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A company's performance relative to its competitors is based on the piece of the market the company is able to gain control over. This market portion is called the market share. This simple calculation allows companies to understand their standing within their current market. Understanding how much of your market your company has secured allows you to recognize the efficiency of your company and gives you the data to make changes if necessary.
Calculate your company's total revenue (also called total sales). The total revenue amount is stated at the top of any of the company's income statements. This amount is the total amount of income the company has attained during that income statement period before the company's debts have been subtracted. For the most accurate market share calculation, use your most recent income statement to attain the company's most recent total revenue.
Calculate the total market sales. This is the total amount of sales (or revenue) the entire market is acquiring. The total market sales amount is found through your specific industry's trade associations or through a certified research firm. Or Statistical Data available from Reputed Business Magazines
Divide your company's total revenue by your entire industry's total market sales. The result of this division equals your company's specific market share. With this value, you can decipher the efficiency of your company as well as make a decision to either stay at your current market share or implement changes to increase your company's market share.
Three Main Reasons for Assessment:
· Reasons to stay at your current market share: In the circumstance the company is close to production capacity, an additional investment may be necessary in order to increase market share resulting in higher costs.
· If you increase promotional expenses or decrease product prices in order to increase market share, this could result in the company's overall profits to decline.
· Competitors may attempt to regain their share taken by your company by lowering their product prices even lower, resulting in a price war.
The market share of our product can be estimated by the total volume of sale turnover of a product of all the suppliers over a period compared with our sale turnover for a the same segment under the same territory. It can also indicate the result of promotional measures and direct for a good analysis
There are many ways which are sometimes industry specific. For instance in FMCG you can analyse the Numeric and Weighted distrbution to get an idea about the share. Secondly you can calculate the percentage of your revenue with industry turnover.
