Define Market Share - Part 1

Conduct a Marketing SWOT Analysis

Define market share, and the share of the market that your business has (and wants). Conduct a marketing SWOT analysis, define the marketing mix and build a marketing plan to focus on increasing market share.

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From a marketing and sales perspective, it is important to understand and define market share. A good analogy for market share is that it is a 'piece of the whole pie' ... with the pie being the market, and the piece of pie being what the business sales represent.

Definition of Market Share

How to Calculate Market Share

A more traditional definition of market share is that it is the business' 'share' or percent of the total market. One of the ways to calculate market share is:

For example, if you owned a computer services business, if sales last year were $500,000, and if the total market size was $50,000,000, then the computer market share is 0.1 or 1%. It is fair to say that you are not a big player in the market; from a market perspective, you are not a market leader, you are, by size alone, a market follower.

More formally, market share information is calculated by comparing individual business revenues to the total defined market.

The big challenge in either equations or calculations, and in understanding how to increase market share, is in first accurately defining what is market size.

If your total defined market is a country; then the total domestic market is "calculated by adding manufacturing shipments to imports and subtracting total exports." (Statistics Canada) However duplication of manufacturing data in most country statistics can result in a distorted total figure.

Define Market Share – More on Research Sources

In some cases, particularly for global markets, you may have to buy some research data to obtain market size information. Usually, however, you should be able to gather the market size information through secondary research, such as:

• Industry Canada
• US Department of Commerce
• Industry or trade associations are also good sources of market size data. For example: the Canadian Printing Industry Association's website shows the following market data:
  • Canada's printing industry is the fourth largest manufacturing employer in the nation with more than 85,000 employees, who work in 8500 establishments from St. John's to Victoria. In 2007 these employees produced over $10.7 billion worth of shipments, $1.432 billion of which was in export sales. With a gross output multiplier of 1.65, the industry will generate an additional $8 billion in other sectors of the Canadian economy.
  • The regional distribution of the industry's output is as follows:
  • British Columbia 8.5%
  • Alberta 8.3%
  • Saskatchewan 1.4%
  • Manitoba 5.1%
  • Ontario 48.6%
  • Quebec 23.7%
  • Prince Edward Island 0.1%
  (reference from CPIA site March 29, 2009)

  There are also many market research sources available on a per fee basis. A couple of those sources are listed below:

• Euro Monitor
• Data Monitor
• Market Research

Defining market size is the first part of the marketing planning process. During marketing planning, you need to segment your market, target your market, define marketing mix and build the marketing mix program, and a variety of other activities.

Defining market share is only part of your marketing process: you also need to do a marketing SWOT analysis (strengths, weaknesses, opportunities and threats) and to define marketing mix.

Additionally, to define market share for your business, you need to recognize where you fit in the overall market.

Once you understand both market size and your share of the market, you need to learn how to increase market share (or not). Part 2 of Define Market Share will help you to understand why market share is important to your business and how you can manage market share to target business growth.

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Read More:

Understand Competition Analysis and how to manage your competitive tactics.

Conduct an Industry Analysis to learn more about your marketplace.

Build strong Market Strategies to win more market share.

Or Return From Define Market Share (Part 1) to What is Market Share? (Part 2) and more on how understanding market share will help your business compete.

Or return to More For Small Business.