Market share

Definition

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.

What is market share?

Market share 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:

1. Overall market share: This refers to the company’s share of the entire market, encompassing all competitors and products within a specific industry.
2. Segment market share: Companies can also analyse their market share within specific segments or subcategories of the market. 
3. 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.

How to increase market share

To increase market share, a company can implement several strategies. Improving product quality and innovation can attract more customers. Competitive pricing and promotional offers can make products more appealing. Expanding distribution channels and improving customer service can increase accessibility and customer satisfaction. Marketing and branding efforts can raise awareness and loyalty. Additionally, acquiring competitors or entering new markets can also help capture a larger market share. Effective execution of these strategies can lead to sustained growth and a stronger market position.

Example of market share

In the beverage industry, Company XYZ sells a popular brand of cola. There are several other competitors in the market, including Company ABC and Company DEF.

Let’s say that in a given year, total cola sales in the market amount to 100 million units. Of these, Company XYZ sells 40 million units.

To calculate market share, you can use the formula:

Market share of Company XYZ = (40 million units / 100 million units) × 100 = 40%

In this example, Company XYZ has a market share of 40%. This means that out of all the cola sold in the market, Company XYZ’s brand accounts for 40% of the total sales volume.