Market share is the percentage of sales in a market acquired by a particular company.
Market share is used as a measure of a company’s market leadership and their success relative to other companies in the same market. Generally, market share is expressed as a percentage of the total number of dollars spent by consumers in a market. The market share percentage can be found by dividing the total number of consumer dollars spent in a market by the number of dollars in sales for the subject company. It may also be expressed as a percentage of the total number of products sold in the market. These percentages give a quick reference of a company’s relative dominance or weakness.
Markets are often broken down geographically. Companies watch market share carefully to gauge the market’s competitiveness. They also use it as guidance on trends relating to their own products, marketing and pricing.
As a rule, companies aim for a high market share as it is usually connected to high profits. However, having a very high market share also involves increased risk. It ensures aggressive competition and may lead to anti-trust action. As a result, some companies seek to keep their market share lower than it could potentially be to avoid being targeted by the competition and harsh regulations.