If you have ever wondered how companies like Apple, Samsung, Tata, or Nike understand their position in the market, the answer lies in one simple measurement: market share. Market share tells you how much of the total market a company controls. It shows whether a company is a small player, a growing competitor, or a market leader. Whether you’re a student, business owner, or someone learning about business strategy, understanding what market share is very important. And don’t worry, in this guide you can learn everything about market share calculation.
What is a market share?
Market share is a percentage of the total market data the company owns in terms of sales or volume. For example, if 100 smartphones are sold in one month and Samsung sells 30 of them, the market share is around 30%. Out of the entire market, how much belongs to this company is one of the most basic questions you would have.
If a company has higher market share, it usually means:
- Strong brand value
- Better customer trust
- Competitive advantage
- More pricing power
That’s why traders and investors always look at company market share before making decisions.
Why is market share so important?
Knowing a market share helps you understand your position in the market. Are you a leader or a challenger or just a small player? How well is the company performing? Is the share growing or shrinking? You can also check out the competition level and who the biggest competitors are. A higher share often means customers trust the brand more, and customer preference can also be understood well with the market share. Marketing sales and product strategies depend heavily on the market share, so strategic decisions are also taken depending on the market share. Companies with high market share usually enjoy more customers, better brand position, and higher profits. This is even though every business tracks its market share carefully.
Market Share Calculation – The Basic Formula
If you’re wondering how to calculate market share, you firstly need to understand the market share formula basics. Market share, equal to company sales divided by total market sales multiplied by 100, is equal to the sales made by the company, and total market sales equals the sales made by all companies in the market. The formula works by unit sold revenue and customers.
Now let’s come to the main part: the market share formula.
The formula is very simple:
Market Share (%) = (Company Sales ÷ Total Market Sales) × 100
That’s it. No rocket science.
Market share examples
Example one
Smartphone market
Suppose total smartphones sold in India in a year equals 10,00,00,000 and a company sells 2,00,00,000 smartphones; the market share will be 2,00,00,000 / 10,00,00,000 into 100. The market share is 20%.
Car industry
Total cars sold equals 30,00,000, and the company sold 1,200,000, so the market share here will be 1,200,000 / 3,000,000 into 100. The market share is 40%. So, the company controls 40% of the market. This is why they are the leaders.
Types of company market share
Unit market share is calculated based on the number of units sold. For example 5 out of twenty bridges sold means 25%. Revenue market share is based on money earned but not units. For example 50,00,000 out of 2,00,00,000 equals 25%. Customer market shares a person of the total customers a company has. For example 5,00,000 customers over 20,00,000 equals 25%. Relative market share compares a company with its biggest competitor. Your market share is divided by competitors’ market share. If your share is 20% and the competitor has 40%, the relative market share is 20 / 40, which equals 0.5.
How do companies use market share in real life?
Market share is not just a percentage; it drives important business decisions. If you see growing market share, you might introduce new products to grow further. Companies with high market share can get premium pricing because of the strong demand. To plan marketing campaigns, you can also use market share. If your market share drops, you can increase advertising to regain the customers. To attract customers or investors, you can use market share, as investors prefer companies with strong or growing market share. It basically shows stability. Companies compare their share with rivals to understand who is leading the market.
How to calculate market share in real business situations
Firstly, you need to define the market, like, for example, the smartphone market or the dairy products market. You must be very clear about the market that you’re analyzing. You need total industry sales of company sales. This information often comes from industry reports or competitor data and market analysis. Calculate using the formula and compare overtime. Companies track market share monthly, quarterly, and yearly, so if it grows, business is improving, and if it falls, they need new strategies. Compare with your competitors, as this shows who is winning and who is losing the market battle.
Let’s understand how to calculate market share with easy steps.
Step 1: Find Company’s Sales
You need the company’s total sales or revenue for a specific period (monthly, quarterly, or yearly).
You can find this in:
- Annual reports
- Financial statements
- Investor presentations
Step 2: Find Total Market Sales
This means total sales of the entire industry or market.
This data is available from:
- Industry reports
- Market research firms
- Government data
- Sector analysis reports
Step 3: Apply Market Share Formula
Divide company sales by total market sales and multiply by 100.
Factors that influence the market share
Market share changes because of price changes, new competitors launch of new products and customer preferences. Companies watch these factors closely to stay ahead.
Common mistakes and market share calculation
Even professionals make mistakes but you can avoid them. For example you can use the wrong total market size if total sales are incorrect or calculation becomes wrong. Confusing unit sales with revenue. Use the right type based on what you are measuring. Mixing markets you cannot compare smartphone sales with laptop sales.
Limitations of Market Share Analysis
Market share is powerful, but it’s not perfect.
Some limitations are:
- Data may not be accurate
- Industry size can change
- High market share doesn’t always mean high profit
- New disruptive companies may grow fast with low share
That’s why at Alpha Trading Academy, we always combine market share with price action, volume, and fundamentals.
Why is market share important for small businesses too?
Market share is not only for big companies like Apple or Tata. Even small businesses benefit from calculating it. For example, a bakery measuring the percentage of customers in its area or a clothing store tracking sales compared to competitors. Market share helps every business understand how well they are doing.
So calculating market share is one of the most useful tools in the business analysis part. It tells you how big a company is in the market or how it compares to competitors. The formula is simple but the insight it provides is powerful. Whether you are a beginner or a business owner, knowing how to calculate market share will help you make smarter and more confident decisions.
Understanding how to calculate market share, using the correct market share formula, and analyzing company market share will give you an edge over others.
At Alpha Trading Academy, we focus on practical knowledge that actually works in real markets. Market share is not just a number, it’s a story of competition, growth, and survival.
If you learn to read that story properly, your trading and investing decisions will automatically improve.
FAQs
What is the easiest formula to calculate market share?
The simplest formula is market share equals company sales divided by the total market sales into 100.
What data do you need to calculate market share?
You need 2 numbers: sales of the company and total sales of the entire market.
What is the difference between unit market share and revenue market share?
Unit market share is based on the number of products sold, and revenue market share is based on the total money earned.
