Market share

Definition

Market share refers to the portion of a market controlled by a particular company or product, expressed as a percentage of total sales in that market. It is a key indicator of competitiveness and performance, revealing how well a business is doing compared to its rivals and playing a vital role in strategic planning and positioning.

5 Must Know Facts For Your Next Test

1. Market share is critical for businesses to understand their position in the industry and identify growth opportunities.
2. A high market share often correlates with increased pricing power, brand recognition, and economies of scale.
3. Companies can increase their market share through various strategies such as competitive pricing, enhancing product features, or effective marketing campaigns.
4. Monitoring market share helps businesses assess the effectiveness of their strategies and adjust to changes in consumer preferences or competitive pressures.
5. Changes in market share can indicate shifts in industry dynamics, such as emerging competitors or changing customer needs.

Review Questions

• How does understanding market share contribute to the strategic management process for businesses?
  • Understanding market share provides essential insights into a company's competitive position within its industry. It allows businesses to evaluate their performance against competitors and identify strengths and weaknesses in their strategies. By analyzing market share trends, companies can make informed decisions regarding resource allocation, product development, and marketing efforts, ultimately enhancing their strategic management processes.
• Discuss the impact of market share on corporate entrepreneurship and intrapreneurship within organizations.
  • Market share significantly influences corporate entrepreneurship and intrapreneurship by shaping the organization's innovation culture and willingness to invest in new ventures. Companies with higher market shares may have more resources available for research and development, enabling them to explore innovative ideas and solutions. Conversely, organizations with lower market shares may need to foster an entrepreneurial mindset internally to identify new opportunities and drive growth through innovation.
• Evaluate how changes in global market share can affect international strategy formulation for businesses expanding abroad.
  • Changes in global market share are crucial for international strategy formulation as they inform companies about their competitive positioning across different markets. If a firm sees an increase in market share in a foreign country, it may decide to invest more heavily in that region or replicate successful strategies from other markets. Conversely, declining market share might prompt businesses to reassess their international approaches, considering adjustments in marketing strategies, partnerships, or even exiting underperforming markets. This analysis helps firms make strategic decisions that align with their overall objectives while responding effectively to global market dynamics.

Related terms

Competitive Advantage:

The unique advantage a company has over its competitors, allowing it to generate greater sales or margins and retain more customers.

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

Sales Volume: The total number of units sold by a company or within a market during a specific period, often used to assess market performance.