What is Market Share

In business and especially in market research, market share is the percentage of a company’s or product’s share of the total market volume at a given point in time. The compound market share is made up of the determinative word “market” for the place of exchange of goods and the root word “share” for the subset of a total quantity. This market share is essential for a company’s importance as a provider, so that the business indicator of market share is one of the most important sales strategy indicators and company data of all.

In addition to sales volume or revenue, other product-specific variables can also be used as a metric for the metric, such as the number of television viewers in terms of audience ratings or the number of seats available at airlines.

The term absolute market share expresses the share of sales of a company or product in the total market volume of the industry. Absolute market share is used in common market share statistics. It is usually expressed as a percentage. However, it is not meaningful in polypolistic markets, where even small market shares can be sufficient for market leadership. This is where the relative market share is more helpful.

Relative market share indicates the share of its own absolute market share in the absolute market share of its largest competitor. It is therefore the distance between the market leader and the nearest competitor and reflects the market position of a company in relation to its main competitor. It is expressed as a percentage or as a share without unit.

Companies with a low market share cannot exercise market power and act as volume adjusters. However, in exceptional cases, a low market share can also help to gain market power in the case of high residual loads, scarce capacities and low demand elasticities. A high market share leads to market power, which allows a company to influence the market price and makes it a price adjuster. A company’s largest market share makes it the market leader. Large companies therefore only try to operate in markets where they can take on the role of market leader. The greater the number of suppliers in an oligopoly, the closer the market price is to marginal costs. The greater the elasticity of demand, the smaller the mark-up on marginal costs will be, and the larger the market share, the higher the mark-up will be.