Finance - Top Tips - Market share analysis
This document is designed as a quick reference guide to Market Share Analysis.
This will enable you to gain knowledge of a particular skill, task or process.
This means you can quickly find the key information that you need and refer to it on an ongoing basis whenever you need to refresh your knowledge.
Introduction
Market Share Analysis is a process that you can put to good use to help you to:
● Measure the success of your business, product or brand
● Identify your position in the market
● Measure the effectiveness of an action you have taken
While the impact of market share is not always reflected in firms profitability or performance, many firms see it as an important organisational goal.
Accordingly, it could be argued that market share influences the organisational thinking and strategic planning of small to medium sized enterprises.
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Finance - Top Tips - Market share analysis
In order to calculate market share, it is first necessary to establish the size of the market as a whole. Market size is measured by the total volume (i.e. number of units being bought) or value of all sales (i.e. the amount customers are spending in our stores) within the market
Market share measures the proportion of the total market held by a business, product or brand. The formula for calculating Market Share is presented below.
Market Share (%) = Sales of the business, product or brand / Total sales in the market
(Sales can be measured either in volume or value to calculate market share)
By measuring changes in market share the influence of variable factors such as economic growth are excluded, and the business is compared directly against its competitors, allowing us to judge more accurately the success or failure of the business marketing strategies.
Market Segmentation
In order to build truly understand the market in which a business operates and acknowledge and respond to specific customer groups, organisations often divide the market into groups or segments.
Market segmentation can be based on factors such as:
Geography – this is useful in large multi-national organisations as it enables us to focus on the variation in customer needs within each country and develop strategies accordingly
Demographics – breaking the market into groups based on variables like age, gender, family size
Psychographics - divides the market into groups based on social class, lifestyle and personality characteristics. It is based on the assumption that the types of products and brands an individual purchases will reflect their characteristics and patterns of living
Behaviours – groups customers according to their knowledge, attitudes, uses and responses to the product.
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