Market size, or market capacity, is the amount of goods and services sold or consumed in a certain area over a certain period of time. Typically, the market size is determined in areas of significant area (city, region, country) for a fairly long time (month, year, quarter).
Instructions
Step 1
You can calculate the market capacity both in physical terms (pieces, tons, liters, etc.) and in monetary terms. Market size can be mathematically defined as follows:
E = M x C, where
M is the amount of goods sold in physical terms;
С - the price of a unit of goods sold.
Step 2
But you must remember that there are different types of markets, which means that the approaches to determining their capacity will be different. The most common method is the general assessment of market capacity. With its help, the maximum volume of demand for a product is calculated. That being said, first take the data on the total population and the average income level per person. Reduce the calculated volume gradually. First, select from the received volume that part of the income that goes to the purchase of food, from it - the part that goes to the purchase of semi-finished products, of which - to vegetable semi-finished products, and then - potato semi-finished products.
Step 3
In the second stage of the study, find out what is the maximum share of the available potential market that the firm can develop. In doing so, use data on the market segment - the number of consumers of potato semi-finished products and the volume of products manufactured by competitors. Based on this, draw a conclusion about the maximum possible volume of sales of goods. Remember that exceeding it threatens the company with unsold inventory.
Step 4
You can calculate the total market size as follows (using the beef dumplings market as an example):
E = H × PP x K x SP x PG x C, where
H - population aged 5 and over;
PP is the percentage of residents consuming dumplings;
K is the average amount of consumption by one consumer per year;
SP - average consumption of dumplings by one consumer at a time;
GHG is the percentage of consumers who prefer beef dumplings;
C - the average price of a portion of beef dumplings.
