Sep 08 2020
Why is Market Share Important?
Calculating market share is important because it gives insight into the competitive landscape of an industry.
How to Calculate Market Share
To calculate market share you need industry revenue (or total addressable market) and the revenue of a company within that industry.
Once you have these components, you find market share by putting the revenue of a company over the total revenue of the market its serving or industry it’s participating in.
Market share = Company Revenue / Industry Revenue
Here’s a real-world example of how to find market share:
In 2020, the Battery Manufacturing industry in the US is anticipated to generate $9.8 billion in industry revenue.
Battery manufacturer Clarios is forecast to generate $2.6 billion in revenue in 2020.
Putting Clarios’s revenue over industry revenue yields a market share of:
[Clarios 2020 revenue: $2.6 billion] / [Industry revenue: $9.8 billion] = 26.5% market share
So, this calculation tells you that Clarios has a 26.5% share of the US market for batteries in 2020.
Repeating this calculation for other companies in an industry can give you an idea of which companies are most likely to compete with each other. For example, if another battery manufacturer also had a similar market share, they would most likely be a direct competitor to Clarios.
Overall, calculating market share gives you insight into an industry’s concentration, competitive landscape and room for business opportunities.