The market share is the proportion of a company’s total revenue during a specific period, typically expressed as a percentage. By determining the market share, we can evaluate the size of our company in the industry, or in comparison to our competitors. This write-up will elaborate more on market share, including its definition, advantages, and how to calculate it for your business.
What Is Market Share?
Market share, also known as the market portion, refers to the percentage of overall sales obtained by a company. A company’s market share reflects its share of total sales in the industry or market in which it operates.
For instance, Company A sold food and beverage items worth 30 billion rupiahs throughout Indonesia in 2021. If the total sales of all food and beverage companies in Indonesia amounted to 100 billion rupiahs, then Company A’s market share in 2021 would be 30%.
Why Is Market Share Important for Businesses?
Market share is an important indicator for businesses to assess their competitiveness in the industry. Increasing market share can have a positive impact on business profits.
With this increase, businesses can grow and limit the growth of their competitors. Sometimes, companies deliberately incur losses in certain business areas to eliminate competitors or even force them into bankruptcy. This is done so that the company can increase market share and then raise prices.
At the same time, market share can also affect stock prices, especially in cyclical industries when profit margins shrink and competition intensifies. Even small changes in market share can trigger weaknesses or strengths in investor sentiment.
How to Calculate Your Business’s Market Share
Calculating market share is a useful way for businesses to understand their position in the industry. It can be calculated by dividing the total number of sales by the total industry sales.
| Market share = Total company sales / Total industry sales |
However, there are other methods businesses can use to obtain their market share percentage. Here are the steps:
Choose the time range to be analyzed
Businesses can choose monthly, quarterly, or annual time periods. Then, collect all the necessary information and data from the company and the industry where they operate.
Choose the basis for assessing market share
Businesses can assess their market share in two ways: by looking at total sales or total consumers. With the second method, businesses only need to divide their total number of consumers by the total number of consumers in the industry.
Determine the total company
In this step, businesses need to decide whether to use the first or second method. For example, if a business chooses the first method, it needs to collect data on the company’s total sales during that period, and vice versa.
Determine the total industry
Similar to the previous step, businesses need to collect data related to the industry according to the method used, and for the same period of time. For example, if using the second method with total consumers, businesses need to find data on the total consumers in the industry.
Divide the company’s total and the industry’s total results
After obtaining all the data, the next step is to divide the company’s total results by the industry’s total results. Thus, the business’s market share percentage will be obtained. The larger the percentage, the larger the market share.
Benefits of Market Share for Businesses
Market share percentage changes reflect a company’s relative competitiveness level in a particular industry. When a company increases its market share, its revenue grows faster than its competitors.
There are several benefits of market share for businesses:
Operating on a larger scale
A higher market share enables businesses to operate on a larger scale, which increases profits and allows them to produce goods or services at a lower cost than their competitors.
Increasing sales
A larger market share helps companies increase overall sales. When consumers see that many of their friends are using a product, they are more likely to buy products from the same brand.
Expanding the consumer base
A wider market share helps businesses expand their consumer base. When one loyal customer uses products from a particular brand, their followers usually follow suit.
Analyze Your Business’s Market Share with LOKASI Intelligence
Businesses can analyze their market share and design new strategies to increase it using LOKASI Intelligence. This geospatial analytics and location intelligence platform allows businesses to visualize stores, market penetration, sales potential, population density, and traffic in an area.Â
This data helps businesses make informed decisions to expand their market share and increase profits.
Learn more about how LOKASI Intelligence can help businesses by contacting email: [email protected] or WA: 087779077750
FAQ
What does market share mean?
Market share represents the portion of total sales acquired by a company.
How do you calculate market share?
To calculate market share, divide a company’s total sales by the industry’s total sales.
What is the purpose of market share?
The aim of market share is to serve as a valuable metric demonstrating a company’s dominance and competitiveness.
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