Market share can be defined as the percentage of a typical industry, business or a particular market that is acquired by a specific company or a business entity in a specific period of time. There are a number of ways of calculating market share. One of the best ways of calculating market share of a particular company is to take the total number of sales of the company in a specific time period and divide the total sales of the industry or the market in the similar time period. The metric of market share is very important to find out the strength of a company within a specific market or a specific segment. It also helps in determining the share earned by a specific company from the market in the form of its market share. The market share of the company also helps in determining the size of the company along with measuring its relative strength as compared to its competitors.
Investors while investing in a company closely monitor the market share of the company as decrease or increase in the market share of the company is a potential indicator of the market success, revenue earned and competitive strength of the company within the industry. If the market share of the company is growing along with the growing industry it shows that products of the company are well accepted in the market and company is generating revenue from the overall growth of the market. With an increased market share the company can enjoy increased profitability and also can achieve high scale in terms of operational efficiency.
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