Knowing the extent of a market share provides a great basis for growth in most businesses. Before a company is established the onus falls on the founders to organize primary investigations as to the possible market share the company’s services or products will have. This knowledge creates a ground for proper strategizing, planning, and all the organization implements that ensures growth and success. A market share is therefore a segmented market consisting of buyer’s interest in a particular product. A company might want to work up a good market share for their products or services, because possessing a greater market shares indicates profits; and good profits is a good indicator of a well established company.
A good business man and even a commodity investor should have a good knowledge of market shares for his or her product before investing. This is because market share determines gains and profits, and since all business motive boils down to making profits, this concept applies to a wide range of business establishments. For instance if a selected area has a population of 1 million people and a certain business man wishes to set up a candle making business, his prior interest is how to catch the interest of at-least 70% of the population; but the problem is that there are two to three competitors already selling candles and this means the market share has been overtaken by his competitors. What does he do? He runs a promotion in order to acquire more market shares in his region; well that is a likely possibility but the question that begs for an answer is how he can identify the market share in the first place.
1. The first step is to decide which product or services one is interested in selling. Without this knowledge it will not be possible to identify other similar products or services already in existence. This knowledge will be required to measure a product against competitor’s product, as well as a product’s response in that market.
2. Target market area. Find out the target market area; this may be an urban, rural, regional area etc. Note that the purpose of evaluating market share in a local area where there are very low populations, and probably less competition might not necessary.
3. Decide which measure to evaluate the market share; is it in units or revenue? Evaluating in units refer to recognizing a given product or service in terms of quantity sold. In the case of measuring by revenue, the number of profits generated over a period of time is the key indicator examined.
4. Compile a company’s sales account for the product or services along with revenues and units. This will give you the idea of the condition of the product or services in the market and how well they are doing.
5. Conduct research based on these findings in the prospective industry the product or services belongs to. This information can be obtained from business magazines, trade journals, and other financial publications.
6. The next stage is to discover the market share of competitors. This shouldn’t be difficult; all that has to be done is to conduct a survey in order to obtain an estimated value of the competitor’s market share. If it is a public company this is made easier, as such results can be found in the company’s annual reports.
Gaining a good market share is important for any business or investor because it determines the company’s profit level, and also provides information of the company’s efforts and sustainability in a given market.