What is Market Share?
Market Share Definition
Market share is the percent of total sales in an industry generated by a given company or product.
This metric is calculated by taking the company’s sales over a specified period of time and dividing it by the total sales of the industry over the same period of time.
The Purpose of Market Share
The purpose of this metric is to give a general idea of the size of a company relative to its direct competitors.
Additionally, investors use market share data when assessing the opportunity of a business for growth.
Define Market Share in Simple Terms
Market share is complementary with a company growing or shrinking.
When the market share of a company increases or decreases, it gives analysts information on how competitive that company’s goods or services are at that particular time.
If the total market for a product or service grows, and a company maintains its market share, it means it is growing revenues at the same rate as the total market.
If it is growing its market share, its revenue is growing faster than the total market revenue.
Growing a Company's Market Share
When a company increases its market share, they have more room to improve operations and profitability.
Market shares assume a fixed market size but can be grown.
Some tactics that companies use to grow their market size include advertising, lowering prices, adding new products, or appealing to unique and specific demographics.
International Market Share
Market share is usually calculated within specific countries, however investors can obtain market share data from other independent sources, and often from the companies themselves.
In some industries, it can be difficult to accurately measure when comparing across countries.