What is the market share?

The market share is a percentage of the company's sales turnover compared to the entire industry, and it is determined based on the revenue and sales of the enterprise.

Market share identifies the size of the company in relation to the rest of the market and competition.

It provides information about the market leader (the manufacturer or brand that holds the highest market share in an industry) also based on temporal analysis which helps understand which companies are gaining market shares and which are losing them.

How is market share calculated?

Market share is calculated by dividing a product's sales by the total sales of an industry over a specific period of time.

Three factors are important for calculating market share:

• The time frame
• Whether the share is measured based on a single or multiple products
• Whether it works with the national, regional, or global market

Thanks to these factors, we are able to have more specific and effective statistics, also providing a clearer picture of the industry because it deduces how strong competitors are among companies, managing to detect consumer preferences and whether they have an interest in one product over another.

The calculation of market share is often obtained through turnover; therefore, a high market share is not always indicative of good profitability.

Thus, from the analysis of the shares as a whole, we can deduce that:

• The stronger the leader is, the lower the competition will be;
• If there are many companies with a low share, there will be a higher level of competition.

Market share can be calculated in two different ways:

• By value (Company's turnover / total market turnover); 
• By volume (Units sold by the company / Total units sold in the market). 

The growth of market share can lead to an increase in sales through one or more competitors, or through the acquisition of a competitor and its share.

Examples of Market Share

This chart explains the turnover of three companies in the reference period:

• Company A: 31%;
• Company B: 18%;
• Company C: 51%.

The first step in calculating market share is selecting the unit of measure.

The sum of turnovers represents the market value.

Usually, the time frame for calculating market share is the calendar year, and calculating the share is very important because it can indicate an index of strength and effectiveness when the share increases, therefore it can represent an effective marketing strategy.