Understanding Market Share
Market share is a measure of how much of the total market for a particular product or service is being supplied or sold by a particular company or group of companies. It is calculated by taking the company’s sales over a given period of time, usually a year or quarter, and dividing it by the total sales of the entire market. Market share is an important metric for companies in competitive markets, as it gives an indication of their relative strengths and weaknesses.
Calculating Market Share
To calculate market share, first you must determine the total size of the market. This can be done by researching the total sales of the specific product or service in question. Then, you must determine the company’s total sales for the same period of time. Finally, divide the company’s total sales by the total size of the market to get the company’s market share.
Uses of Market Share
Market share can be used for a variety of purposes:
- It can provide insight into the competitive landscape, showing which companies have the most market power and which companies have the least.
- It can be used to set pricing strategies and product offerings, as companies can use their market share to determine how they should price their products and services relative to their competitors.
- It can be used to measure the success of marketing campaigns, as increases in market share can indicate that campaigns are having the desired effect.
- It can be used to assess the success of new products, as increases in market share may indicate that a product is being well-received by the market.
Examples of Market Share
- Apple Inc. – Apple has a market share of 18.9% in the smartphone market, making it the second-largest smartphone manufacturer in the world.
- McDonald’s Corp. – McDonald’s has a market share of 13.4% in the fast food restaurant market, making it the largest fast food restaurant chain in the world.
- Amazon.com Inc. – Amazon has a market share of 38.2% in the online retail market, making it the largest online retailer in the world.
Market share is an important metric for companies, as it provides insight into their performance relative to their competitors. By understanding and tracking their market share, companies can make better decisions about pricing, product offerings, and marketing campaigns.