Market Share

Market Share, the proportion of total sales of a product (or type of product) by a company in a given market. Market share can be calculated by value or in terms of units sold. The product may be tightly defined or loosely; for example, the market share of a CD-ROM multimedia encyclopedia could be calculated in relation to all CD-ROM multimedia encyclopedias, in relation to all CD-ROM multimedia reference titles, or in relation to all CD-ROM multimedia products. Similarly, a product’s market share may be calculated according to any market. This may be geographical; for example, city, region, country, continent, the world. Or it may be linked to some other distinguishing characteristic: age group, social class, or whatever. However, the more specific the segment of the market investigated, the more difficult it is to get accurate data: total sales by geographical area is information that a company nearly always has available instantly; sales to, say, a particular age group can normally only be calculated after some market research (a survey, for example) has been carried out.

Market share is an indicator of the success of a company’s marketing policy. The company that has the largest market share for a given geographical market is said to be the market leader in that market. The importance companies attach to market share varies according to business culture; in the English-speaking world, at least, profit is what companies focus on, though market share is, of course, a key determinant of profit. In Japan, on the other hand, market share can be more important than profit. It is common for Japanese companies to invest hugely in order to gain market share and to place a greater emphasis on the long-term rather than on profits in the short term.

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