#Popular topics:
Problem Framing
Proposal Phase
2. Problem Analysis
Problem Framing
Proposal Phase
2. Problem Analysis
Consulting guesstimate exercise refers to making quick, educated estimates in business scenarios, often used in case interviews.
Two main approaches:
Top-down: Start with a large, known number and break it down. Example: Estimating coffee shop customers by starting with city population.
Bottom-up: Build up from smaller, known quantities. Example: Estimating coffee shop customers by calculating customers per hour, then extrapolating to a day.
Both methods help in making reasonable estimates when exact data isn't available.
Estimate the number of smartphones sold in India in a year
Top-Down Approach
Start with the Total Population:
India's population: ~1.4 billion.
Determine the Percentage of Smartphone Users:
Assume around 50% of the population uses smartphones (based on market penetration data).
Smartphone users = 1.4 billion * 50% = 700 million.
Estimate the Average Replacement Cycle:
Assume the average smartphone replacement cycle is every 2 years.
Therefore, each year, about half of the smartphone users will replace their phones.
Number of smartphones replaced each year = 700 million / 2 = 350 million.
Consider New Users:
Assume 5% of the population becomes new smartphone users each year.
New smartphone users per year = 1.4 billion * 5% = 70 million.
Sum the Replacement and New Sales:
Total smartphones sold in a year = Replacements + New users.
Total = 350 million + 70 million = 420 million.
Top-Down Approach
Start with the Total Population:
India's population: ~1.4 billion.
Determine the Percentage of Smartphone Users:
Assume around 50% of the population uses smartphones (based on market penetration data).
Smartphone users = 1.4 billion * 50% = 700 million.
Estimate the Average Replacement Cycle:
Assume the average smartphone replacement cycle is every 2 years.
Therefore, each year, about half of the smartphone users will replace their phones.
Number of smartphones replaced each year = 700 million / 2 = 350 million.
Consider New Users:
Assume 5% of the population becomes new smartphone users each year.
New smartphone users per year = 1.4 billion * 5% = 70 million.
Sum the Replacement and New Sales:
Total smartphones sold in a year = Replacements + New users.
Total = 350 million + 70 million = 420 million.
Bottom-Up Approach
Identify Key Segments of the Population:
Urban population: ~35% of 1.4 billion = 490 million.
Rural population: ~65% of 1.4 billion = 910 million.
Estimate Smartphone Penetration in Each Segment:
Urban smartphone penetration: 70%.
Rural smartphone penetration: 30%.
Calculate the Number of Smartphone Users in Each Segment:
Urban smartphone users = 490 million * 70% = 343 million.
Rural smartphone users = 910 million * 30% = 273 million.
Total smartphone users = 343 million + 273 million = 616 million.
Estimate the Replacement Cycle and New Users:
Assume urban users replace their phones every 1.5 years.
Assume rural users replace their phones every 3 years.
Urban replacements per year = 343 million / 1.5 = 229 million.
Rural replacements per year = 273 million / 3 = 91 million.
Estimate New Users in Each Segment:
Assume 7% of the urban population becomes new smartphone users each year.
Assume 3% of the rural population becomes new smartphone users each year.
New urban users = 490 million * 7% = 34.3 million.
New rural users = 910 million * 3% = 27.3 million.
Total new users = 34.3 million + 27.3 million = 61.6 million.
Sum the Replacement and New Sales:
Total smartphones sold in a year = Urban replacements + Rural replacements + New users.
Total = 229 million + 91 million + 61.6 million = 381.6 million.
Bottom-Up Approach
Identify Key Segments of the Population:
Urban population: ~35% of 1.4 billion = 490 million.
Rural population: ~65% of 1.4 billion = 910 million.
Estimate Smartphone Penetration in Each Segment:
Urban smartphone penetration: 70%.
Rural smartphone penetration: 30%.
Calculate the Number of Smartphone Users in Each Segment:
Urban smartphone users = 490 million * 70% = 343 million.
Rural smartphone users = 910 million * 30% = 273 million.
Total smartphone users = 343 million + 273 million = 616 million.
Estimate the Replacement Cycle and New Users:
Assume urban users replace their phones every 1.5 years.
Assume rural users replace their phones every 3 years.
Urban replacements per year = 343 million / 1.5 = 229 million.
Rural replacements per year = 273 million / 3 = 91 million.
Estimate New Users in Each Segment:
Assume 7% of the urban population becomes new smartphone users each year.
Assume 3% of the rural population becomes new smartphone users each year.
New urban users = 490 million * 7% = 34.3 million.
New rural users = 910 million * 3% = 27.3 million.
Total new users = 34.3 million + 27.3 million = 61.6 million.
Sum the Replacement and New Sales:
Total smartphones sold in a year = Urban replacements + Rural replacements + New users.
Total = 229 million + 91 million + 61.6 million = 381.6 million.
Summary
Top-Down Approach: Estimated 420 million smartphones sold in a year.Bottom-Up Approach: Estimated 381.6 million smartphones sold in a year.Both approaches provide a structured way to tackle the guesstimate problem, with slight variations in the final numbers due to different assumptions and segmentation.
Summary
Top-Down Approach: Estimated 420 million smartphones sold in a year.Bottom-Up Approach: Estimated 381.6 million smartphones sold in a year.Both approaches provide a structured way to tackle the guesstimate problem, with slight variations in the final numbers due to different assumptions and segmentation.
Guesstimate Problem-Solving Framework
1. Initial Planning
Identify key variables (30 sec)
Choose Top Down or Bottom Up
1. Initial Planning
Identify key variables (30 sec)
Choose Top Down or Bottom Up
2. Variable Identification
List all relevant variables
Segment problem (supply/demand)
2. Variable Identification
List all relevant variables
Segment problem (supply/demand)
3. Assumption Justification
Back assumptions with reason
Limit assumptions, use facts
3. Assumption Justification
Back assumptions with reason
Limit assumptions, use facts
4. Structured Approach
Maintain organized thinking
Validate before computing
4. Structured Approach
Maintain organized thinking
Validate before computing
5. Communication
Convey logic clearly
Segregate facts and assumptions
5. Communication
Convey logic clearly
Segregate facts and assumptions
6. Adaptability
Make quick decisions
Use exclusive information
6. Adaptability
Make quick decisions
Use exclusive information
Consulting guesstimate exercise refers to making quick, educated estimates in business scenarios, often used in case interviews.
Two main approaches:
Top-down: Start with a large, known number and break it down. Example: Estimating coffee shop customers by starting with city population.
Bottom-up: Build up from smaller, known quantities. Example: Estimating coffee shop customers by calculating customers per hour, then extrapolating to a day.
Both methods help in making reasonable estimates when exact data isn't available.
Estimate the number of smartphones sold in India in a year
Top-Down Approach
Start with the Total Population:
India's population: ~1.4 billion.
Determine the Percentage of Smartphone Users:
Assume around 50% of the population uses smartphones (based on market penetration data).
Smartphone users = 1.4 billion * 50% = 700 million.
Estimate the Average Replacement Cycle:
Assume the average smartphone replacement cycle is every 2 years.
Therefore, each year, about half of the smartphone users will replace their phones.
Number of smartphones replaced each year = 700 million / 2 = 350 million.
Consider New Users:
Assume 5% of the population becomes new smartphone users each year.
New smartphone users per year = 1.4 billion * 5% = 70 million.
Sum the Replacement and New Sales:
Total smartphones sold in a year = Replacements + New users.
Total = 350 million + 70 million = 420 million.
Bottom-Up Approach
Identify Key Segments of the Population:
Urban population: ~35% of 1.4 billion = 490 million.
Rural population: ~65% of 1.4 billion = 910 million.
Estimate Smartphone Penetration in Each Segment:
Urban smartphone penetration: 70%.
Rural smartphone penetration: 30%.
Calculate the Number of Smartphone Users in Each Segment:
Urban smartphone users = 490 million * 70% = 343 million.
Rural smartphone users = 910 million * 30% = 273 million.
Total smartphone users = 343 million + 273 million = 616 million.
Estimate the Replacement Cycle and New Users:
Assume urban users replace their phones every 1.5 years.
Assume rural users replace their phones every 3 years.
Urban replacements per year = 343 million / 1.5 = 229 million.
Rural replacements per year = 273 million / 3 = 91 million.
Estimate New Users in Each Segment:
Assume 7% of the urban population becomes new smartphone users each year.
Assume 3% of the rural population becomes new smartphone users each year.
New urban users = 490 million * 7% = 34.3 million.
New rural users = 910 million * 3% = 27.3 million.
Total new users = 34.3 million + 27.3 million = 61.6 million.
Sum the Replacement and New Sales:
Total smartphones sold in a year = Urban replacements + Rural replacements + New users.
Total = 229 million + 91 million + 61.6 million = 381.6 million.
Summary
Top-Down Approach: Estimated 420 million smartphones sold in a year.Bottom-Up Approach: Estimated 381.6 million smartphones sold in a year.Both approaches provide a structured way to tackle the guesstimate problem, with slight variations in the final numbers due to different assumptions and segmentation.
Guesstimate Problem-Solving Framework
1. Initial Planning
Identify key variables (30 sec)
Choose Top Down or Bottom Up
2. Variable Identification
List all relevant variables
Segment problem (supply/demand)
3. Assumption Justification
Back assumptions with reason
Limit assumptions, use facts
4. Structured Approach
Maintain organized thinking
Validate before computing
5. Communication
Convey logic clearly
Segregate facts and assumptions
6. Adaptability
Make quick decisions
Use exclusive information