Market share

Definition

Market share is the percentage of an industry's sales that a particular company controls, reflecting its competitiveness and position within the market. A higher market share often indicates a stronger brand presence and customer loyalty, while also providing insights into brand performance relative to competitors. Tracking market share can help brands make informed decisions about strategy, product development, and marketing efforts.

5 Must Know Facts For Your Next Test

1. Market share can be calculated by dividing a company's total sales by the total sales of the industry during the same period.
2. An increase in market share often leads to economies of scale, allowing companies to lower costs and improve profit margins.
3. Brands with higher market share are usually more resilient during economic downturns due to their established customer base.
4. Understanding market share is crucial for portfolio management as it helps identify underperforming brands or products needing strategic adjustments.
5. Tracking changes in market share can indicate shifts in consumer preferences or competitive dynamics within the industry.

Review Questions

• How does market share impact a company's strategy regarding brand architecture and portfolio management?
  • Market share directly influences a company's strategy as it indicates how well its brands are performing compared to competitors. A higher market share allows companies to leverage their strong positions when managing their brand portfolio, leading to better resource allocation and investment in successful brands. Additionally, understanding market share helps identify which brands may need revitalization or repositioning to improve overall portfolio performance.
• Discuss how analyzing market share can inform decisions about brand equity and competitive advantage.
  • Analyzing market share provides insights into brand equity by revealing consumer perception and loyalty in relation to competitors. Brands with a significant market share often possess strong brand equity, which enhances their ability to maintain pricing power and attract new customers. This understanding allows companies to focus on building competitive advantages through targeted marketing strategies, product differentiation, and customer engagement initiatives.
• Evaluate the implications of shifting market shares within an industry and how this affects brand architecture decisions.
  • Shifting market shares within an industry can have significant implications for brand architecture as it reflects changing consumer preferences and competitive dynamics. When a competitor gains market share, it may prompt existing brands within a portfolio to reassess their positioning and value proposition. Companies may need to consolidate, refresh, or even divest certain brands to respond effectively to these shifts, ensuring that their overall brand architecture remains relevant and aligned with market demands.

Related terms

competitive advantage:

A condition or circumstance that puts a company in a favorable or superior business position over its competitors.

brand equity: The value that a brand adds to a product or service, based on consumer perception, recognition, and loyalty.

market segmentation: The process of dividing a broad consumer or business market into sub-groups based on shared characteristics.