What is market share? Instructions on how to effectively calculate market share

Market share is an important factor in business, helping businesses evaluate their position in a volatile market. In the article below, 1C Vietnam would like to send your business information related to what market share is , how to calculate market share and solutions to help increase market share for businesses. See now!

1. Find out what is market share?

Market share, also known in English as Market Share, is a term that often appears in modern Marketing and strategic management, used to refer to the percentage of product/service consumption in the market that a business is selling. gain an advantage over opponents.

The higher the market share a business has, the greater its revenue and its competitive position. Therefore, the market leader in an industry is the business with the largest market share.

For example: Suppose consumers' purchasing needs are 100 tubes of toothpaste and business A has sold 60 tubes, meaning business A accounts for 60% of the market share of toothpaste sales in the market, proves that business A has a competitive advantage over its competitors.

2. Formula to calculate market share

2.1 How to calculate absolute market share

The formula for calculating absolute market share can be applied in two ways:

Method 1:

Market share = Total business sales / Total market sales

Method 2:

Market share = Total products sold by the business/ Total products consumed by the market

For example:

• Company A sells processed wooden tables and chairs
• Total market share when sold is 1000 seats
• Business A sells 200 chairs

=> Then, the market share of business A is determined to be (200/1000)*100 = 20%. Thus, business A holds 20% of the market share of processed wooden chair products.

2.2 How to calculate relative market share

The meaning of this calculation is to show the scale and competitive advantage of a business compared to its competitors. Once the relative market share is calculated, managers can map out appropriate business strategies to compete and expand market share.

The calculation of relative market share can be applied in the following two ways:

Method 1: Relative market share = Total revenue earned by the business / Total revenue earned by competitors

Method 2: Relative market share = Total number of products sold by the business / Total number of products sold by competitors

To come to an accurate conclusion, in addition to applying the above formula, businesses also need to note the following points:

• If relative market share > 1, the business has a competitive advantage.
• If relative market share < 1, competitive advantage belongs to the competitor.
• If relative market share = 1, the competitive advantage of the business and that of its competitors are similar.

3. Some important notes when calculating market share

Understanding how to calculate market share is an important first step in assessing a business's position. However, to effectively apply market share, businesses do not only rely on applying the formula but also need to pay attention to the following important factors:

• Research the market of the field that the business is interested in.
• The time to calculate market share will be based on months or years, because market share is the percentage of a business in the entire industry at a specified time point.
• The unit for calculating market share must be identical and at the same time.

4. The role of market share for businesses

Besides clearly understanding what market share is, businesses also need to pay attention to the importance of market share to effectively apply it to their business and investment strategies.

4.1 Determine competitiveness

By determining the market share they are occupying, businesses can know their competitiveness compared to competitors, thereby implementing appropriate campaigns and marketing and business strategies.

4.2 Determine growth rate

Understanding the growth rate not only helps managers have an overview of the business situation but also sets appropriate directions. Thereby, the lower the market share value, the more slowly it means the business is growing slower than the market. At the same time, this also proves that the growth rate of the business is stagnant, managers need to re-establish more appropriate business and marketing strategies.

4.3 Is the basis for building resources

In fact, businesses can consolidate and develop plans to supplement human resources or policies to promote development based on the amount of market share they currently own.

If the business's market share figures are reaching a low threshold, it is necessary to quickly add appropriate human resources to implement strategies to help increase market share. On the contrary, if the market share is high, businesses also need to plan promotion programs to take advantage and promote existing advantages.

5. Solutions to help increase market share for businesses

To increase market share for businesses, managers need to effectively apply strategies to attract and retain customers, improve service quality and optimize business operations. Below are 6 solutions to effectively increase market share for businesses:

5.1 Develop appropriate competition policy

In addition to advertising and promotion strategies, many businesses have also been implementing competition policies to attract more customers to shop and boost sales. However, to have appropriate competition policies, businesses need to rely on important factors such as: Target market, production costs, brand, competitors and product/service quality. .

5.2 Enhance customer experience

Besides implementing competitive policies on price and product quality, businesses also need to promote services to improve customer experience when shopping. When customers feel satisfied with the quality of a business's products/services, they will feel respected and will be the first to return if the business launches new products for sale.

5.3 Diversify products and services

Selling a variety of products/services is considered an effective strategy, attracting a large number of potential customers. If the number of customers does not change well, diversifying products will help businesses attract new customers and old customers can also buy more products of the same brand.

5.4 Improvement and innovation

Innovating the apparatus is a great method to increase market share for businesses, for example by innovating products, production methods or simply promoting new technology to the market that competitors do not yet have. provide. From there, businesses will gain advantages over competitors as well as improve business efficiency.

5.5 Mergers and acquisitions

Acquiring competitors is a sure way to help businesses increase market share. Through this method, businesses can both exploit their competitors' existing customer files and gain a sizable market share for the business, reducing the number of competing companies in the market.

5.6 Understand customer insight

Finally, to maintain and have a stable customer base, understanding customer insight is extremely important for any business to apply. Even though there is a large market, if customers do not like to use the company's products, all marketing and business strategies will become meaningless.

5.7 Respect talent

Almost businesses with high market shares focus on the most skilled and dedicated employees. Utilizing the best employees is a way to help businesses reduce costs related to labor rotation and training. To do this, managers need to offer ideally competitive salaries and benefits.

It can be said that market share plays an extremely important role, directly determining the revenue and position of a business in a fluctuating market. Through sharing about what market share is , how to calculate market share and solutions to help increase market share that 1C Vietnam has provided above, we hope businesses will clearly understand and apply it effectively. into your business strategy. To increase market share, businesses can apply improvements and innovations to business operations, typically 1C:Company Management software. This is a comprehensive business management software that connects departments together, helping to optimize costs and increase operational efficiency. Refer to more software information at 1C Vietnam homepage!