Market share is the percentage of a company’s sales of a particular product or service in a given area. It can be calculated in terms of revenue or of units sold. Knowledge of a company’s share is useful for investors, since businesses with a large share usually have lower operating expenses and are therefore more profitable than smaller competitors. Business owners can also benefit from reading the changes in share, in order to determine their competitive strength in comparison to other companies in the same sector, and assess performance from year to year.

There are four basic ways to enhance market share. You can improve your product, lower the price or offer special discounts and sales. Furthermore, you can find new means of distribution so your product can reach more places and people, as well as advertise and promote your product. Reasons to increase share may include economies of scale (a higher volume can help develop a cost advantage), sales growth in a stationary industry (when the industry is in a stalemate, sales can be given a boost by increasing share), reputation and influence However, increased share might be a counterproductive endeavor if it is associated with expensive advertising or a big price decrease that would render it unprofitable. Also, an increased share may bring about a demand for huge investments in new equipment and employees that a company may not be able to meet. It is even possible to benefit from a decreased share if lower costs enhance profitability. Managing market share is a delicate subject with many factors and concepts to be considered.

The company with the biggest market share is the market leader, and usually has the highest marketing expenditures, distribution, price changes, and new product innovations. Market challengers are the companies working to increase their share. The leader must constantly survey the market because the challengers are consistently trying to capture share. The market leader has three options to preserve its market position: expand the total market, protect share, or expand share. Developing more usage, new uses, or users increases markets. Leaders can protect share by observing their position and quickly alleviating any weaknesses. Constant innovation is the best way to protect share. When leaders become complacent with their products or services, the challengers find it easier to make progress.

The market challenger must try to take share away from the leader. The challenger must have some viable competitive edge to attack the leader’s share. The challenger can attack other competitors through a direct attack by altering price, promotion, or distribution, or indirectly by diversifying or catering to untapped segments. Market share is readily comprehended by the majority of managers, employees, and shareholders; hence, it is frequently used to measure success. It is essential to understand market share, how it is used to identify market players, and how the different participants use it to determine their market strategy.