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A market share analysis compares the status of a business with competitors in its sales region. There are many types of information collected for this type of analysis, including the names of competitors, an indicators of market size, and the study of past and projected market growth. A typical goal of a market share analysis is to determine the portion of market share that the business will target.
An important task of a market share analysis is to determine the value of market share for the type of business being examined. In order to find this value, several factors must be determined. This includes the size of the industry’s market and what kinds of products are sold. The overall size of the market can be determined by revenue and sales volume. These factors are studied within a specified timeframe.
Once the size of the market is known, the next step of a market share analysis is to determine what percentage each business holds. If a small number of businesses makes a high percentage of sales, then the region has a highly concentrated marketed. When sales are more evenly distributed across several different businesses, then the market is fragmented. The primary purpose of this exercise is to determine the top competitors in the field.
An analysis of both the most and least successful competitors in the market can be another important factor of market share analysis. By understanding why one business is succeeding while another is struggling, a company can devise a sound strategy for expanding the business. This includes avoiding the missteps of smaller businesses and learning from the victories and mistakes of the larger businesses.
A market share analysis will show not only the overall percentage a business holds in the market, but also a more detailed analysis of its status in different areas. For example, a business may have a fairly low market share overall, but dominate in the sales of a particular product. Understanding this aspect of market share can help a company to strategize future product development, whether it is to continue to grow a strong sector or to compete more strongly in other areas.
Another aspect of market share analysis is the study of market growth. By anticipating how market demand and the overall economy are expected to change in the next few years, a business can create a growth strategy. This can include determining where there may be more opportunities to take more market share by filling a new need, serving a different population, or adapting to developments in areas such as technology.