1. What Is Market Share?
Market share is the percentage of total sales in an industry or market that a company controls. It shows how competitive a business is compared to others in the same sector.
2. Why Market Share Matters
- Measures business competitiveness.
- Helps assess growth potential.
- Attracts investors and lenders.
- Guides pricing and marketing strategies.
- Identifies strengths and weaknesses against competitors.
3. Formula for Market Share
Basic Formula:
Market Share (%) = (Company Sales ÷ Total Market Sales) × 100
Where:
- Company Sales = Revenue or units sold by your business.
- Total Market Sales = Revenue or units sold by the entire market.
4. Example of Market Share Calculation
Example 1 – Based on Revenue
- Company A sales: £5 million.
- Total industry sales: £50 million.
Calculation:
(£5m ÷ £50m) × 100 = 10% market share.
Example 2 – Based on Units Sold
- Company B sells 20,000 smartphones.
- Total market sales = 200,000 smartphones.
Calculation:
(20,000 ÷ 200,000) × 100 = 10% market share.
5. Types of Market Share
- Revenue Market Share: Based on sales value.
- Unit Market Share: Based on quantity of products sold.
- Relative Market Share: Compares your share against the largest competitor.
Formula:
Relative Market Share = Your Market Share ÷ Largest Competitor’s Market Share
6. Sources of Market Data
- Industry reports.
- Trade associations.
- Government statistics.
- Competitor financial reports.
- Market research firms.
7. Challenges in Calculating Market Share
- Lack of accurate industry-wide data.
- Hidden competitors in niche markets.
- Rapid changes in consumer demand.
- Different methods of measuring sales (units vs. revenue).
8. Tips for Accurate Market Share Analysis
- Use reliable and up-to-date industry data.
- Decide whether revenue or unit-based calculation suits your business.
- Track market share over time to identify trends.
- Compare with both direct and indirect competitors.
- Adjust calculations for local, regional, or global markets.
Frequently Asked Questions
1. What is the formula for market share?
Market Share (%) = (Company Sales ÷ Total Market Sales) × 100.
2. Should I calculate market share by revenue or units?
It depends—revenue shows value share, while units show volume share.
3. How do I find total market sales?
Use industry reports, government statistics, or research firms.
4. What does a high market share mean?
It indicates strong competitive positioning and brand recognition.
5. Can small businesses calculate market share?
Yes, even local businesses can estimate market share using local sales data.
6. What is relative market share?
It compares your share directly against your largest competitor’s share.
Conclusion
The calculation of market share helps businesses understand their position in the market and make informed decisions about pricing, marketing, and growth. By applying simple formulas, using reliable data, and tracking changes over time, companies can strengthen their competitive edge.