• Edwin David

Understanding marketshare

Your business maybe growing but is it in tandem with a growing market? Usually small-medium businesses mistake topline growth for success. Some pointers on share of the pie.

A regular sized cake, weighing a kilo or so, will cut you about ten equal-sized large pieces.

In business, however, not everyone gets an equal share. In your own market, for instance, if you are an existing player and a longstanding one at that, it is likely that you will dominate marketshare. You may have the equivalent of two or even three pieces of that cake! (In terms of percentage share it could be around 30%). However, as markets evolve and new players enter (competitors), your market share is likely to erode. New players will end up getting a portion of the existing cake, with lower pricing, more value-for-money and sometimes a value-addition, like home delivery.

As a market leader, you may not feel the impact. Your argument, that business has actually sustained or has been growing - in terms of revenue or increased sales (topline growth) is well placed, except that the size of the cake just got bigger and we didn't notice it.

The market has grown. Demographics have changed. A new customer base has emerged. Existing clients have increased spending and so on. Such shifts happen all the time.

If your turnover has grown by, let's say 10%, then your share of market ought to have proportionately increased, too. So, if the size of the cake itself increases by 50% then a one-and-a-half kilo should render you at least 450 gms which is your share - 30% of the total market. Instead, you are left with 330 gms, which is 10% higher than your past year's performance, but reduced to the region of 20% of the overall share of market - a smaller piece of cake. (Note: The calculations are not accurate but indicative)

Usually, a good measure of how you are faring in the marketplace is done with the help of a SWOT analysis - it's time tested and gets you closer to the market realities. You get a grip on emerging players, changing trends and, your own strengths and leveraging capability.

With this critical analysis, you can easily arrive at targets for the ensuing business quarters and in all probability, you could end up with a lot more than the icing on the cake!

#businessdevelopment #businessmanagement


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