Market Share

Share's meaning could be a little clearer.

Market share alludes to the percentage of an industry's sales that have a place with a specific company. All in all, market share is a single company's "share" of a whole industry's income — its cut of the pie, as it were. The company with the biggest market share in a specific industry or product category is known as the market leader.
Companies gain and lose market share constantly, and some invest impressive marketing resources in endeavors to siphon market share away from contenders. Think about internet or cell telephone service, for example. How frequently do you hear or see a promotion from one service provider endeavoring to captivate customers of other service providers to "switch and save?" Any advertisement like this is an endeavor by a company to develop its market share by changing over its rivals' customers utilizing an incentive of some kind.

How Is Market Share Calculated?

Market share is calculated by partitioning a single company's sales for a specific period by the total sales of its industry during a similar period. The outcome can be communicated as a percentage.
For example, in the event that Peter Peanut sold $400 worth of peanuts throughout a year, and the nut industry's sales totaled $3,000 for that very year, Peter Peanut's market share would be . . .

$400/$3,000 = 0.133 = 13.3%

Of course, a few companies offer numerous products that fall into various product categories. For example, Apple offers smartphones, computers, and digital storage. If you wanted to figure out what Apple's share of the smartphone industry is, you wouldn't utilize apple's total sales. All things considered, you'd separate only their smartphone sales by total (extensive) smartphone sales.

Market Share Formula

MS = Company Sales/Total Industry Sales

Or on the other hand

MS = Company Sales of One Product Type/Industry-Wide Sales of Same Product Type

Market Share Example: Tesla (NASDAQ: TSLA)

In 2021, 14% of all electric vehicles sold worldwide were Teslas. This means that Tesla had the biggest market share of any electric vehicle manufacturer in the world. Volkswagen and SAIC took second and third place, with 12% and 11% shares separately. In developing industries like electric vehicles, competition for market share can be wild, yet it can likewise drive innovation and more pleasant pricing models.

How Do Companies Gain and Lose Market Share?

There are numerous ways that companies can gain market share. Below are just a couple of models.

• Low Prices: A company might set its prices low and acknowledge slimmer margins trying to offer the lowest prices in a specific industry with the expectations of developing its market share. On the off chance that its rivals crease, a company might increase its prices later on again market share is secured.
• All new Offerings and Innovations: Within some random product category, one company could emerge with another feature or another rendition of a product (for example, a camera company could make its products waterproof). At the point when this happens, customers of contending companies might rush to the company offering the new feature since — basically for a period — it is the only one in the industry to do as such.
• Customer Loyalty Incentives: A company might offer its customers incentives in return for their loyalty. Starbucks, for example, has a smartphone app with an integrated rewards system that allows customers to earn points with each visit. These points can then be reclaimed for free products. Numerous carriers offer comparative programs wherein customers can earn miles or points toward future flights each time they purchase a ticket.
• Consolidations and Acquisitions: Sometimes, a company might purchase (or converge with) its rival. In doing as such, it gains that company's market share, and by coordinating the acquired company's strengths and assets with its own, it can frequently draw in extra customers from residual rivals in the industry.

All in all, then, how do companies lose market share? Generally, they do as such by neglecting to keep up with the competition in the ways referenced previously. In the event that a company stops improving or neglects to utilize marketing tools to draw in and hold customers, it might slowly lose its customer base to contenders that are improving at keeping up with the industry and customer needs.

How Could Investors Interpret Market Share?

How in all actuality does market share influence stock price? Should investors go with buy and sell choices based on changes in a company's market share? These are convoluted inquiries, and the response changes with every individual situation. It is important to recollect, notwithstanding, that changes in market share influence various industries in an unexpected way.
In more up to date, developing industries that are as yet drawing in new consumers and rearing new innovations, market share can change frequently and rapidly, yet this isn't be guaranteed to reason to worry. Since the industry itself is as yet developing, there is more total market share to go around as time passes. A small cut of a developing pie can develop with the pie, in a manner of speaking.
In mature industries, then again, changes in market share can have more extreme results. At the point when an industry or product category is mature and deep rooted, its customer base doesn't develop especially rapidly. This means that a loss in market share could seriously affect a company's main concern, which could, thusly, influence the value of its stock.
When in doubt of thumb, while investing in mature industries, deep rooted companies with great market share and narratives of customer retention can be the most secure picks. With regards to developing markets, industry-explicit ETFs offer a simple method for differentiating and spread risk across various companies.

What Market Share Constitutes a Monopoly?

At the point when we think of a monopoly, we generally picture one all-powerful company that is the main option for consumers with regards to a specific product or service. As per Justice.gov, in any case, "a market share of greater than fifty percent has been needed for courts to find the presence of monopoly power." So, from a legal perspective, any market share more than half might actually comprise a monopoly.

Features

• This measurement is utilized to give an overall thought of the size of a company comparable to its market and its rivals.
• Market share addresses the percentage of an industry, or a market's total sales, that is earned by a specific company throughout a predefined time span.
• Market share is calculated by taking the company's sales over the period and partitioning it by the total sales of the industry over a similar period.

FAQ

What Is Market Share?

Market share shows the size of a company, a valuable measurement in outlining a company's dominance and seriousness in a given field. Market share is calculated as the percentage of company sales compared to the total share of sales in its particular industry throughout a time span. A company's market share can influence its operations essentially, in particular, its share performance, scalability, and prices that it can offer for its product or services.

Why Is Market Share Important?

Basically, market share is a key indicator of a company's intensity. At the point when a company increases its market share, this can work on its profitability. This is on the grounds that as companies increase in size, they too can scale, subsequently offering lower prices and restricting their rivals' growth.In a few cases, companies might venture to such an extreme as operating at a loss in a divisions to push out the contenders or force them into bankruptcy. After this point, the company might increase its market share, and further increase prices. In financial markets, market share can significantly influence stock prices, particularly in cyclical industries when edges are narrow and competition is savage. Any undeniable difference in market share might trigger weakness or strength in investor sentiment.

What Strategies Are Used to Gain Market Share?

To gain greater market share, a company might apply one of numerous strategies. In the first place, it might acquaint new technology with draw in customers that might have in any case purchased from their rival. Second, sustaining customer loyalty is a strategy that can bring about both a strong existing customer base and expansion through verbal. Third, hiring capable employees forestall exorbitant employee turnover expenses, allowing the company to rather focus on its core competencies. At last, with an acquisition, a company can both reduce the number of contenders and obtain their base of customers.