McKinsey EM in New York /12 years recruiting experience

Hi,

An alternative approach to this is to split the population into households vs age groups.

- So assuming population of 60M, and a HH size of 3 let's say 20M HH in the UK

- Then make assumptions around computer hardware here - assuming it is desktops and laptops for now you can go with 4 or more per HH  (most numbers work with some kind of justification)

- Once you arrive at the market value using replacement rate and average price of hardware you have the personal market (B2C) size for computer hardware in the UK

- For the B2B market, an alternate methodology is to assume that the total market size is xx% personal and yy% B2B. If we play with some assumptions for a bit, you can see that businesses will have higher replacement needs and higher prices as they can afford to pay more. However it is likely that there are fewer Business laptops than personal ones (as many people dont work and go to school etc.). It is reasonable to assume in my opinion that 50% of the market is B2B and 50% B2C - so if you double your estimate for personal you will be able to get total computer hardware market size for the UK

Hope this helps,

Udayan

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Top Answer by
Antonello
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Related Article
Market Sizing
Questions about market size are frequently asked in case interviews in consulting because they require a blend of logic, mathematics, and common sense. They can be asked as standalone questions or as part of a larger case. Applicants who are familiar with market sizing questions can really perform here. What Are Market Sizing Cases?If you're applying to top consulting firms like McKinsey, BCG, or Bain, you're unlikely to escape a market estimation case. Market sizing cases are considered "back-of-the-envelope" calculations because they can be done on the back of an envelope. Despite the name, it's not just about estimating market sizes; other estimations may also be asked for.For example, if you're discussing a British clothing retailer's growth strategy, you could calculate on an envelope how large the online clothing market is and what percentage of the market the retailer already penetrates. If you perform these calculations quickly, the conversation with the client stays fluid, leaving a good impression.You can receive the question about market size as a standalone case (although this is less common) or as part of a more comprehensive problem, such as market entry. The good news: There's no right or wrong answer when it comes to the question of market size. The interviewer is less concerned about the specific number you come up with for the market than the approach you took to arrive at that number. Why Are Market Sizing Cases Commonly Used in Consulting Interviews?Market Sizing Cases are used to test your quantitative and logical abilities. The interviewer wants to ascertain whether you work well with numbers and if you can make informed assumptions and deal with ambiguities. Questions about market size aren't just about the size of markets; they also involve other types of estimations, such as the number of golf balls in a jumbo jet. As you may have noticed, math is crucial in tackling these questions since you don't have a calculator to rely on. Most importantly, you need to be comfortable dealing with large numbers like millions and billions as well as percentages. More on that later. How Do You Best Approach Market Sizing Cases?Now that we understand the theory behind Market Sizing Cases and their relevance to your case interview, let's take a closer look at the process.Segmentation – The Key to Market Sizing CasesIf you've done some reading on case interviews before delving into market sizing questions, you might have come across areas where segmentation is necessary. Segmenting data is a crucial skill you must master as both a candidate in a case interview and in your later career as a consultant. Segmentation generally refers to dividing a larger whole into smaller parts or segments. The principle you need to understand to do this correctly is the MECE principle.MECE stands for "mutually exclusive, collectively exhaustive." Simply put, segmenting a group of data according to the MECE principle means forming subgroups that do not overlap but collectively cover the entirety of the data, meaning no data is missing. An example useful for market sizing questions is dividing a country's population into age groups (as different age groups often behave differently).Below is a breakdown into Group 1 in the age range 0 to 14, Group 2 in the age range 15 to 64, and Group 3 for everyone over 65: Note that none of the groups overlap, so no age is counted twice, but also no age is overlooked. Now that the population is correctly segmented, we can treat each group differently. If we had divided the population of the United Kingdom into the aforementioned groups, we could estimate clothing expenditures per person in these groups in online retail. Common sense suggests that expenditures per person in the 0-14 age group are lower than in the 15-64 age group. We can justify this estimation by noting that the majority of 0-14-year-olds do not purchase their clothing online. 
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