Market share refers to the portion or percentage of total sales or revenue that a particular company or product captures within a specific industry or market. It is a key performance indicator used to assess a company’s competitive position and its relative strength in relation to other players in the market.
The formula for calculating market share is:
Market Share = (company’s sales or revenue / total market sales or revenue) x 100
This formula provides a percentage that represents the company’s share of the total market.
Market share is a crucial metric for assessing a company’s competitive position within its industry. A higher market share indicates a stronger presence and influence in the market. It allows companies to compare their performance with the competitors. A company with a higher market share may be seen as the industry leader.
A high market share can be an indication of brand strength and customer loyalty. Customers may perceive a company with a large market share as more trustworthy and reliable.
Types of market share:
- Overall market share: This refers to the company’s share of the entire market, encompassing all competitors and products within a specific industry.
- Segment market share: Companies can also analyse their market share within specific segments or subcategories of the market.
- Geographic market share: Companies may evaluate their market share within specific geographic regions or countries, especially if they operate in multiple markets.
A high market share does not necessarily guarantee profitability. It’s possible for a company with a large market share to still be unprofitable if its costs are too high. Some companies may operate in niche markets where they have a small market share but a strong and profitable presence.