Market Share

Company sales divided by total sales of all firms for a specified product-market determines the market share of a particular firm. Market share is calculated on the basis of actual sales or forecasted sales. Market share can be used to forecast future company sales and to compare actual market position among competing brands of a product. Market share may vary depending on the use of dollar sales or unit sales due to price differences across competitors.

Exhibit 3-11 shows the relationships among the different estimates. Industrial painting units are used to apply paint for industrial applications such as buildings and equipment. The line at the top of the chart shows the market potential from 1990 to 1996 and an estimate of potential for 1997. The next line is industry sales trend and the 1997 forecast. The difference between potential and the industry sales is the amount of unrealized potential. The third line shows the company sales and the forecast. Dividing company sales by the industry sales forecast yields the market share (actual or forecast). Comparison of competitor and industry sales results and forecasts with company sales information should be made with caution. Sales and forecasts may vary due to differences in product-market definition, product type, time period, and channel of distribution level (wholesale versus retail)