Market Share Analysis

Definition

Market share analysis is the process of evaluating a company's or product's performance within a specific market by examining its percentage of total sales or units sold in that market. It provides insights into a company's competitive position and helps guide strategic decision-making.

5 Must Know Facts For Your Next Test

1. Market share analysis helps identify a company's competitive position and areas for potential growth or improvement.
2. Analyzing market share trends over time can reveal changes in customer preferences, the effectiveness of marketing strategies, and the impact of new competitors.
3. Market share data can be used to set realistic sales goals, allocate resources, and develop targeted marketing campaigns.
4. Factors that influence market share include product quality, pricing, distribution, brand recognition, and customer loyalty.
5. Comparing a company's market share to industry averages or market leaders can provide valuable benchmarking insights.

Review Questions

• Explain how market share analysis can inform effective market segmentation strategies.
  • Market share analysis provides valuable insights into the relative performance of a company or product within different market segments. By understanding which segments have the highest market share, companies can focus their segmentation efforts on the most promising areas. This information can guide the development of targeted marketing strategies, product features, and pricing that cater to the specific needs and preferences of the most valuable customer segments.
• Describe how market share analysis can be used to assess a company's competitive position.
  • Market share analysis allows companies to evaluate their performance relative to competitors within a given market. By examining factors such as market share trends, market leader positions, and changes in customer preferences, companies can identify their strengths, weaknesses, and areas for improvement. This information can inform strategic decisions related to product development, pricing, distribution, and marketing efforts to enhance the company's competitive advantage and position within the market.
• Evaluate how market share analysis can be used to guide resource allocation and investment decisions.
  • Market share data can help companies prioritize their resource allocation and investment decisions. By identifying the most profitable or high-growth market segments, companies can focus their resources on developing and marketing products that cater to these segments. This may involve investing in product innovation, enhancing distribution channels, or increasing marketing efforts in the most promising areas. Conversely, market share analysis can also reveal underperforming segments, prompting companies to reallocate resources or consider exiting those markets altogether. This strategic approach to resource allocation can improve overall profitability and market competitiveness.

Related terms

Competitive Analysis: The systematic examination of a company's competitors, their strengths, weaknesses, strategies, and market positions.

Market Penetration: The measure of a company's sales or units sold within a defined market compared to the total potential sales or units in that market.

Market Segmentation: The process of dividing a market into distinct groups of consumers with different needs, characteristics, or behaviors who might require separate products or marketing mixes.