How to Calculate Market Share of a Company

How to Calculate Market Share of a Company

In today’s world, the market is flooded with several methods that can offer evaluative details regarding the strength of a business. But, now the question arises, how can a company determine its profit and future aspect? Well, there is only one solution to the dozens of problems out there, i.e. Market share. Let’s talk about this most prominent aspect of a business in detail.

Introduction To Market Share

Before getting into the depth of market share analysis, it is important to understand its meaning first. Market share can be defined as the market’s amount (units or revenue) that is controlled by a specific company. Furthermore, it also states a firm’s size within the market. The primary objective of a business is to increase its market share. Many companies use market share as to increase their business performance as its main advantage is that it doesn’t depend on any tax policy change or state of the economy. To understand the importance of market share more clearly, it’s time to throw some light on the types of market share. These are listed below:

  • Unit market share: The number of items sold by a specific company as a percentage of market sales can be termed as the unit market share.
    The unit market share can be calculated by the number of unit sales divided by the total market unit sales.
  • Revenue market share: This kind of market share is completely different from the unit market share. As, it just shows the prices at which the commodity is sold. The simple way to calculate the revenue market share price is to divide the sales revenue by the total market sales revenue.

Purpose Of Market Share

Market share is a complete indication of competitiveness. Moreover, it plays an important role among the opposing companies. In a competitive environment, an aspect of decision making also affects the company’s own market share. It also influences on various factors such as customers, suppliers, and even competitors which defines the notion of total market share.

What Is An Example Of A Market Share?

There are two big branded companies in the mobile world and are currently dominating the market. Both the firms are doing intensive marketing and selling. This can even lead to rise in the quality of products as each company wants to offer best to their customers. This market share example gives you the best idea about this topic.

Role Of Market Share In An Economy

  • Market strategy: When it comes to marketing and selling, all the companies provide their best services to the customers at different prices. The main objective of a company is to earn maximum profit from the consumers.  But, it doesn’t mean that a company with large market share always earns high profits.
  • Measuring market share: Every company wants to capture as much shares with their competent strategy. A firm clearly targets the particular market segment by focusing on sales, products and the services.
  • Change in market share: Every company performance change after a specific interval of time. A change in market share implies the company’s strategy. If market share is rising, then the firm’s policy is effective, but if the market share falls, then it clearly states that the policy was not effective.

Strength And Limitations Of Market Share

Everything in this world comes up with its merits and demerits that make a particular item distinct from others. In this case, market share also has certain strengths and associated with it. Let’s have a deep look on them:

  • Though, market share acts as a tool to compare two share marketing companies, but it also signifies the extent to which a company’s product competes or fails to compete in the market.
  • Market share used to indicate the profitability of the company. If a company has a large portion of the market, but makes less profit, then the market share becomes a less substantial indicator of future success.
  • Market share indicates the condition of the market rather than the company. But, some markets have been continuously lead by several companies and just a minor change has taken place over a long time. Then, market share analysis will only determine the fact.

How Do You Calculate The Market Share?

Market Share Of A Company- EssayCorp

Most of the organization always get trapped into the web of how to calculate market share of a company? Here your solution to the problem. Market share refers as the measured sales of an industry’s total revenue over a period. It’s time to calculate market share of a company by this following formula:

Calculate market share= (company’s total sales or revenue) / (market’s total sales)

By using this formula for market share, a company can get the general idea of its market share as compared to others. Besides this, a firm must need to determine a period; it can be quarter, a year, or many years. After that, compute company’s total sale of that time, then figure out the total sale of company’s industry. Eventually, divide company total sale by the industry total sales. Market share is also used to compare similar organizations within the same industry.

What Is A Dollar Share?

With the reference to the above conversation, market share is the percentage amount (units or revenue) accounted by a particular organization. However, in a survey of various marketing managers, a majority of them responded that they found “dollar market share” metric very valuable. On the contrary, some of them found “unit share” more useful.

What Does It Mean To Increase Your Market Share?

Now, a query ascends how to increase market share of a company? Market share shows the amount of market total sales earned by a specific organization over a period of time. To increase the market share, it is necessary it first. When a company is able to compute the market share, then only, it can be able to increase its share by various methods such as marketing and selling etc. Calculate market share of a company by taking company’s sales and divide it by the total industry sale.

To make your business grow up to an apex level, then it is mandatory to learn about the calculation of market share of a company. Likewise, one can even also keep an eye on other business for a better competition. Usually, market share is also used to improve your business performance better than the others. We provide assignment help at affordable prices.

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