Market share refers to the proportion or percentage of total sales or revenue that a company or brand holds within a specific market or industry. It is a metric used to measure a company's or a product's competitive position and market dominance in relation to its peers or competitors.
Calculating market share typically involves dividing a company's total sales revenue by the total revenue of the entire market in which it operates. This percentage indicates the relative size of a company's business in comparison to the overall industry. For example, if a company's annual revenue is $50 million and the total market revenue for the same industry is $500 million, its market share would be 10% (50/500 x 100).
Market share serves as a key performance indicator for businesses as it reflects their success in capturing a portion of the market demand. Companies with a higher market share generally have a stronger presence and may benefit from economies of scale, which can lead to increased profits and enhanced competitive advantage.
Market share analysis is crucial for strategic decision-making as it helps companies evaluate their positions in the market, identify growth opportunities, assess market potential, and anticipate competitive threats. It provides insights into market trends, customer preferences, and market dynamics, enabling companies to refine their marketing strategies and allocate resources more effectively. Additionally, market share comparisons can serve as benchmarks for evaluating a company's performance against competitors and overall market growth.
The term "market-share" is composed of two distinct words: "market" and "share".
1. "Market" originated from the Latin word "mercatus", meaning "a buying and selling". It evolved into the Old North French word "marchiet", and later into the Middle English word "market".
2. "Share" has its roots in the Old English word "scearu", which denotes a portion or division.
Combining these two words, "market-share" was coined to refer to the portion or division of a market that a particular company or product holds. It describes the percentage or proportion of total sales in a market that is generated by a certain company or product. The term is commonly used in business and marketing to analyze and measure a company's position and competitiveness in a specific market.