Market share: Definition and the importance of to brands

What is market share? Why does market share show enterprises’ position and level of competition in the industry market? Find out with CleverAds here.

1. What is market share?

Market share is a term used to denote the percentage of sales volume a business has dominated.

Market share is an essential factor in evaluating the competitiveness of enterprises. A high market share means an enterprise earns large profits and has many competitive advantages in the industry market.

To gain a significant market share, businesses must have and build appropriate business strategies to help gain an advantage over competitors.

For example:

Apple’s share of the Chinese smartphone market was ranked second in Q4 2020, with Vivo and Oppo at 17%. At that time, 29% of China’s mobile phone market comprised many other brands. From Q1 to Q3, Apple’s market share in China dropped to 12%, trailing Vivo and Oppo. In the fourth quarter of 2021, Apple had a return of 22%. In Q1 2022, it remained at 18%.

2. What is the formula for calculating market share?

The formula is as follows:

Market share = Total sales of the business / total market sales.

Or:

Market share = Total sales of the business / total market sales.

In addition, the calculation of relative market share is shown as follows:

Relative market share = Total sales of the business / Total sales of competitors.

Or:

Relative market share = Total sales of the business / Total products sold by competitors.

• Relative market share > 1: Enterprise has a competitive advantage leading the market share better than competitors.
• Relative market share < 1: Competitors have a competitive advantage over the business.
• Relative market share = 1: The enterprise’s competitive advantage is equal to the competitive advantage of the competitors in the market.

3. The roles of market share

As mentioned in part 1- What is market share? Market share is a factor showing the competitiveness in the market of enterprises. A factor in identifying and evaluating competitors. From these factors, the crucial role of market share can be determined as follows:

3.1. Determining the competitiveness of enterprises in the market

When accurately determining a business’s market share, it is possible to recognize not only its position and competitive capacity but also that of its competitors. From there, companies will research and build campaigns and marketing strategies to promote business activities. And there are suitable plans to protect the current market share in the long term sustainably.

3.2. Determine the growth rate of the business

The enterprise’s market share will reflect the speed and level of the enterprise’s development. Therefore, a significant market share index means an efficient business operation.

Conversely, if the market share is small, the business efficiency is still low, or the business has just launched. Therefore, when the market share index is low, the business’s growth rate slows down, so it is necessary to consider and change the essential strategies.

3.3. Creating motivation for development, building appropriate human resources

When understanding what market share is, what is the dominant market share in the market right now, is when businesses have the bases to research to build appropriate human resources or create growth drivers.

At a time when the market share is still low, the brand urgently needs to create more appropriate human resources to build and implement. If the market share is high and well-developed, determining the market share will create a driving force for the enterprise to develop and use its existing advantages.

4. How to increase market share for businesses? 

To increase the company’s market share, people in business can apply ways such as: Providing customers with advanced technology, customer care, strengthening customer loyalty, and acquiring competitors.

4.1. New technology

Innovation is the method by which a company can increase its market share. When businesses launch a new technology/improvement that competitors don’t have, consumers will quickly be attracted and want to experience it.

Even if that technology/improvement meets the customer’s wishes, they may be ready to switch to becoming your customer. And of course, this will decrease the competitor’s market share, and the number of new parts of the business will increase.

4.2. Customer care

Loyal customers are an essential factor in determining the revenue of a business. They are also willing to welcome the brand’s new product. Taking care of and improving the customer experience will bring satisfaction to consumers. When they are satisfied with products and services and see the respect and respect from the business, they will voluntarily become loyal customers.

Naturally, the market share of the business will be firmly consolidated. Companies can also watch out for competitors using strategies to attract and dominate their market share.

Not only that, when customers are satisfied with the business, they will recommend the people around to use the product as a business. And, of course, the company has a new customer base without spending any marketing costs.

4.3. Acquiring a competitor

This is the surest and fastest method to increase market share today. With this method, businesses can eliminate competitors and increase the number of customers for businesses, contributing to ensuring the stability and development of market share.

However, this form requires the company to have enormous costs and appropriate calculations. 

Leaders who run businesses, whether large corporations or small businesses, will always look for good acquisitions when their companies rise.

4.4. Developing new market segments

The penetration and development of new markets will help the company have the opportunity to increase and expand its market share. But to do this, the company needs to have a profound and thorough study of the target market that will develop to come up with the most suitable business and promotion strategy for products and services.

However, before doing this, businesses need to study the market thoroughly so they will expand into developing the most suitable business and marketing strategy for the product.

Example: Minh Long Ceramics Enterprise exports products to foreign markets through the world’s largest e-commerce platform Amazon.

5. Conclusion

Market share is important to businesses. Hopefully, through the article “What is market share? The importance of market share to the brand”, readers will have a broader view of the market share from which to learn and research the appropriate method to expand market share for their business.

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