The market share (market share in English) represents the percentage of the total market that that company has. In other words, of the amount of sales generated in that market, what percentage does that particular business represent? As a general rule, the market share is calculated in a specific period of time.
For example, imagine that a company sells 100 million tractors a year in a specific country. That same year, 200 million were sold in that country. This means that the market share that the company has in the sale of that specific product is 50%
How is market share calculated?
Market share can be calculated in two different ways:
- Taking as reference the total economic value of the market (all sales) / the economic value of the company's sales
- Taking as reference the total number of units sold of that product / the number of units sold for the specific company.
The importance of market share
One of the main characteristics of market share has to do with the interest it generates in investors, who closely monitor changes (both rises and falls that can occur for a specific product or service. If the market grows and a company maintains its market share, that means that its profits also increase.