Market Share Formula (Table of Contents)
What is the Market Share Formula?
The term “market share” of a company refers to the percentage of the market’s total sales that are being made by that company over a certain period of time, usually a year. In other words, if the entire market sales form a big pie, then the market share of a company means the size of the piece of the pie taken by the company. The formula for market share is very simple and it can be derived by dividing the total sales of the company under consideration by the total sales of the entire market multiplied by 100%. Mathematically, it is represented as,
However, the market share is also expressed purely in terms of a number of units sold, such that the formula can be derived by dividing the total number of units sold by the company by the total number of units sold in the entire market multiplied by 100%. Mathematically, it is represented as,
Examples of Market Share Formula (With Excel Template)
Let’s take an example to understand the calculation of Market Share in a better manner.
Market Share Formula– Example #1
Let us take the example of a beverage company that has recently launched a new line of non-alcoholic beers. Last year the company booked total sales of $50 million. Calculate the market share of the company if the total market size of the non-alcoholic beverage industry is $500 million.
Solution:
Market Share is calculated using the formula given below
Market Share = (Total Sales of the Company / Total Sales of the Market) * 100
- Market Share = ($50 million / $500 million) * 100
- Market Share = 10%
Therefore, the market share of the company was 10% during the last year.
Market Share Formula– Example #2
Let us take the example of four companies – company A, company B, company C, company D, that form the entire industry. During FY18, company A, company B, company C, and company D clocked total sales of $55 million, $75 million, $35 million and $45 million respectively. calculate the market share of company B based on the available information.
Solution:
Market Share of Company B
Total Sales of the Market is calculated using the formula given below
Total Sales of the Market = Total Sales of Company A + Total Sales of Company B + Total Sales of Company C + Total Sales of Company D
- Total Sales of the Market = $55 million + $75 million + $35 million + $45 million
- Total Sales of the Market = $210 million
Market Share is calculated using the formula given below
Market Share = (Total Sales of the Company / Total Sales of the Market) * 100
- Market Share = ($75 million / $210 million) * 100
- Market Share = 35.71%
Therefore, the market share of company B was 35.71% during FY18.
Market Share Formula– Example #3
Let us take the example of global mobile phone sales. During Q4 2018, Apple and Samsung sold 64.5 million units and 70.8 million units respectively. According to sources, the total volume of mobile phone sales of the entire global market during the same period stood at 408.2 million units. Calculate the market share of Apple and Samsung based on the number of units sold.
Solution:
Market Share of Apple
Market Share is calculated using the formula given below
Market Share = (Total Number of Units Sold by the Company / Total Number of Units Sold in the Market) * 100
- Market Share = (64.5 million / 408.2 million) * 100
- Market Share = 15.8%
Market Share of Samsung
Market Share is calculated using the formula given below
Market Share = (Total Number of Units Sold by the Company / Total Number of Units Sold in the Market) * 100
- Market Share = (70.8 million / 408.2 million) * 100
- Market Share = 17.3%
Therefore, Apple and Samsung earned a market share of 15.8% and 17.3% respectively during Q4 2018.
Explanation
The formula for market share can be derived by using the following steps:
Step 1: Firstly, determine the total sales of a certain company that will be easily available in its income statement. It is basically the average price per unit times the number the units sold during a certain period of time as shown below.
Total Sales of the Company = Average Price Per Unit * Number of Units Sold
Step 2: Next, determine the total sales of the entire market or industry, which is the aggregate of the total sales of all the individual companies within the industry. This information is usually available in various industry level databases.
Step 3: Finally, the formula for a market share of a company can be derived by dividing the total sales of the company (step 1) by the total sales of the entire market (step 2), which is then multiplied by 100% as shown below.
Market Share = (Total Sales of the Company / Total Sales of the Market) * 100
Relevance and Uses of Market Share Formula
The concept of market share is used to determine the strength of a company in the industry. An increase or even maintenance of the market share can be seen as a sign of competitiveness that can be owing to strong demographic appeal, innovation or simply advertising. However, at times a company might earn so much market share that it ends up becoming part of an oligopoly or even a monopoly.
Market Share Formula Calculator
You can use the following Market Share Calculator
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