Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Silver Street Partners is considering an investment in Drone Delivery Solutions (DDS), a provider of autonomous drone delivery services for e-commerce companies. During the due
Silver Street Partners is considering an investment in Drone Delivery Solutions (DDS), a provider of autonomous drone delivery services for e-commerce companies. During the due diligence process, the firm is evaluating DDS's total addressable market (TAM) using both top-down and bottom-up approaches. For the top-down approach, the team has gathered the following information: The global e-commerce market is expected to reach $6.3 trillion by 2025. Based on industry research, approximately 10% of e-commerce deliveries could be suitable for autonomous drone delivery. For the bottom-up approach, the team has collected the following data: DDS currently operates in 5 major cities, each with an average of 500,000 households. The average household in these cities places 20 e-commerce orders per year. DDS charges an average of $5 per delivery. Based on the information provided, which of the following statements best describes the potential discrepancy between the top-down and bottom-up TAM estimates? The top-down approach likely overestimates the TAM by assuming that all e-commerce deliveries are suitable for autonomous drone delivery, while the bottom-up approach provides a more realistic estimate based on DDS's current operations and pricing. The bottom-up approach likely overestimates the TAM by assuming that DDS can capture 100% of the e-commerce
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started