Market share

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In the area of strategic management and marketing, market share is the fraction or percentage of the total available market or market segment that is being supplied by the company.

It can be expressed as a percentage of the company's sales (in the market) divided by the total sales available in the market or it can also be expressed as the total units sold by the company divided by the units sold in the market. market.

Market share is one of the most common objectives used in a company (other objectives are return on investment (ROI), Return on Assets (ROA) and profit objective). The main advantage of using market share is that it is abstracted from industry-related environmental variables such as the state of the economy, inflation, GDP, or changes in tax policy.

Determining market share

The most commonly held assumption is that market share is determined from the "marketing effort" made by the company, in such a way that the fee would be proportional to the fraction of the effort made:

(1) ${displaystyle S_{i}={frac {M_{i}}{sum _{j}M_{j}}}leq 1}$

Where ${displaystyle scriptstyle M_{i}}$ represent the company's marketing efforts i in a given period. For the crude formula above to be able to explain, it would be necessary to clarify how the "market effort" is measured in terms of quality, spending on advertising, distribution capacity. Some authors have proposed for this marketing effort:

(♪) ${displaystyle M_{i}={frac {R_{i}^{rho _{i}}D_{i}^{delta _{i}}A_{i}^{alpha _{i}}}{P_{i}^{pi _{i}}}}}$

Where:

{displaystyle R_{i},}

, indicator of product quality.

{displaystyle P_{i},}

, product price.

{displaystyle A_{i},}

, advertising and promotion expenses.

D_i,

, distribution and sales force costs.

{displaystyle rho _{i},delta _{i},}

, elasticity of quality and elasticity of distribution.

{displaystyle alpha _{i},pi _{i},}

, elasticity of advertising and elasticity of price.

Furthermore, factors that measure the effectiveness of advertising and distribution can be introduced by introducing the expression (*) for effort marketing broken down into (1), and taking into account the price factor, we have an expression of the type:

(2) ${displaystyle S_{i}={frac {R_{i}^{rho _{i}}(a_{i}A_{i})^{alpha _{i}}(d_{i}D_{i})^{delta _{i}}P_{i}^{-pi _{i}}}{sum _{k}R_{k}^{rho _{k}}(a_{k}A_{k})^{alpha _{k}}(d_{k}D_{k})^{delta _{k}}P_{k}^{-pi _{k}}}}leq 1}$

The above magnitudes are assumed to be measured in a given period, and may vary from one period considered to another, although the temporal dependence has been omitted in the above formula so as not to overload the notation. The subscript i indicates that the magnitude refers to the ith company. The additional quantities involved in this formula are: to company.

{displaystyle a_{i},}

, advertising effectiveness index, for an average company

{displaystyle a_{i}=1,}

1,}" xmlns="http://www.w3.org/1998/Math/MathML">ai▪1{displaystyle a_{i} 20051,}1,}" aria-hidden="true" class="mwe-math-fallback-image-inline" src="https://wikimedia.org/api/rest_v1/media/math/render/svg/074512e32eb2ef32dffb8d85dbc288bf1a164920" style="vertical-align: -0.671ex; width:6.678ex; height:2.509ex;"/>

for a company more efficient than the average

<math alttext="{displaystyle a_{i}ai.1{displaystyle a_{i} vis1,}<img alt="{displaystyle a_{i}

for less efficient than average.

{displaystyle d_{i},}

, distribution effectiveness index, again for an average company

{displaystyle d_{i}=1,}

This formula summarizes the main determinants of the company's market share (expenses on marketing activities, marketing mix variables, effectiveness of these actions and the elasticity of these actions and of the variables); Likewise, this formula could be further completed taking into account:

The geographical area where marketing costs are made,

The delayed effect of marketing activities,

Synergy effects of mixed marketing.

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