How to Calculate Market Share
Market share is typically calculated by dividing a company’s total sales (or units sold) by the total sales (or units sold) in the industry over a specific period. This calculation gives you the company’s market share as a proportion, which is often expressed as a percentage.
Here’s the formula:
Market Share = (Company’s Sales / Total Market Sales) * 100%
Example of How to Calculate Market Share
Let’s consider an example from the automobile industry.
Let’s say that in the year 2023, the total number of cars sold worldwide was 70 million. Of these, a specific car manufacturer, let’s say AutoCo, sold 7 million cars.
To find AutoCo’s market share, we can use the market share formula:
Market Share = (Company’s Sales / Total Market Sales) * 100%
So, in this case, AutoCo’s market share would be:
Market Share = (7 million cars / 70 million cars) * 100% = 10%
This calculation tells us that AutoCo has a 10% share of the global car market in terms of units sold in the year 2023.
This market share figure can help AutoCo understand its position in the market relative to its competitors. If AutoCo sees its market share increasing over time, this could be an indication that its strategies are effective. On the other hand, a decreasing market share could signal that competitors are gaining an edge and AutoCo might need to reassess its market strategy.
