Market share

Definition

Market share is the percentage of an industry or market's total sales that is earned by a particular company over a specified time period. It reflects a company's competitiveness and position within the market relative to its competitors, indicating how well it is performing in attracting customers and generating sales.

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 or market, then multiplying by 100 to get a percentage.
2. Increasing market share is often seen as a key goal for companies because it typically leads to greater profitability and increased brand recognition.
3. A high market share can provide companies with economies of scale, allowing them to reduce costs and improve margins.
4. Changes in market share can indicate shifts in consumer preferences or competitive dynamics within an industry.
5. Market share can be influenced by various factors, including pricing strategies, product quality, marketing effectiveness, and customer service.

Review Questions

• How does an increase in market share influence a company's overall performance?
  • An increase in market share typically enhances a company's overall performance by boosting its revenues and profitability. This can occur due to greater customer reach and recognition, which may result in economies of scale that lower production costs. Additionally, higher market share often allows companies to invest more in marketing and product development, further solidifying their competitive edge.
• Discuss the relationship between market share and competitive advantage within an industry.
  • Market share is closely linked to competitive advantage, as companies with larger shares often benefit from increased visibility and customer trust. A higher market share can result from unique selling propositions, effective branding strategies, and superior customer service. This competitive advantage enables these companies to maintain their market positions and fend off potential entrants or competitors more effectively.
• Evaluate the strategies a company might use to improve its market share in a saturated market.
  • To improve market share in a saturated market, a company might employ several strategies, such as enhancing product quality or diversifying its product line to attract different customer segments. Effective promotional campaigns that emphasize unique features or benefits can also help capture consumer interest. Additionally, forming strategic partnerships or improving distribution channels can expand accessibility to the product, thereby increasing sales and overall market share.

Related terms

competitive advantage: A condition or circumstance that puts a company in a favorable or superior business position compared to its competitors.

market penetration:

The percentage of a target market that consumes a product or service from a specific company, reflecting its level of presence in that market.

customer loyalty: The tendency of consumers to continue buying the same brand of goods or services, which can significantly impact a company's market share.