Market Share

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Market share is defined as the percentage of total market or market segment that a particular firm occupies. In strategic management and marketing, it is the percentage or proportion of the total available market or market segment that is being serviced by a company.

It can be expressed as a company's sales revenue (from that market) divided by the total sales revenue available in that market. It can also be expressed as a company's unit sales volume (in a market) divided by the total volume of units sold in that market.

It is generally necessary to commission market research (generally desk/secondary research, although sometimes primary research) to estimate the total market size and a company's market share

Increasing market share is an important business objective and can be one useful way of measuring a company's performance when compared with its peers. The main advantage of using market share is that it abstracts from industry-wide macroenvironmental variables such as the state of the economy, or changes in tax policy.

However, evaluating a company based on its market share can be problematic - what is ultimately more important to a company is profits, and profits are sometimes at odds with market share. For example, a company can increase its market share by cutting its prices, but this may make it less profitable and would be a bad decision.

Other objectives include return on investment (ROI), return on assets (ROA), and target rate of profit. Market share has the potential to increase profits as profit leads to more customers with a higher demand for a particular product.[1]

References

  1. Wikipedia (http://en.wikipedia.org/wiki/Market_share)
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