Relative market share

Relative market share
See also

Relative market share - refers to the market share of individual enterprises in relation to the largest competitor. It can be calculated using quantity of product sold (sales volume of a company or brand) or value of sales (turnover value which may be difficult to interpret because it changes with the change in the number of units and prices). Market share can be also calculated in global market or only in the market segment supported by the company. Share in the supported market will always be larger than the share in the total reference market. Value of relative market share is used in method of calculating the BCG matrix to identify position of product range on BCG matrix.

Relative market share is a process of mensuration market share. The business will gauge its market share with its rival to establish the comparative market share, with market conductivity being the most significant.

As they say Robert Jacobson and David A. Aaker most of all influential growth in strategic management has been the uprising of market share. Two causal explains are usually offered for the observed link betwixt market share and profitability. First is the linked effects of the experiment curve and economies of scope. Scope economies can be reached by greater share business as plant and equipment investment and outgoings such as marketing can be distributed over more units (Robert Jacobson and David A. Aaker. 1985, p. 11).

Why market share is profitable[edit]

There are at least three eventuality explains:

  • Economies of scale - The most brights rationale for the superior stake of return enjoyed by great share businesses is that they have reached economies of scale in delivery, production, marketing, and different cost components. A company with a greater share in a given the market will reach much more grade, more efficient methods of operation within a special type of technology.
  • Market power - Many of economists, particularly among those engaged in antitrust work, believe that economies of scale are of comparatively slight importance in most ingenuities. These economists dispute that if great-scale businesses earn advanced profits than their slighter competitors, it is a result of their superior market power: their dimension permits them to opportunity more effectively, "administer" prices, and, in the end, realize meaningly higher prices for a respective product.
  • Quality of management - The easiest of all elucidations for the market-share / profitability relationship is that both share show a communal underlying factor: the quality of management. Good managers are auspicious in attaining high shares of their particular markets; they are also competent in controlling costs, reaching maximum productivity of employees, and so on. Furthermore, once a business reaches a leadership position - possibly by expanding a novel field - it is much simplier for it to maintain its guide than for others to catch up. (Robert D. Buzzell, Bradley T. Gale, and Ralph G.M. Sultan 1975, p. 2)


Author: Sylwia Wierciak