CFA EOC for Industry and Company analysis has a question where a candidate projects sales from nominal GDP, then assumes a 2% decline in market share.
We’re asked if the approach is top down, bottom up or hybrid.
The right answer is top down. However, considering the candidate uses a market share assumption (bottom up?) shouldn’t the answer be hybrid? Why is market share not a bottom up approach?
When you project revenues, there are different ways. One way is you decide how much market share your company will get in certain year. lets say your biggest competition has 30% market share with 100M of revenues and as your products has few competitive advantages, you aim to get max 20% market share. This is a top down approach.
On the other hand you might start by assessing how many units you can sell in one year, based on the selling price you come out with revenues, this is an example of bottom up approach.
Not sure if this example helped you differentiate both?