1. Introduction to Market Share
Market share measures the percentage of sales a business controls in its industry compared to competitors. Knowing how to work out market share helps you assess competitiveness, identify growth opportunities, and make strategic decisions.
2. Why Market Share Matters
- Shows your position in the market.
- Highlights competitive strengths and weaknesses.
- Helps attract investors and funding.
- Guides pricing, marketing, and expansion strategies.
3. The Market Share Formula
The basic formula is:
Market Share (%) = (Company Sales ÷ Total Industry Sales) × 100
Where:
- Company Sales = Revenue or units sold by your business.
- Total Industry Sales = Combined sales of all competitors in your sector.
4. Example of Market Share Calculation
- Your company’s annual sales: £500,000
- Total industry sales: £10,000,000
Market Share = (500,000 ÷ 10,000,000) × 100 = 5%
This means your company controls 5% of the market.
5. Unit-Based Market Share Calculation
Sometimes measured by units sold rather than revenue.
Example:
- Your company sold 20,000 units.
- Industry total sales: 200,000 units.
Market Share = (20,000 ÷ 200,000) × 100 = 10%
6. Types of Market Share Analysis
- Revenue Market Share – Focuses on sales value (£).
- Unit Market Share – Focuses on volume of goods sold.
- Relative Market Share – Compares your share directly with the largest competitor.
7. Data Sources for Market Share Calculation
- Industry reports and market research firms.
- Trade associations.
- Government statistics.
- Competitor financial reports.
- Customer surveys and industry analysis tools.
8. Challenges in Calculating Market Share
- Lack of reliable industry sales data.
- Different measurement methods across sectors.
- Rapidly changing markets and consumer trends.
9. Market Share vs Market Growth
- Market Share: Your slice of the existing market.
- Market Growth: How the overall market is expanding or shrinking.
Both are vital for assessing opportunities.
10. How to Increase Market Share
- Improve product quality or service.
- Strengthen brand awareness and marketing.
- Expand distribution channels.
- Innovate with new products.
- Offer competitive pricing strategies.
11. Importance of Relative Market Share
Relative market share compares your business to the market leader:
Relative Market Share = Your Market Share ÷ Market Leader’s Share
This highlights how competitive your business is against the top company.
12. Market Share in Niche vs Broad Markets
- Niche markets: Easier to achieve high share but smaller potential sales.
- Broad markets: Lower share may still equal high revenue due to scale.
13. Common Mistakes When Working Out Market Share
- Using outdated or unreliable industry data.
- Ignoring smaller competitors.
- Measuring market share only once instead of tracking trends.
14. Tools to Help Calculate Market Share
- Market research platforms (Statista, IBISWorld).
- Industry surveys and analytics.
- CRM and sales data software.
15. Why Investors Care About Market Share
A higher or growing market share signals strong competitiveness and growth potential, making your business more attractive to investors and lenders.
Frequently Asked Questions
Q1: How do I work out market share if I don’t know total industry sales?
You can use market research reports, trade associations, or estimate using competitor data.
Q2: Is market share based on revenue or units sold?
It can be calculated both ways—choose the method most relevant to your industry.
Q3: Can startups calculate market share?
Yes, but they often estimate using projected sales and market size.
Q4: What is a good market share percentage?
It varies by industry. Even 5–10% can be strong in competitive markets.
Q5: How often should I calculate market share?
At least annually, or quarterly in fast-changing industries.
Q6: Does market share guarantee profitability?
No, a company can have high market share but low profit margins.
Conclusion
Knowing how to work out market share is essential for measuring business performance against competitors. By dividing your sales by total industry sales, you can identify your market position, track progress, and develop strategies to grow. Regular monitoring ensures you stay competitive and adapt to changing market conditions.