For a business in an unorganized, unexplored or immature sector or market, I like to start with Top Down analysis to evaluate Market Potential (aka the size of Opportunity) and then narrow it down to the specific business leader based on its targetted Market Share, Customer Segmentation etc...
This approach is particularly good for market leaders in upcoming/fast growing sectors… and what better place to start than our population ~1.1 billion or ~6.5 billion if you have plans for globalization :)
Warning: What follows is very crude mathematics.
March 2001
Pagers were badly outclassed by mobile phones. However, these mobile phones were limited to rich and elite. Even incoming calls were Rs. 6/- or Rs. 12/- a minute and incoming text messages weren't free either.
July 2004
The market was ripe with 3 aggressive players: Airtel, Hutch and Reliance. Incoming calls were now free and making outgoing calls or sending text messages was now affordable.
The "turning point" for this market had been reached. The mobile phone cost which was the major "barrier to entry" for the student and the great Indian middle class was addressed both through low cost handsets and also through attractive handset financing schemes by operators.
"The Common Man" was now seen rushing to and queuing at outlets to register for the scheme.
And in what was to follow, you could find even the cab and auto rickshaw drivers, and small retailers / vegetable vendors carrying mobile phones.
Population as on July 2004 --> around 1.05 billion
Mobile Subscriber Base in July 2004 --> around 40 million
Projected Population in 10 years (2014) --> around 1.25 billion
Projected Mobile Subscriber base in 10 years (2014) --> anywhere between 400 million to 800 million
Bharti Airtel's market share (2004) --> around 25%
Bharti's Average Revenue Per User --> INR 563/-
It was more than obvious that average revenue per user was to fall as the mobiles expanded beyond the rich to lower income groups.
Managing same market share would mean over 125 million subscribers for Bharti Airtel in about 10 years… say 2014
At a Monthly ARPU of INR 300/- per user and a user base of 125 million subscribers:
Monthly Revenue potential: around INR 38 billion ($850 million)
Annual Revenue potential: around INR 450 billion ($10 billion)
So we are looking at "a business potentially scaling up to annual revenues of $10 billion in around 10 years"
At post tax margins of 20%, this means ~$2 billion in annual Profits
(Although we are only atrempting to evaluate the revenue potential in the scope of this exercise)
This approach is particularly good for market leaders in upcoming/fast growing sectors… and what better place to start than our population ~1.1 billion or ~6.5 billion if you have plans for globalization :)
Warning: What follows is very crude mathematics.
March 2001
Pagers were badly outclassed by mobile phones. However, these mobile phones were limited to rich and elite. Even incoming calls were Rs. 6/- or Rs. 12/- a minute and incoming text messages weren't free either.
July 2004
The market was ripe with 3 aggressive players: Airtel, Hutch and Reliance. Incoming calls were now free and making outgoing calls or sending text messages was now affordable.
The "turning point" for this market had been reached. The mobile phone cost which was the major "barrier to entry" for the student and the great Indian middle class was addressed both through low cost handsets and also through attractive handset financing schemes by operators.
"The Common Man" was now seen rushing to and queuing at outlets to register for the scheme.
And in what was to follow, you could find even the cab and auto rickshaw drivers, and small retailers / vegetable vendors carrying mobile phones.
Population as on July 2004 --> around 1.05 billion
Mobile Subscriber Base in July 2004 --> around 40 million
Projected Population in 10 years (2014) --> around 1.25 billion
Projected Mobile Subscriber base in 10 years (2014) --> anywhere between 400 million to 800 million
Bharti Airtel's market share (2004) --> around 25%
Bharti's Average Revenue Per User --> INR 563/-
It was more than obvious that average revenue per user was to fall as the mobiles expanded beyond the rich to lower income groups.
Managing same market share would mean over 125 million subscribers for Bharti Airtel in about 10 years… say 2014
At a Monthly ARPU of INR 300/- per user and a user base of 125 million subscribers:
Monthly Revenue potential: around INR 38 billion ($850 million)
Annual Revenue potential: around INR 450 billion ($10 billion)
So we are looking at "a business potentially scaling up to annual revenues of $10 billion in around 10 years"
At post tax margins of 20%, this means ~$2 billion in annual Profits
(Although we are only atrempting to evaluate the revenue potential in the scope of this exercise)
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