Market Share Growth – Definition and Benefits (Information You Should Know)


The market share growth indicator enables you to know where your company and business are heading in the future if you continue to operate in the same manner.

Market share growth refers to the percentage increase in the volume that the company can acquire from the market or the commercial field in which it operates. The growth in market share is calculated over a specific period, usually annually, but the company can adjust this period according to the nature and effectiveness of the market.

This article will provide you with a complete and clear explanation of the importance and impact of market share growth on the future of your company and business. Let’s start

Market share growth VS. Market share

The company’s market share is defined as the percentage the company will receive from the total revenue of the market or industry in which the company operates. It is usually determined by sales volume (based on the number of products sold). 

The concept of market share helps measure the company’s performance in a particular field and understand its rank compared to competitors.

Also, It helps to determine the leader in its market and the company’s size compared to its competitors. Or market share growth is a comparison between the same company’s market share in a certain period and its market share in another period.

The difference in market share in the two periods represents growth in market share. The difference may be negative, which indicates a loss of part of the market share. Or it may be positive indicators of an increase in market share.

Why is growth in market share important?

The market share growth indicator shows the decline or development of the company during a specific period, which helps companies track the reasons for this decline or progress.

Analyzing the growth index in the market share enables companies to know the opportunities and challenges facing the company before they worsen. 

If this indicator is positive, the company can increase the production wheel to get a larger market share. If this indicator is negative, companies should study the reasons for the decline in their market share to treat them before the situation worsens.

Investors track the market share growth indicator to help them determine the development or decline of the company before investing their money in these companies.

The market share growth indicator is often considered a measure of success between the company and its competitors in a specific period.

The opposite of market share growth is market share loss; you can refer to the market share loss article for more information.

Types of company’s market share

Market shares vary in shape and size. The market share can be measured by the revenues or the quantity sold of the goods. 

Sales volume refers to the ratio of the actual number of products sold by the company in the market. 

Revenue volume refers to the financial value of the products sold.

The market share can be high and low at the same time. For example, the market share of the volume may be high because the product’s price is high, but the share of the volume may be low because the number of sales is few. 

Therefore, the company’s market share is calculated by several different methods and indicators. The most important ones are as follows:

What are the most critical influences on the growth of the company’s market share?

 The factors affecting the growth of the market share are numerous, and the most important of them can be listed as follows:

  • The ability of the company on production and marketing.
  • Changing in customers’ desires.
  • Entry of new competitors to the market.
  • Changing the production technology, which is reflected in the cost and quality of the product.
  • One of the competitors produces a higher quality and lower price product.
  • Changing the economic situation of the country.
  • Financial indicators and company performance.
  • The company’s profit rate and expected future profits.

What are the most important benefits of growing the market share of the company?

Significant market share growth means the company has a strong, even dominant, presence in a particular market. 

This strong presence of the company provides comfortable profitability for its activities.

The dominant company has enormous purchasing power, which allows it to get better prices from suppliers. 

Finally, a dominant company can hire competent employees with more than competitive salaries and benefits

and reduces expenses in employee training or employee turnover. 

ٍSmall & medium companies in a specific field can also have a significant market share if they decide to take an operational excellence approach with limited targeting at a range of products or a type of customer.

The purpose of using the market share indicator is to give a general idea of ​​the organization’s size corresponding to its market and its competitors. 

Financial investors can get market share data from various accessible sources such as trade conglomerates and observers. However, it is difficult to determine the exact figures for some companies than for others.

Also, by knowing the growth in market share, it is possible to determine its direction if it continues to operate in the same manner, whatever if it is a decline or growth.

This early knowledge of the company’s situation has many benefits, the most important of which is enabling the company to seize the available opportunities or avoid the company’s dangers.

How can you increase the market share of your company?

 Strategies to increase your company’s market share vary depending on the industry, with some strategies working better than others.

Understanding the customer’s needs

Listen to the target audience; this will allow you to think of new strategies, other products, or services that can help solve specific problems.

Take a consultative sales approach so you can develop a relationship, establish credibility, and build collaboration with clients even if they’re working with a competitor.

price cut

This strategy inevitably leads to low margins, and eventually, everyone loses unless a few competitors have to leave the business.

Buy a competitor

Acquiring a competitor is one of the safest ways to increase your market share. On the one hand, you build on the existing customer base of the newly acquired business, and on the other hand, you reduce the number of companies competing for market share.

Forming a strategic alliance

When there is a lack of sufficient resources for effective marketing or distribution, forming a strategic alliance with another company strengthens your position to improve financing attempts to gain market share.

How is the growth in market share calculated for your company?

Growth in market share is calculated by calculating the difference between market shares in two different periods.

To calculate the market share, get the company’s sales during a specific period are divided by the sales of the entire market during the same period through the following equation.

Market share during period A = (the company’s sales / total market sales during period A ) * 100.

The same formula calculates the market share during another period in this way:

Market share during period B = (the company’s sales during period B / total market sales during period B ) * 100.

The difference in market share in period A and market share in period B is the growth in market share.

Growth in market share = market share during period B – market share during period A

You need to know that the growth in market share may be positive or negative. 

If it is positive, it indicates growth in the market share, and if it is negative, it shows a loss of part of the market share.

How do you expect the value of growth in your market share?

You can expect growth in the market share by several indicators, the most important of which are:-

  • If you reduce the price, expect to increase your sales.
  • If you improve the quality of your product more than the competitors, expect to increase your market share.
  • If one of your competitors exits the market, expect your market share to grow.
  • If you increase your promotional campaign, expect to increase your market share.
  • Changing the consumption patterns of your customers will affect the growth and decline of your market share.
  • If a new competitor enters the market, expect your market share to decrease.

Conclusion

Market share is a crucial indicator of your competitiveness in the market: how well a company is performing against its competitors. 

And because it shows the market share that your company has been able to acquire from competitors.

Growth in market share is the percentage increase in the company’s share from the market or the commercial field in it operates.

The growth in market share is calculated by calculating the difference between the company’s market share during a specified period, usually annually.

Market share growth compares its market share in a certain period and its market share in another period. 

The difference in market share in the two periods represents growth in market share. The difference may be negative, which indicates a loss of part of the market share. Or it may be positive indicators of an increase in market share.

Growth in market share = market share during period B – market share during period A

Analyzing the growth index in the market share enables companies to know the opportunities and challenges facing the company before they worsen. 

If this indicator is positive, the company can increase the production wheel to get a larger market share. 

If this indicator is negative, companies should study the reasons for the decline in their market share to treat them before the situation worsens.

The market share growth indicator is often considered a measure of success between the company and its competitors in a specific period.


Source:

Market Share

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