Driftwood Hotels: This Market Size Looks Too Big
Consulting
easy35 min0 submissionsMorgan Stanley
Scenario
A junior consultant has sized the annual replacement market for a household appliance in Southeast Asia. The number is being used to justify a $147 M capacity investment.
Their working, verbatim
Population is 155m. Average household size is 3, so there are about 52m households.
Penetration of this appliance is 28%.
Appliances are replaced every 8 years.
So annual replacement demand = 155m × 28% ÷ 8 = 5.4m units per year.
At $3973 per unit, that is a market of roughly $21,554 M a year.
The partner has asked you to check it before it goes in the deck.
Supporting data
derived hints
- corrected units m
- 1.8
- overstatement multiple
- 3
stated working
- households m
- 52
- population m
- 155
- household size
- 3
- price per unit
- 3973
- stated units m
- 5.4
- penetration pct
- 28
- replacement years
- 8
Your task
Check the estimate. Your answer should provide:
- Analysis — find the error and quantify how much it distorts the answer.
- Risks — what depends on this number being right.
- Recommendation — the corrected size, computed, and how you would sanity-check it.
State any assumptions you make.
Ready to move forward? Up next: Lumen Learning: Pressure-Test This RecommendationNext question
How you'll be graded
100 points, 60% to pass.
- explanation20
- residual review15
- error identification35
- quantitative correction30
Hint
Reveal suggested structure
Unit consistency; households vs individuals; recompute; sanity-check against a known anchor