How to Define Market Share

Every businessman wants to capture as much market share as he can to run a successful business. Perhaps you know that market share is actually the number of customers (usually expressed in percentage) who are purchasing your products in a given market. However, it might be a tricky task to define or actually measure the exact market share your business is having. There might be many scenarios in which you have to look at the market share in a different way and have to device a new definition for it.

Instructions

  • 1

    First of all, you have to choose the product you want to determine the market share of. Say, you are a shoe retailer, you would like to know how much percentage of business market is captured by people doing the same business overall. You should know how wide customer base your other competitors have, so you can determine a trend of success by existing competitors.

  • 2

    You should determine the width of the market you are considering. Your scope of operation should be clear to you, i.e. whether you are competing at local, city, state, country or international level. Obviously, smaller businesses would like to target a local market and would not require extensive data to measure its market share. However, for huge businesses spreading across the countries, they have to consider the entire world as one market and have to account for many things before determining total market share.

  • 3

    Market share can be calculated in terms of revenue generated or by the number of units sold or even by both of these measures. Revenue is normally used as a primary standard for determining the market share by most businesses but in certain circumstances, units-based calculation becomes inevitable.

  • 4

    Once you have collected all the relevant information about the market, you need to compile your company’s sales or service providing records, along with the number of units you sold.

  • 5

    You will also require the revenue information of your relative industry and it can be easily obtained from trade journals, financial papers and government agencies.

  • 6

    Figure out the market share of your competitors from the accumulated information and from their financial reports. Financial information regarding public companies is relatively easily to obtain, since they have to make it public, whilst the private organisations usually do not reveal their revenue figures to others, especially their competitors.

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