"Market share is the percentage of a market (defined in
terms of either units or revenue) accounted for by a specific entity." In
a survey of nearly 200 senior marketing managers, 67 percent responded that
they found the "dollar market share" metric very useful, while 61%
found "unit market share" very useful.
"Marketers need to be able to translate sales targets into market
share because this will demonstrate whether forecasts are to be attained by
growing with the market or by capturing share from competitors. The latter will
almost always be more difficult to achieve. Market share is closely monitored
for signs of change in the competitive landscape, and it frequently drives
strategic or tactical action."
Increasing market share is one of the most important objectives of business.
The main advantage of using market share as a measure of business performance
is that it is less dependent upon macroenvironmental variables such as the
state of the economy or changes in tax policy. However, increasing market share
may be dangerous for makers of fungible hazardous products, particularly
products sold into the United States market, where they may be subject to market
share liability.
Purpose
Market share is a key indicator of market competitiveness—that is, how
well a firm is doing against its competitors. "This metric, supplemented
by changes in sales revenue, helps managers evaluate both primary and selective
demand in their market. That is, it enables them to judge not only total market
growth or decline but also trends in customers’ selections among competitors.
Generally, sales growth resulting from primary demand (total market growth) is
less costly and more profitable than that achieved by capturing share from
competitors. Conversely, losses in market share can signal serious long-term
problems that require strategic adjustments. Firms with market shares below a
certain level may not be viable. Similarly, within a firm’s product line,
market share trends for individual products are considered early indicators of
future opportunities or problems."
Research has also shown that market share is a desired asset among
competing firms. Experts, however, discourage making market share an objective
and criterion upon which to base economic policies. The aforementioned usage of
market share as a basis for gauging the performance of competing firms has
fostered a system in which firms make decisions with regard to their operation
with careful consideration of the impact of each decision on the market share
of their competitors.
It is generally necessary to commission market research (generally desk/secondary
research) to determine. Sometimes, though, one can use primary research to
estimate the total market size and a company's market share.
Construction
"Market share: The percentage of a market accounted for
by a specific entity."
"Unit market share: The units sold by a particular
company as a percentage of total market sales, measured in the same units."
Unit market share (%) = 100 *
Unit sales (#) / Total Market Unit Sales (#)
"This formula, of course, can be rearranged to derive either unit
sales or total market unit sales from the other two variables, as illustrated
in the following:"
Unit sales (#) = Unit market
share (%) * Total Market Unit Sales (#) / 100
Total Market Unit Sales (#) =
100 * Unit sales (#) / Unit market share (%)
"Revenue market share: Revenue market share differs from
unit market share in that it reflects the prices at which goods are sold. In
fact, a relatively simple way to calculate relative price is to divide revenue
market share by unit market share."
Revenue market share (%) = 100
* Sales Revenue ($) / Total Market Sales Revenue($)
"As with the unit market share, this equation for revenue market
share can be rearranged to calculate either sales revenue or total market sales
revenue from the other two variables."
Methodologies
"Although market share is likely the single most important
marketing metric, there is no generally acknowledged best method for
calculating it. This is unfortunate, as different methods may yield not only
different computations of market share at a given moment, but also widely
divergent trends over time. The reasons for these disparities include
variations in the lenses through which share is viewed (units versus dollars),
where in the channel the measurements are taken (shipments from manufacturers
versus consumer purchases), market definition (scope of the competitive
universe), and measurement error."
e-mail : pratheepvasudev@gmail.com
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