What is market share?

Market share is defined as the total sales revenue of a company divided by the total sales revenue of all companies in a specific market. This ratio indicates how much of the market's revenue is captured by that particular company compared to its competitors. It is a critical measure used to assess a company's performance relative to others within the same industry, providing insight into competitive positioning and market dominance.

Understanding market share helps businesses identify their standing in the market, formulate strategies to increase sales, and gauge the effectiveness of marketing efforts. It is not simply about total sales revenue or potential revenue across the industry, nor is it specifically about the total revenue available for new entrants. Instead, it focuses on the actual sales performance and market presence of a single company within the broader market context.