Business Administration 166 - Advertising - Cardona

Market share is the percent of total sales in an industry generated by a particular company. Market share is calculated by taking the company's sales over the period and dividing it by the total sales of the industry over the same period. This metric is used to give a general idea of the size of a company in relation to its market and its competitors. The market leader in an industry is the company with the largest market share.

Market share represents the percentage of an industry, or a market's total sales, that is earned by a particular company over a specified time period.

Market share is calculated by taking the company's sales over the period and dividing it by the total sales of the industry over the same period. To calculate a company's market share, first determine a period you want to examine. It can be a fiscal quarter, year, or multiple years. Next, calculate the company's total sales over that period. Then, find out the total sales of the company's industry. Finally, divide the company's total revenues by its industry's total sales. 

Example Calculation:

Your company sold $100 million in tractors last year domestically, and the total amount of tractors sold in the U.S. was $200 million, the company's U.S. market share for tractors would be 50%.

($100 million company total revenue) / ($200 million industry total sales) = 0.5 or 50% of the market for the last year

To find market share, you need:

• NAICS codes, or other industry codes (see side box for more on NAICS)
• Revenue or sales, i.e. company / brand size (Microsoft versus a neighborhood web design shop)
• Target customers (Microsoft has a different customer base than a neighborhood web design shop; but both are in the software business!)
• Who compiles the data?!  E.g. a government agency, trade association, research firm, etc.

Adapted from Investopedia and Marquette.

Starting Points for Industry Research:

• Identify the industry or industries your business will be in, then find an industry report for the closest related industry using the NAICS Code.
• If you can't pinpoint an industry, try looking up a company that is similar and see what industries it is in. 
• Looking for a niche industry? Look at broader industries in addition to searching trade publications for articles. 
• When looking for data, consider who might collect that information: Government agencies? Industry associations? Research centers?

From LOC and UNC LibGuide.