What is market share? Formula and how to calculate it

Shrewd executives, whether in charge of small businesses or large corporations, will have their eye out for a good acquisition deal when their companies are in a growth model. However, if a firm attains quite a larger market share, it can be subject to rules and regulations, including anti-competition laws. Overall the formula is a good indicator of the company’s position but should be used along with other factors like profitability and market trends to get a comprehensive view of the business performance. Market share is a type of market prospect ratio that shows the number of sales in an industry that a company generates compared to the total sales generated in that industry. We will look at the market share formula, examples, and the different types of market shares with their analysis. Expanding your market share requires a strategic approach that encompasses various tactics and initiatives aimed at attracting new customers, retaining existing ones, and outperforming competitors.

By now we have covered how to define your market and gain and grow your market share. This might be a good time to dive a little deeper into how to understand what your competitive landscape looks like. Calculate the number of innovators, early adopters, and part of the mainstream adopters that you can realistically convert to customers in the short term. Understanding market share enables companies to understand the market potential. This is as much true for companies as for individuals in their pursuit of success.

How to increase your market share

The value proposition describes the offering and why customers should be interested in and buy it. Having this is fundamental to establishing your market and the competitors in the market. Factors like quality, pricing, marketing, and customer satisfaction impact share. Growing strategies encompass diversification, expansion, mergers, competitive pricing, and international presence.

Increase Customer Engagement and Strengthen Customer Relationship

What does market share mean for your position in the competitive environment? It shows how the pie is sliced and how big a piece you have relative to everyone else. When you segment your target market, you receive a more granulated view.

Growing a Company’s Market Share

For example, if you generate half as much revenue as the industry leader, your relative market share is 50%. Market share is the percentage of total sales a company has in a specific market. It is like a piece of a pie, showing how much of the market “pie” belongs to each company. By providing excellent customer service, addressing any issues promptly, and going the extra mile to make customers feel valued, a company can create a positive reputation and increase customer loyalty.

SWOT Analysis

For example, if the dominant player in the US clothing market holds a 25% market share, the calculation would see New Fashion’s 1.5% share divided by 25%, equaling 6%. Market share or absolute market share is slightly different from the relative market share. Now, it is very important to understand that market share can be calculated with the help of two different variables. If we are to speak in business language, technically, you are serving 25 percent of the market. Or, your market share in the retail industry of that particular town is 25 percent. A 25 percent market share also means you are an industry giant in that specific town and have a massive impact on its retail industry.

After they calculated Tesla’s market share within the global EV market, the company decided it could do things differently and take on long-standing competitors in the auto industry. If you generate leads or sales through your website, you should also know how to determine market share by organic search traffic. This is the ratio between the clicks you get out of the total available clicks for a defined set of keywords. For example, if you have 250 customers and your target market has 1,295 potential customers, your market share would be approximately 19.3%.

A company that is growing its market share will be growing its revenues faster than its competitors. Analysis of market share is a key to understanding the firm’s performance over time in relation to its competitors. A market share analysis needs to take into account the total how to calculate market share size of the market, making reference to the annual business volume either in currency or in the number of transactions. The analysis should also take note of the growth rate of the market, that is the Compounded Annualized Growth Rate (CAGR) that is being taken over the period of three to five years. In summary, monitoring market share offers numerous benefits for businesses, including insights into competitive positioning, growth opportunities, marketing effectiveness, and product performance.

When it comes to market share, this means understanding the part of the serviceable market that can be captured in the short term.
Any tiny shift in the market distribution in stable markets can disrupt well-balanced market forces.
Another way Coca-Cola discovered that it could increase market share was by diversifying its portfolio of products to include other types of drinks such as Vitaminwater.
Toyota leads globally, followed by Volkswagen, Renault, Stellantis, and Kia.
Well, the thing is, synergies are always stronger than individual efforts.
Apple’s market share in China’s smartphone market has varied over the years, as it vies with domestic companies there.

The Bullish Bears team focuses on keeping things as simple as possible in our online trading courses and chat rooms.
It also manufactures and sells hardware, such as the Surface line of devices and Xbox gaming consoles.
A company’s market share is its sales measured as a percentage of an industry’s total revenues.
Any difference in market share may either be a trigger of weakness or strength in investor sentiment.
It can also lay the foundation to generate new business opportunities.
Gaining a larger market share requires thinking long-term about how to capitalize on existing momentum and keep that share growing.
We’ll look deeper into market share and explore a few industries and their market share leaders.

This is the fun part, as it requires you to tap into your detective skills and critically evaluate the information. You can imagine that a declining market is to be approached differently than a growing one. Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos. At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content.

You have the option to trade stocks instead of going the options trading route if you wish. While it may be challenging to learn the exact percentages of each market segment in the United States, it is more challenging to know how much of any product or service is sold in the country. They say it is relatively easier to achieve something distinctive but to maintain that distinction is very difficult. If a firm has succeeded in getting a fair market share, here is how the firm can maintain it.