Roots[ edit ] The emergence of HPM is linked to humanistic psychology.
How to Miss By a Mile: And as you would expect, his answer is critically dependent on these two assumptions. As the Series A investor and board member at Uber, I was quite intrigued when I heard that there was a FiveThirtyEight article specifically focused on the company.
I have always loved the deep, structured analysis that Bill Simmons and Grantland bring to sports, and when Nate Silver also joined ESPN, I was looking forward to the same thoughtful analysis applied to a much broader range of subjects.
I could hardly wait to dive in and see the approach. Young math students are warned about the critical difference between precision and accuracy.
Financial models, especially valuation models, are interesting in that they can be particularly precise. A discounted cash flow model can lead A study on market potential for a result with two numbers right of the decimal for price-per-share.
But what is the true accuracy of most of these financial models? So here is the objective of this post. It is not my aim to specifically convince anyone that Uber is worth any specific valuation. I am also not out to prove him wrong. I am much more interested in the subject of critical reasoning and predictions, and how certain assumptions can lead to gravely different outcomes.
And I hope the analysis is judged on whether the arguments I make are reasonable and feasible.
Damodaran uses two primary assumptions that drive the core of his analysis. He then guesses at a market share limit for Uber — basically a maximum in terms of market share the company could potentially achieve. The rest of his model is rather straightforward and typical. In my view, there is a critical error in both of these two core assumptions.
There are multiple reasons why this is a flawed assumption.
When you materially improve an offering, and create new features, functions, experiences, price points, and even enable new use cases, you can materially expand the market in the process.
The past can be a poor guide for the future if the future offering is materially different than the past. Consider the following example from 34 years ago that included the exact same type of prediction error: Bythe number of subscribers worldwide had surpassed 5 Billion and cellular communication had become an unprecedented technological revolution.
We will now walk through those key differences, dive deep on the issue of price, and then consider a range of expanded use cases for Uber, including one that changes the game entirely. A Radically Different Experience Pick-up times.
In cities where Uber has high liquidity, you have average pick-up times of less than five minutes. For most of America, prior to Uber it was impossible to predict how long it would take for a taxi to show up.
As Uber becomes more established in a market, pick-up times continue to fall, and the product continues to improve. As Uber evolves in a city, the geographic area they serve grows and grows. Uber initially worked well primarily within the San Francisco city limits.
It now has high liquidity from South San Jose to Napa. This enlarged coverage area not only increases the number of potential customers, but it also increases the potential use-cases. Uber is already achieving liquidity in geographic regions where consumers rarely order taxis, which is explicitly market expanding.
With Uber you never need cash to affect a transaction. The service relies solely on payment enabled through a smartphone application.
This makes it much easier to use on the spur of the moment.
It also removes a time consuming and unnecessary step from the previous process.Sep 27, · The market analysis is one of the most important parts of any startup strategy.
It can actually help reduce risk because if you really understand your potential customers and market conditions, you’ll have a better chance of developing a viable product or service/5(93).
Employees of firms with 2-D diversity are 45% likelier to report a growth in market share over the previous year and 70% likelier to report that the firm captured a new market. Yesterday I went to to the grocery store and asked a person working there why beef was so expensive.
|The C-suite Study | IBM||Study to measure Market Potential and Customers Buying Motives Abstract It is detailed study of market potential performance to detect strengths and weaknesses.|
|Reinvent and outperform||Getty The facts are sobering: In fact, a recent study undertaken by the Blackbox seed accelerator found that many tech start-ups failed because they focused more on their product than on their potential customers.|
|Use 'market' in a Sentence||Gumpert How to Really Create a Successful Business Plan Feasibility studies and business plans are identified in Chapter 4 as key steps to starting a cooperative.|
He told me that the market determined the price, and his supplier raised prices, so they had to raise prices on the consumer as well.
A market analysis studies the attractiveness and the dynamics of a special market within a special industry. It is part of the industry analysis and thus in turn of the global environmental benjaminpohle.comh all of these analyses, the strengths, weaknesses, opportunities and threats (SWOT) of a .
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