Question

Market Size Model The first step is to model the entire market. The company manufacturers two products (A and B) so each market must be modeled. Modeling the market requires establishing growth rates for each of the products. Complete the model by entering formulas in the green cells below. The exercise is designed such that an error early in the assignment will not adversely impact later grading. The market size of each product can be forecast based on growth expectations. Product A's growth will decelerate, declining linearly by .5% every year. Product B's growth will be stable at 10% annually. Hint: When financial analysts adjust a growth rate or market share you do not compound the adjustment. If the growth rate is 10% and it declines by 3%, the adjusted growth rate is 7%. Please use this clarification to understand how to forecast throughout this Sheet. 2026 1,005 Market Size Units Product A Product B 2021 1,005 503 503 2022 1,005 503 503 2023 1,005 503 503 2024 1,005 503 503 2025 1,005 503 503 2027 1,005 503 503 2028 1,005 503 503 2029 1,005 503 503 2030 1,005 503 503 2031 1,005 503 503 503 503 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Market Unit Growth Rate Product A Product B 10.0% 10.0%

Answer 1

To calculate the market size for each product in the years 2026 to 2031 based on the provided growth rates, you can use the formulas in the green cells. The market size for each year depends on the previous year's market size and the specified growth rate.

Here's how you can calculate the market size for each product:

For Product A (which decelerates by 0.5% each year):

In cell C7 (for 2026):

`=C6 - (C6 * 0.005)`

In cell C8 (for 2027):

`=C7 - (C7 * 0.005)`

Drag these formulas down for the subsequent years (C8 to C11).

For Product B (which grows at a stable rate of 10% annually):

In cell D7 (for 2026):

`=D6 + (D6 * 0.10)`

In cell D8 (for 2027):

`=D7 + (D7 * 0.10)`

Drag these formulas down for the subsequent years (D8 to D11).

Now, you should have the market size units for both Product A and Product B for the years 2026 to 2031, taking into account their respective growth rates.

Answer 2

Product B's market size will rise from 503 units in 2021 to 1,287 units in 2031, whereas Product A's market size will decrease from 503 units in 2021 to 479 units in 2031.

The provided data presents a clear contrast in the market trajectories of Products A and B from 2021 to 2031.

For Product A, which experiences a declining growth rate of 0.5% annually, a simple linear equation is utilized to forecast its market size each year.

This implies a steady decrease from 503 units in 2021 to 479 units in 2031.

On the other hand, Product B exhibits a remarkable growth pattern, with a constant annual growth rate of 10%.

The use of a simple compounding formula accurately predicts the expansion of its market size, soaring from 503 units in 2021 to a robust 1,287 units by 2031.

These calculations provide a quantitative perspective on the contrasting trajectories of the two products.

Product A faces a gradual decline in market size, reflecting potential challenges or shifts in consumer preferences.

In contrast, Product B's consistent growth hints at factors such as high demand, effective marketing strategies, or product innovations driving its increasing market share.

The results underscore the importance of considering growth rates and employing appropriate forecasting methods when analyzing the future market dynamics of different products.