This is the second video in mock guesstimate series brought to you by Consulting and Strategy Club, IIM Lucknow where the candidate is estimating number of washing machines sold in India in a year.
@@Aggarwal0709 0.5 *0.4 explanation: 0.4 is the 40% representing the penetration share of middle-class families in Tier II cities. ie. assumption is that only 40% of middle-class families in Tier-II would use a washing machine. 0.5 is the 50% representing the percent of middle class families in Tier-II cities. So, when we multiply the 0.5 with 0.4, what we mean is that of the 50% population in Tier-II (which is the middle class), only 40% use a washing machine, i.e. 0.5*0.4= 0.2; i.e. total 20% in Tier-II use washing machine. This is just the middle class part. You should add the rich class too, which is 10% of Tier-II with 100% penetration (so we know all 10% rich class in Tier-II use washing machine). So we add 0.1 to 0.2 or 10% to earlier 20%. So total washing machine penetration in Tier-II is 30% I hope I made some sense. I suck at explaining things to others.
To demonstrate the MECE principle, always ask the interviewer all the exhaustive list of questions. Here I would also ask whether we are looking at fully automatics, semi-automatic, or simple washing machines. There dynamics of these three will be very different. In guesstimate questions MECE principle is most important followed by structured thinking
Hello, great video. However, I have two comments 1) Why not to approach from supply side - a) We would have to estimate the number of suppliers - True and valid. b) manufacturers making different type of washing machines - this is not valid, we care about the total in the end. c) Channels of sale - Again, not valid directly. Only (a) is a relevant point here in my view 2) Market share calculation - Market share by only considering the number of units is incomplete. Market share is revenue of one player/size of that industry. Therefore, we need both units sold and price per unit.
This was the exact question grail research, gurgaon asked me in 2010 during job interview & I started with india's population, divided it into segments, took 4 people in each household but still I was not selected 😒
Hey Unnati! Would you like to share your interview experience and the questions they asked you? It'd be super helpful for peeps like me preparing for interviews!
For number of washing machines in India, we can also check with interviewer whether we should include or exclude the unsold inventory present in manufacturing plants, warehouses, retail outlets, etc.
Question, should all guestimate questions have these two to three level approach? For example would it be seen poorly if from the household data, I went straight and said 60% of households are rich and middle class and have 1 washing machine, vs dividing it by cities and then by classes and then by penetration?
10:00 the market share of existing dominating brands was not taken into account , out of 47 lac washing machines selling every year majority of machines are sold by big players which will eventually reduce the market share of the new manufacturer trying to enter the market.
Hi, thanks for the great video. The approach was very insightful. Can you put up an example of a problem getting solved using the supply side approach?
Hey Anubhav, please refer to the video on the following link for an example of how to solve a problem from supply side. Link: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-gh_fIUCGWAY.html
In replacement= current market size/ Avg. Life = 4.7/10 = 0.47 but you guys write 4.7 directly. How can total no. of washing machines at household smaller than no. of washing machines sold in a year. Please make it correct. Overall the content is very good and knowlegable.
Hi, I felt like it was unnecessary complex to segment into cities and then into income groups. Isn't it quicker and more comprehensive to segment according to income tiers from the get-go? That was my approach and I got a similar final answer. Although answers don't matter, the thought process does.
hi thanks for this video but i didnt understand that calculation involving washing machine sold each year, the last part of it....5% of 4.7 crore is not 2.3 ...pls explain
Since the calculation is made via population, it is incorrect to use the economic growth rate. We should be using the population growth rate for that i.e. 1%. Am I missing something? Also, shouldn't it be 5% of the annual sales and not the total market share?
I think using population growth as a proxy might be problematic because sectoral growth rarely track population changes practically. Factors affecting such growth are usually economic. Hence, economic growth rate might be safer. Not sure. There is no right answer here. Also, annual sales are what we are trying to compute coz we only have the current market size. So we are assuming a growth of 5% every year based on current market size.
@UCrq83R9MiXbuChoqGqGpIWQ why would the penetration be different in middle class in different areas? Is it because the urban middle class is more well off than rural middle class or is there a demand/supply problem in rural areas which lowers the penetration?
Percentage of people in said classes to own a Washing machine. Ex- not all middle class families own a washing machines, so we’re assuming half of them own one. Hence penetration is 50%
I think vishaal last ans was wrong, how could you add 4 .7+ 2.3 =7 Current market size is 4.7. Then to correct ans should be 4.7/10= 0.47. Washing machine sold will be equal to 0.47+ 2.3= 2.77 cr
I think it's , how many families buy a new one after there old one gets damaged, they took assumption of 10 years that's why 10% of total washing machine getting replaced every year.
No , that would give the increase in no of washing machines sold per year compared to the the previous year . Here the goal is to find the total no of washing machines sold due to the increase in growth rate of the economy.
Hello, requesting to recheck the growth element. It can not be 5% of 4.7 Cr. It should of 5% of what is sold in each year i.e. 47 lakhs. Answer should be 51,70,000 Another way to verify is that wihout growth element demand per year is 47 Lakhs.. Can demand increase by 50% each year?
The guesstimate is not completely exhaustive. Washing machines would be used by commercial establishments also like hotels,hospitals , guest houses etc. So if you have assumed population only as the criteria is wrong.
Not every family in india can afford a washing machine. Especially BPL families. I think it’s an important assumption to consider while talking about India.
