Analysts have created dozens of ways to evaluate the performance of a company (and new ones are constantly emerging), so very often specialists forget about some of the traditional tools for evaluating a company's performance. Market share is one of these indicators and, knowing the methods of its calculation, you will be able to determine the efficiency of the company and predict the company's prospects.
Steps
Part 1
Market Share Calculation- If the company you are analyzing has wide range of goods and services sold, do not look at the total income of the company, but find its breakdown by specific goods and services.
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Find the total sales in the market in question. These are the total sales in the market in question.
Divide the total revenue of the analyzed company by the total sales in the market to find the market share of this company. For example, if a firm's revenue from the sale of a particular product is $1 million and total market sales are $15 million, then that firm's market share is $1,000,000/$15,000,000.
Determine the parameters of the market. Companies are looking to expand their market share in line with their strategy. In our example, BMW knows that not every car buyer is one of its potential customers. BMW makes cars in the high price category, so less than 10% of car buyers are its customers (luxury car sales are a small fraction of the total of 12.7 million cars sold per year). BMW sold 247,907 vehicles in 2011, more than any other luxury car manufacturer.
- Clearly define the specific market segment you intend to explore. This can be a general market, so target total sales, or a specific market segment limited to specific products and services (in which case compare the values for a specific product/service for each company in the market).
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Determine the annual change in the market share of the analyzed company. Moreover, you can compare the market share changes of all competing companies. If the market share is growing, then the company's market strategy is very effective. For example, the market share and the number of cars sold by BMW increased in 2011 (compared to 2010). This means that the marketing and pricing strategies of this company were more effective than those of competitors (Lexus, Mercedes, Acura).
To correctly calculate market share, it is necessary to consider certain values for a specific period of time, for example, for a quarter, a year or several years.
Calculate the total income (revenue) of the company. This can be done on the basis of data from a quarterly or annual financial reporting public company. Such reporting includes information about the company's total income, as well as a breakdown of income for specific goods and services sold by the company.
The information basis for calculating the market share of a product of a certain trademark(for simplicity - the market share of a particular brand) are indicators of the volume of sales of competing products. Thus, market share is a calculated indicator, except when it is determined expert method by asking experts direct questions about their opinion on the value of this indicator for individual products.
Typically, the sales volume for calculating the market share indicator is expressed as monetary units. However, to exclude the influence of prices on this indicator, it is possible, where appropriate, to use natural indicators, for example, the number of cars sold of certain brands.
To determine the market share of a product of a certain brand (a certain assortment position of a product group), both primary and secondary data should be used. Primary data is collected and processed using the following main methods.
1. Trade audit– determination of the share of sales of various products based on sales data of a representative sample of points of sale - wholesale and retail outlets.
Obviously, various retail outlets can be classified according to their location, type, sales volume, etc. The sample should include different types outlets. To form a sample, it is necessary to have a complete database of outlets. Only in this case, it becomes possible to project the obtained data on the entire studied market (market segment). Data is collected on the volume of sales of the studied products of competing companies.
Trade audit is typically performed by large research agencies with extensive data collection and analysis resources and mature research technology. Such studies cost tens and even hundreds of thousands of dollars, so they can be afforded mainly by large companies, most often global manufacturers of food and consumer goods.
Trade audit is carried out in the following sequence.
First, a complete census (sensus) of the trade network of the study area is carried out. The census includes any retail outlets that have the studied goods in stock, ready for sale. As a result of the sensation, we get Full description of the studied general population - the number of outlets, their classification and distribution.
Further, a sample is made from the entire trading network, a so-called statistical panel is formed. Panel - these are the outlets where sales of the product under study will be recorded. The panel is divided into sub-samples, consisting of different types outlets. You should first agree with the management of outlets about the possibility of the presence of an auditor and the collection of information. The auditor works directly at the point of sale and keeps a description of all the goods of the category under study, located both on the trading floor and in the warehouse. The audit is carried out cyclically. Each audit cycle reflects sales over a specific period of time.
All collected data is entered into databases. For each brand of product and for different product groups, sales volumes and market share indicators are calculated.
Let be the total sales volumes for each competing product (A, B, C, ..., N) of a certain category in the studied outlets, included in the sample, presented in monetary units for the selected period of time, and - the total sales of "our" product. Then the market share of product A for a sample of outlets - PDA is calculated as follows:
(6)
Similarly, the market shares of all the products studied in our example are calculated:
It's obvious that .
It is possible to cover not all competing products of the studied category, but only the products of the main competitors. IN this case the calculation of the market share indicator is carried out only for the main competitors. Let the market share of "our" product and two products of the main competitors be investigated. Then
This indicator does not give a picture as a whole for the market (the figure of 100% refers only to the studied products, and not to the totality of competing products presented in retail outlets).
The sales volume for a sample of retail stores can be determined based on a regular Nielsen trading panel that provides a view of all retailers in a particular industry. Based on measurements on the trading panel, the Nielsen index is calculated, which determines the volume of sales by product, brand for a certain period of time (usually two months). The Nielsen index characterizes the average sales volume in one sample store for a certain period of time:
(8)
where V- sales volume for the selected period of time; - stocks at the beginning of the period; P - deliveries; B - return; - inventory at the end of the period.
The market share indicator is calculated using the above formulas.
Market share can also be determined using indicators such as numerical weighted distribution, selection indicator, average share in turnover.
Numerical distribution(PR) is the ratio of the number of retail stores that carry a given brand of product to the total number of a particular type of store where a consumer typically buys that type of product, expressed as a percentage.
PR = number of brand retailers Product X / total number of product retailers X (%).
Weighted Distribution(BP) is the market share of products held by retailers with Y brand of this product.
VR = total product sales X retailers who sell the brand Y/total product sales X (%).
A weighted distribution takes into account the size of stores that carry a particular product. For example, a weighted distribution of 60% of brand Y product X means that the Y brand is represented in stores that provide a total of 60% of the product's sales volume x.
Selection indicator(IV) = VR / PR = average product sales X in stores selling the Y brand / average sales of products for all retailers. A VR of 60% and a PR of 20% mean above-average sized stores are selected (they are few, but they produce the bulk of the product's sales). The selection indicator in this case is greater than one, namely 60/20 = 3.
Average share in turnover(DM) shows what position a particular brand occupies in selected stores, and can be considered as the market share of brand Y in the total turnover of product X in selected stores.
SD = brand turnover Y product X in selected stores / total turnover of products in selected stores (%).
Then the market share (SR) is defined as MR = PR IV SD = VR SD.
2. Diary consumer panel of regular respondents.
Respondents use a diary (records + checks and receipts) to record all purchases of the product group under study. The data obtained on the basis of the above calculated dependencies are translated by the researcher into market shares. Diary entries are used by many companies in different countries. As a rule, such panels are balanced in terms of family size, age of the head of the family, family income and geography. Panel members are selected quarterly and added to the active roster after receiving a report from them that meets the standards of the research company. For participation in the panel, its participants are stimulated. A family may be excluded from the panel upon application or simply by failing to send three reports in a row. In Russia, this method is beginning to be mastered by some large marketing companies in Moscow, but in the regions it is still very rare.
3. The scanner-panel is similar to the previous method, except for the method of fixing purchases.
In this case, the respondents are given an identification card (or the respondent's credit card is used). A person presents (uses) a card when paying for purchases in a store that has a barcode scanner. The respondent code is appended to the data read by the scanner. Unlike the first method, the scanner-panel allows you to evaluate sales within various segments of the consumer market. But this method is applicable only in countries with very a high degree trade automation - it is necessary that almost all purchases be made in stores equipped with scanners.
4. Based on panel surveys, primarily for consumer products (both frequent consumption, such as food, and durable products, such as televisions), the market share of products of a certain brand can be calculated using the Parfitt-Collins method using the formula
where DR is the market share of the brand; PR - penetration of the brand, characterized by the percentage of buyers of this brand from total number buyers who purchase products of the category to which this brand belongs at least once during a certain period of time; PP - re-acquisition (substitution) of the brand, determined by the percentage of buyers who make
repeated purchases of a product of this brand. This is the percentage of consumers who have become adherents of this brand; I – intensity of brand consumption – the ratio of the volume of consumption of this brand by repeat buyers (brand adherents) to the average level of consumption of this category of products.
When applying this method, all products are divided into two categories - durable goods (demand is calculated per household) and non-durable goods (demand is calculated per consumer). Brand penetration for both groups characterizes the group of consumers who purchased the product for the first time. Repurchase, which characterizes secondary demand, for non-durable goods means that the consumer continues to buy the product of this brand, i.e. remains a fan of hers. For durable goods, secondary demand refers to a return to a given brand of product when a product is replaced or when an additional purchase is made. This method directly related to consumer research (bottom-up approach).
Suppose there are 10 buyers and competing products in the market X, Y, Z(Table 3.2).
Table 3.2. Market share calculation
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Buyers |
Penetration |
Reacquisition |
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XXXX |
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XXXX |
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Brand penetration value X accounts for 40%, reacquisition 66% (8:12). The consumption intensity of the brand is calculated as I = 3: 1.8 = 1.67, where the number 3 characterizes the ratio of the amount of the product X(the sum of initial and repeated purchases) to the number of buyers who bought this product(12:4=3). The number 1.8 characterizing average level consumption of a given category of products is calculated in a similar way for all buyers of all studied products (18:10 = 1.8).
Market share is calculated using formula (1) as DR = 0.4 0.66 1.67 = 44% (check: DR = 8/18, column "Reacquisition").
5. Survey of consumers (physical and legal entities) is carried out at the place of residence of the respondent, in in public places, in the workplace, or in any other setting that involves personal contact.
Respondents are directly asked what products and how often and in what quantity they buy.
To determine market share consumer products everyday demand, we can offer the following structure of the questionnaire (Table 3.3).
Table 3.3. Questionnaire structure
The product of these answers to three questions (O P Q) by the number of buyers of each product - P characterizes the sales volume of competing products for the study period.
For fast expendable products purchased systematically, for which there are certain consumption rates (for example, 2 g of toothpaste for one brushing), it is sufficient to determine consumer loyalty to a certain brand and the frequency of toothbrushing based on a survey.
The same applies to calculating the sales volume of category products. B2B, having consumption standards, for example, consumables, tools, etc.
- 6. When the number of analyzed products is relatively large (more than 7–10), the method of paired comparisons is used (this method is discussed in the works). To conduct a market share analysis based on paired comparisons, you need to:
- 1) make all possible pairs of the studied products and prepare questionnaires for pairwise comparisons;
- 2) using these questionnaires to conduct a survey of consumers (representatives of the consumer or business market, depending on the object of study). Respondents are asked to compare in pairs with each other products of the same type supplied to the market under study. At the same time, the questionnaire questions can be formulated, for example, as follows: "If you had to choose product A or product B when buying, which one would you prefer?" Possible answers: "Product A", "Product B", "Products are equivalent";
- 3) based on the data obtained, evaluate the market shares of products of competing companies.
Assuming that steps 1) and 2) have already been completed, we will show how, based on the results of pairwise comparisons, we can estimate the market share of each competing product.
Consider conditional example. Let the respondents express their attitude to five competing brands A, B, C, D, E (Table 3.4).
Table 3.4. Determination of market share based on pairwise comparisons
The numbers at the intersection of, for example, the first row A and the second column B (0.61) represent the proportion of cases where brand A is preferred over brand B. Obviously, at the intersection of the second row and the first column there should be a number that complements the previous share to one (0.39). If the respondent finds it difficult to choose the preferred trade mark, then the numbers 0.5 are entered into the table.
It is easy to check that the sum of all preferences in the example is equal to 10, the number of pairs being evaluated. Dividing the total preferences of each brand by the sum of all preferences characterizes the calculated value of the market share indicator for products of a particular brand.
7. Determination of market share indicators based on expert assessments.
It is carried out by direct processing and analysis of expert judgments, which can be employees of marketing departments of organizations, retail stores, as well as employees of consulting firms, marketing centers, marketing specialists, etc. involved from outside.
In addition to primary data, in the case when the market share is studied for enlarged assortment positions, and the market tends to an oligopolistic structure (oil, gas, metals, mineral fertilizers etc.), which is typical for products B2B, it is possible to use secondary data obtained from Russian and international statistical collections.
8. Use of marketing intelligence data, which can be carried out in various directions.
Having data on labor productivity in the industry and the number of workers employed in the production of major competitors, and assuming that all output is sold, it is possible to estimate the production volumes of competitors by multiplying labor productivity by the number of workers.
Knowing the costs of any type of resources (raw materials, electricity, gas, etc.) for the production of a unit of output and the volume of purchases of resources by competitors, it is possible to estimate the production volumes of competitors by dividing the volume of resources by the cost of resources for the production of a unit of output.
Knowing the average waste output per unit of production and the volumes of industrial waste of competitors, it is possible to calculate the volume of production of competitors by dividing the volume of industrial waste by the waste output per unit of product.
When industrial market, when there are few sellers, few buyers, and each purchase is expensive, the market size can be calculated as a direct addition of data on projects announced by competitors. Enterprises operating in such markets, as a rule, publish information about their projects in the press and on the Internet (since there are few projects, they tend to talk about each, at least on their own website). Thus, by monitoring the press, competitive and thematic Internet sites, you can collect very exact information on all projects in this industry for the reporting period.
Often, a company has access to specific data, which can be used to accurately determine the size of the market. For example, all POS terminals must be affixed with a special stamp at the time of sale, certifying that this type of POS terminal is approved for operation by the Federal Tax Service of the Russian Federation. It is also known that the right to manufacture and sell such stamps belongs to only one organization. If you can get information from this organization about how many stamps were sold in a year, then multiplying the number of stamps by average cost cash terminal, you can get the market volume and your share in it (according to your own sales).
When using publicly available data, one must keep in mind that they can be very inaccurate. Majority Russian companies does not provide accurate information about the volume of products produced or sold and will try to circumvent existing rules(no matter what it concerns - customs, accounting or something else).
It is obvious that the use of various methods for determining market share will give different results. In this case, it is necessary either to give preference to the most reliable method, or to use the average value of the market share indicator.
Relative market share measures the market share of a company or brand relative to its largest competitor and therefore reflects a company's true market power and identifies opportunities for improvement. Let's explain the importance of the phrase "relative share": with a 20% share, you can both dominate the market and remain in second or even lower position among competitors.
The key question this metric helps answer is how much is our market share growing compared to our competitors?
The calculation of relative market share (see formula) allows managers to compare the relative positions in the markets of different products. This KPI gained popularity due to research (especially by the Boston Consulting Group) that showed that major players in the market tend to be more profitable than their competitors (although this claim has detractors, see "Remarks").
Relative market share tends to be closer to cash flow, since the higher the market share, the more cash flow is generated. As a result of economies of scale, it is assumed that these profits grow the faster, the higher the market share.
The reason for choosing relative market share, rather than just profit, is that market share carries more information than ordinary cash flow. The relative market share indicator shows the position of the brand relative to the main competitors and its possible future. It also gives an idea of what kind marketing activity will bring the greatest effect.
The measure of relative market share was first proposed in the 1960s. and was subsequently popularized by the Boston Consulting Group in their famous Relative Market Share and Growth Matrix.
In this matrix, one axis represents relative market share - analogous to competitiveness. The other axis represents the market growth rate - . On each axis, products are ranked high or low, falling into one of four quadrants. In the traditional interpretation of this matrix, products with a high relative share in a growing market are viewed as "stars" whose production must be supported by an appropriate amount of investment. Cash for such investments can be obtained from "cash cows", products with a high share in relatively stable markets. " Question marks' or 'problem children' may have the potential to further growth, but are still in a weak competitive position. And finally, "dogs" have neither growth potential nor sustainable competitive positions.
How to take measurements
Information collection method
Information can be obtained through analysis of publicly available annual reports and market research. If obtaining information is difficult, then such an analysis can be performed on request.
Formula
Relative market share (%) = Market share of the company / Market share of the largest competitor.
As can be seen from the formula, brand share is measured relative to the largest competitor. Thus, if the market share of a brand is 20% and the largest competitor has the same figure, then the ratio will be 1:1. If the largest competitor has a share of 60%, then the ratio will be 1:3, meaning that the brand of the organization is in a weaker position. If the largest competitor has a share of only 5%, then the ratio will be 4:1, meaning that the brand of the organization holds strong positions, and this, in turn, can affect profits and cash flow. When using this method in practice, this dependence is logarithmic, not linear.
Measurements are usually taken annually, more frequently in dynamic markets.
The source of information is annual reports or market research.
The cost of collecting data can be very high, especially when good quality information is not available. Comparative data is available for many industries, but this path can also be expensive. When the necessary information is available, the cost of data collection is minimal.
Target values
Target values can be determined based on existing market research. Comparative data can be gleaned from articles that look at how organizations maintain high positions in relative market share.
Example. Consider the example of the production of small city cars. As a source of information, we present a table with performance indicators key players in this market.
| Company | Number of units sold, thousand units | Revenue, thousand dollars | Market share, % |
| Zipper | 25 | 375 000 | 40 |
| Twister | 10 | 200 000 | 21,3 |
| A-One | 7,5 | 187 500 | 20 |
| Bowls | 5 | 125 000 | 13,3 |
| Chien | 2,5 | 50 000 | 5,3 |
| Market total | 50 | 9 375 000 | 100 |
A-One management needs to know the relative market share of its largest competitors. The calculation was made in relation to the number of cars sold and the proceeds received.
A-One sells 7,500 vehicles a year. Zipper, the market leader, sells 25,000 vehicles. In terms of the number of cars, the relative market share of A-One will be 0.3 (7,500/25,000). We get the same result if we first calculate the shares of A-One (7500 / 50,000 = 0.15) and Zipper (25,000 / 50,000 = 0.5), and then divide 0.15 by 0.5 (0, 15 / 0.5 = 0.3).
In terms of revenue from car sales, A-One has $187.5 million per year, while Zipper, the market leader, has $375 million. Therefore, A-One's relative market share in terms of revenue is 0.5 ( 187.5 / 375). Due to relatively high vehicle prices, A-One has a larger relative market share in terms of revenue than in terms of the number of vehicles.
Remarks
In addition to relative (and absolute) market share, other indicators must be taken into account to get the full picture. To determine the maximum possible market share of an organization, it is necessary to take into account the volume of production, revenue and marginality. There are many ways to measure market share. The simplest is to rank the amount of revenue or measure the absolute volume of products sold or gross income. The measurement of volume is the starting volume, in the future, these measurements should be expressed in terms of the market share held by the company. Holding 70% of the market where you are losing money is not a good strategy. The main criticism of the indicator of the relative market share is connected with the fact that it does not take into account the profit of the company.
Instruction
Assess the scope of the work. share sales represents , the calculation of which can be carried out both in the industry as a whole and within the framework of a single enterprise. If we consider, for example, retail store, then the indicator is usually used to assess the competitive environment, and is also used as a comparison value sales product groups in the assortment list.
Prepare the necessary information. Internal reports of financial and economic activity, as well as information from official statistical collections, are used as the main source. Remember that the correctness of the calculations depends on the availability of reliable data. Therefore, you should not take unverified information from the first Internet site that comes across as a basis.
Use the formula: y \u003d v1 / v2 * 100, where y is the specific gravity (in%); v1 is the compared indicator (i.e. share which needs to be found); v2 - the indicator with which the comparison is made. For example, if you need to find out the specific weight of a particular assortment unit of a store, then for this you need to correlate the amount of selected goods to the turnover as a whole.
Designate the calculation parameters of interest. There are various variations for finding the share sales, their choice depends on the purpose of the analysis. Thus, the share can be determined: In current and comparable prices (in the first case, the real value of the goods for which they are sold is taken as a starting point; in the second, the price is indicated without allowances); At various time intervals (the most popular is the year, quarter, month, but other options are possible); In relation to indicators of the past or base period; Based on internal and external information.
Sources:
- Calculation of the share of sales by region
Knowing your own share on the market, you can see and predict the prospects for the development of the company. To do this, it is important to strike a balance between market dynamics and change. After all, it is obvious that such a good phenomenon as maintaining and increasing the share can be completely leveled by the large-scale growth of the entire market, outpacing the growth of the company's share. This means that competitors perform much better.
Instruction
By and large, for each enterprise, the issue of calculating the occupied share on market becomes an important element of the different dates. Quite often, in the plans of companies, you can see the goal, for example, to take 5 years share market at 50%. Obviously, the market share of any enterprise is calculated by the usual division by the total market capacity. If you know the level of your own sales, calculate share on the market simple enough.
However, it seems so at first glance. The most important variable in calculating the share is the size of the market, which is difficult to adequately and accurately estimate. In fact, for a company operating on a particular market and analyzing it, the problem share on the market, boils down to answering the question: "How to accurately and correctly calculate the market capacity?"
Under the market capacity is the entire volume of transactions carried out on it for a certain period of time. In the theory and practice of marketing, to determine it, they use different methods, for example, an estimate of production adjusted for exports and imports of goods. Formulas are also used that include the number of potential consumers of goods, the average percentage of purchases for the period and the price of goods. Used to evaluate capacity and data state statistics across different economies. In addition, many companies are more inclined to trust their own capacity calculation methods, which are developed depending on the specifics of the market and the products sold.
Sources:
- enterprise market share
by the most in a simple way counting shares it seems to be done in proportion to the total market value of the apartment: if it costs 3 million rubles, and the share in the property is 1/3, then the price is 1 million. But in practice, such money can only be counted on when the entire object is sold. In other cases, the price will be much less.
You will need
- - monitoring similar offers on the real estate market in your region;
- - consultation of real estate specialists.
Instruction
If the apartment is sold with the general consent of the owners as a whole, the option of dividing the proceeds between them, minus the costs associated with the preparation and execution of the transaction, in proportion to the share of each and distributing the amount of the mentioned expenses in the same way seems to be the most fair.
If, on the other hand, a share is sold, especially not allocated in kind, many factors that increase the individual, completely lose their significance. For a buyer who needs an area for living, a room in
Market share is a traditional tool that can be used to evaluate the performance of any enterprise, as well as predict further development prospects. This indicator shows what place the company occupies in the relevant market segment relative to its competitors.
It is worth noting that a quantitative display of market share can be obtained by calculating the percentage of sales volume to general indicators sales volumes of products that belong to the same group.
Market share reflects how effective marketing activities are conducted by the company. It should be noted that at the moment there is no universal method, unanimously adopted in the world economy, that allows to measure this indicator in a perfect way. The company's share can be calculated not only in the market, but also for a separate service segment, that is, that part of the market volume for which many companies are actively competing.
If the total sales in the corresponding market segment cannot be calculated, then share can be determined in relation to parameters such as:
- Sales of nearest competing firms.
- Market segment leader or leading competitor.
What are the ways to calculate market share?
There are several effective ways, with the help of which you can correctly determine the share, namely:
in kind
The indicator is the number of trade units that are sold by a certain enterprise in percentage to the total sales of the market, which are expressed in the same units. In this case, you should use the following formula:
Market Share=Percentage Unit Sales/Amount of the same sales made in the market.
In value terms
The indicator in sales volumes differs from the first method by reflecting the cost at which products are sold. In this case, the calculation formula will look like this:
Market share=Sales in currency/Total sales in the market segment.
Through brand consumption intensity
This method is also known as the P&C technique. To use the methodology of Parfitt and Collins, it is necessary to use information from panel surveys, which are conducted on the basis of a regular sample of real buyers. It is worth noting that the calculations are carried out as a percentage, and the formula looks like this:
Brand market share= Brand penetration * Brand repurchase * Brand consumption intensity.
Brand penetration is the percentage of consumers who purchase a brand at least once out of all consumers who make a purchase of the product to which the company belongs.
Repeat purchase reflects how committed consumers are to a brand. This indicator is calculated as the percentage of brand acquisitions that consumers have purchased more than once during a specified period of time.
Brand consumption intensity refers to the ratio of the average purchases of a company's products by those consumers who make repeated purchases to the average consumption of all product groups represented in a particular category.
What are the goals of conducting a market share analysis?
Share analysis is carried out to determine two goals, in particular:
- The effectiveness of the fight in a competitive environment.
- Advantages in a competitive environment.
It is worth noting that small market segmentation is most often used to determine the first goal. In this case, it is necessary to analyze each segment, including territory, group, product category. In turn, to determine competitive advantages, segments that are more aggregated should be applied. This will allow the best way understand the competitive opportunities of the company as a whole in the market.
How can you collect information about a particular market?
In order to correctly calculate market share, it is necessary to collect relevant data. It is worth considering that collecting detailed information on the market segment is a rather difficult task. There are a number of sources from which data can be obtained, in particular:
- State statistics.
- Manufacturers Associations.
- Retail chains.
- Independent research and analytical agencies.
It is recommended not to dwell on one of them, but rather to collect available information from several sources. Then you should compare it, because only in this way can you correctly assess the state of the market.
