Market Share Definition & Examples

Published Oct 25, 2023

Definition of Market Share

Market share refers to the percentage of total sales or total industry revenue that a company captures within a specific market or industry. It is a measure of a company’s position within the market relative to its competitors. A higher market share indicates that the company has a larger customer base or generates more revenue compared to its competitors in the same market.

Example

Let’s consider the smartphone industry. There are several major players in this market, including Apple, Samsung, and Huawei. In this example, let’s focus on Apple. If Apple sells 100 million smartphones in a given year, and the total number of smartphones sold in the market is 500 million, then Apple’s market share would be 20% (100 million / 500 million * 100%).

Having a high market share is often seen as a positive indicator for a company’s success. It suggests that consumers prefer and choose the company’s products over those of its competitors. A company with a high market share may benefit from economies of scale, better negotiating power with suppliers, and greater brand recognition.

It’s important to note that market share can vary across different markets or geographic regions. For example, a company may have a dominant market share in the United States but have a smaller share in other countries. Market share can also change over time as consumer preferences and competitive dynamics shift.

Why Market Share Matters

Market share is a key metric for companies to assess their competitive position in the market. It provides insights into a company’s performance relative to its competitors and can be used to evaluate the effectiveness of marketing strategies and business decisions. Companies that consistently increase their market share demonstrate their ability to attract and retain customers, which can lead to long-term profitability and growth. Additionally, market share is often used by investors and analysts to evaluate the potential of a company and its ability to generate returns.