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Market Sizing

The document defines key terms used in market sizing including total available market (TAM), served available market (SAM), and share of market (SOM). It provides a two-step process for determining market sizing by first defining the scope and then using top-down or bottom-up methodologies. Finally, it outlines three "golden rules" for structuring problems, finding the right tradeoffs such as rounding, and sanity checking estimates.

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205 views3 pages

Market Sizing

The document defines key terms used in market sizing including total available market (TAM), served available market (SAM), and share of market (SOM). It provides a two-step process for determining market sizing by first defining the scope and then using top-down or bottom-up methodologies. Finally, it outlines three "golden rules" for structuring problems, finding the right tradeoffs such as rounding, and sanity checking estimates.

Uploaded by

dwipayana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Market Sizing

Made Windhu

 Total Available Market (TAM)


o Combined revenue or unit volume in specified market.
o Ex: food packaging producers in a geographic region or market segment.
 Served Available Market (SAM)
o Percentage or size of TAM that a company can reasonably serve based on product,
technology, and geographic constraints.
o SAM is less than TAM
 Share of Market (SOM)
o Percentage of SAM that a particular company currently serves or plans to serve
o SOM is less than SAM (except in the case of monopoly)
 Step 1:
o Determining what products or services should be included as part of TAM
o Narrow down by geographic scope
o Timeframe consideration, historic market sizing or future projection
 Step 2: Methodologies
o Top-down (more quick)
o Bottom-up (more accurate)

 Three Golden Rule


o Use tree to structure the problem
 You should go to the second step only after your tree is laid out and has been
validated by the interviewer
 Splitting the process in two steps, first structure then calculation, simplifies
the problem a lot. Why is that? Because your brain has two separate
hemispheres: the right (creative) and the left (rational).

o Find the right tradeoff
 Do not round them without asking the interviewer if he is fine with it.
 Do not round more than 10%.
 Round up the answer not the input. Ex: 4 x 3.8 = 15.2 = 15 not 4 x 4 - 16
 If possible, round some numbers up and some down in order to cancel out
your rounding errors
 In case you decide to segment the data, try to come up with 3 segments, as
three is the number that people like most.
 Never forget to be MECE (mutually exclusive and collectively exhaustive) in
your segmentation.
 How deep do I have to go for each of the branches? as a rule of thumb, you
need to go as deep as you need to be able to make only defensible
assumptions.
o Sanity-check
 when you have to assess the yearly revenues of a company, compare them to
the revenues of a competitor with similar size.
o Replacement Concept
 Assume the population constant
 Example
o So, I’m gonna go ahead and start with the estimate and I’ll use a bunch of data that
the teams already collected through their research and then I’ll go ahead and just
make a few assumptions along the way to get to the estimate
o So the first assumption that I’m gonna make is that there are 300 m people in the US
and I know this is little bit on the low end but I think it’s just gonna help keep some
of the math simple as we go through
o The second thing we need to talk about is the percent of Americans that actually eat
breakfast

Jakarta
9,5 M
10% = 950.000
15% = 1.425.000
20% = 1.900.000
25% = 2.375.000
30% =

Indonesia

10%
15%
20%
30%

GDP Jakarta
Business Case

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