Market Sizing question - Solution doubt

Question

Hello,

Is the market sizing solution correct? I do not believe it is considering the alloy wheels that are needed for new cars built, therefore not considering the 20 years car life.

It could be the case that we are not considering wheels on newly built cars because this is not our market, however it is not stated on the case that we only sell direct to consumers and not to companies who build the cars.

Thanks in advance

Answer 1

It is considering the alloys for new cars. Let's look at this part of the solution:

"So over 20 years, out of 100 cars, the number of wheels purchased are:

70*5 + 70*5 + 6*5 = 730 alloy wheels"

Let's “translate” these numbers into their meaning:

70*5 → the number of alloy wheels sold into new cars
70*5 → the number of alloy wheels sold into 10 year old cars that previously had alloy wheels
6*5 → the number of alloy wheels sold into 10 year old cars that previously did not had alloy wheels.

As such, you can see that this calculation was considering new vechiles.

I hope this clarifies your doubt and was helpful to you.

Answer 2

I see Pedro already gave you an excellent answer.

It's great that you're pushing for clarity. Feel free to bring that free-thinking into the interview as well and challenge some of the assumptions in the case.

Also, if you have your interviews soon, you might find it useful to have this list of common terms that show up:

Expert Guide: The Must-Know Consulting Terms for Interviews

Best,
Cristian

Answer 3

Pedro gave an excellent explanation here.

Remember that “lifespan” or lifecycle of products i.e. replacement rate is one of multiple methods for market sizing. For more practice consider signing up for this course:

Market Sizing Analysis: Approaches, Techniques, and Exercises