Connotation
Marketshare,alsoknownasmarketshare,reflectsthecompetitivepositionandprofitabilityofanenterprisetoalargeextent,andisanindicatorthatenterprisesattachgreatimportanceto.
Marketsharehastwocharacteristics:quantityandquality.
Whenitcomestomarketshare,mostpeoplefirstthinkofthesizeofthemarketshare.Butinfact,thesizeofmarketshareisonlythecharacteristicofmarketshareintermsofquantity,anditistheembodimentofmarketshareintermsofbreadth.Thereisanotherqualitycharacteristicofmarketshare,whichisthequalityofmarketshare,whichreflectstheprosandconsofmarketshare.Thenumberofmarketsharesisthesizeofthemarketshare.Therearegenerallytwotypesofexpressions:oneisexpressedasapercentageofcorporatesalestototalmarketsales,andtheotherisexpressedasapercentageofcorporatesalestocompetitorsales.
Marketsharequalityreferstothegoldcontentofmarketshare,whichisthesumofthebenefitsthatmarketsharecanbringtotheenterprise.Inadditiontocashincome,thisbenefitalsoincludesincomefromtheappreciationofintangibleassets.Therearetwomainstandardsformeasuringthequalityofmarketshare:oneiscustomersatisfactionrate,andtheotheriscustomerloyaltyrate.Thehigherthecustomersatisfactionrateandcustomerloyaltyrate,thebetterthemarketsharequality,andviceversa,theworsethemarketsharequality.
Therearetworeasonswhycompaniespaylessattentiontothequalityofmarketshare:thefirstreasonisthatmanycompanieshavenotestablishedamoderncustomer-centricmarketingconcept;thesecondreasonisthatthequalityofmarketshareisimproved.Thereturnisuncertain,andcompanieshavedoubtsaboutimprovingthequalityofmarketshare.
Toimprovethequalityofmarketshare,companiesmuststartwithcustomersatisfactionanddomorein-depthanddetailedwork,whichrequiresalotofmanpower,financialandmaterialresources,andtakesalongtime.Duetothelargequantity,highrequirements,longtimeperiod,andtheinaccuratecalculationoftheinvestmenteffect,thiskindofinvestmentappearstoberelativelyrisky,whichmakesmanycompaniesfinallygiveuptheirintentiontoimprovethequalityofmarketshare.
Measuringmethod
Therearefourmeasuringmethodsformarketshareaccordingtodifferentmarketscopes:
Totalmarket
referstothesalesvolumeofanenterprise(Amount)Theproportionoftheentireindustry.
TargetMarket
referstotheproportionofacompany’ssales(amount)initstargetmarket,thatis,themarketitserves.Thescopeofanenterprise'stargetmarketislessthanorequaltotheservicemarketoftheentireindustry,soitstargetmarketshareisalwaysgreaterthan
itsshareintheoverallmarket.
Thethreemajorcompetitors
referstotheratioofthesalesvolumeofanenterprisetothetotalsalesvolumeofthethreelargestcompetitorsinthemarket.Forexample:acompany’smarketshareis30%,anditsthreelargestcompetitorshavemarketsharesof20%,10%,and10%respectively.Therelativemarketshareofthecompanyis30%÷40%=75%.If4companieseachaccountfor25%,therelativemarketshareofthecompanyis33%.Generally,acompanyhasarelativemarketshareofmorethan33%,whichindicatesthatithascertainstrengthinthismarket.
Thebiggestcompetitor
referstotheratioofthesalesvolumeofanenterprisetothesalesvolumeofthelargestcompetitorinthemarket.Ifitishigherthan100%,itindicatesthatthecompanyistheleaderinthismarket.
Profitrelationship
Highmarketsharedoesnotmeanhighprofits.Intheprocessofexpandingmarketshare,manycompanies,althoughsalesgrowthhasledtoadecreaseinproductioncosts,Expensesusedtoexpandthenumberofmarketshareshaveincreasedmuchfasterthanthedeclineinproductioncosts.Coupledwiththedeclineinpricesduetocompetition,theprofitperunitproducthasdroppedrapidly,andfinallytheprofitabilityofthecompany'sproductshasdecreased.Thereasonfortherapidincreaseinthecostofexpandingthenumberofmarketshares,ontheonehand,isduetothelackofexperienceorlackoftrainingorpoorqualityoftheadditionalmarketingmanagementpersonnelintheprocessofmarketexpansion,resultinginout-of-controlcosts;ontheotherhand,thestrongreactionofcompetitorsThecostincreasecaused.Theactionofenterprisestoexpandthenumberofmarketshareswillinevitablycausecompetitorstotakecorrespondingactions.Themostcommononeisthatenterprisesincreaseadvertisinginvestment,competitorswillalsoincreaseadvertisinginvestment,enterpriseswillreduceprices,andcompetitorswillalsoreduceprices,evenlowerthanthatofenterprises.Morepowerful.Theresultisthatthecompanyhasspentalotofmoney.Saleshavenotincreasedsignificantlyorsaleshaveincreasedandmarketsharehasexpanded,butprofitshavedeclined.Infact,theprofitabilityofacompany'sproductsisaffectedbymanyfactors.Inadditiontothenumberofmarketshares,italsoincludesfactorssuchastheintensityofindustrycompetition,theaverageprofitabilityoftheindustry,corporatemanagementcapabilities,andthequalityofmarketshare.Thenumberofmarketsharesisonlyoneofthefactorsthataffecttheprofitabilityofacompany'sproducts.Generallyspeaking,inthefollowingtwosituations,highmarketsharemeanshighprofits.
1.Theunitcostdecreasesasthemarketshareincreases.Thisisduetothefactthatthefactoriesoperatedbythemarketleadersarerelativelylargeandenjoythescaleofcosts.Inaddition,thecostexperiencecurvedeclinesrapidly,sotheunitcostdecreases.
2.Thecompanyprovideshigh-qualityandhigh-pricedproducts,andtheincreaseinpricesexceedstheadditionalcostofhigh-quality.Improvingproductqualitywillnotincreasethecompany'scost,becausethecompanyhasalsoreducedwasteandafter-salesserviceconsumption,andifitscharacteristicsareverysuitableforconsumers'needs,theywouldratherspendmorethanthecostforthis.
Reasonsforthedecline
Asmentionedearlier,anincreaseinthenumberofmarketsharesdoesnotnecessarilyincreasetheprofitabilityofacompany.Similarly,adeclineinthenumberofmarketsharesdoesnotnecessarilyreducetheprofitabilityofthecompany.Whenfacingadeclineinmarketshare,companiesmustcarefullyanalyzeandresearch,andcomeupwithtargetedcountermeasures.
1.Enterprisesalesgrowthislowerthanthedeclineinmarketsharecausedbyindustrysalesgrowth
Therapidgrowthoftheindustrymeansthatthetotalmarketdemandisincreasingsharply,andtherearemanydevelopmentopportunities.Attractive.Inthiscase,theanalysisofthedeclineinthenumberofmarketsharesoftheenterprisemustbecarriedoutinconjunctionwiththesituationofthecompetitors.Shouldfocusontheanalysisofchangesinthenumberofcompetitorsandtheirmarketsharechanges.Iftherearemoreandmorecompetitors,andthenumberofmarketsharesofeachcompetitorisgettingsmallerandsmaller,atthistime,thedeclineinthenumberofmarketsharesofthecompanyisacceptable,andthecompanydoesnotneedtotakespecialactions;ifthenumberofcompetitorsisHowever,thenumberofmarketsharesofsomecompetitorsisrising.Atthistime,companiesmustconductkeyanalysisandresearchonthesecompetitorswhosemarketshareshaveincreased,tounderstandthereasonswhytheirgrowthisfasterthanthedevelopmentoftheindustry,andtocompareandanalyzetheirownshortcomings.Makeimprovementstoavoidbeingopenedupbycompetitors;ifthenumberofcompetitorsisdecreasing,thenumberofmarketsharesofmostmajorcompetitorsisincreasing.Atthistime,thedeclineinthenumberofmarketsharesmeansthatthecompany'sproductsareuncompetitive,andthecompanymustincreaseproductinput,Improveproductperformance,strengthenpromotionandsalesnetworkconstruction,andstrivetochangetheunfavorablesituationfaced;ifthenumberofcompetitorsisdecreasing,andthemarketshareofafewcompetitorsisrising,thismeansthatthemarketisconcentratingonafewbigcompetitors.However,smallandmediumcompetitorsarestruggling.Companiesfaceimportantchoices:eithermaintainthestatusquoorchangethestatusquo.Maintainingthestatusquomeansthatcompaniesfaceadeclineinmarketshareanddonotreverseit.Thisisthechoicewhencompaniesbelievethattheycannotcompetewithlargecompaniesatallandarereadytofadeoutofthemarket.Changingthestatusquomeansthatcompaniesincreaseinvestmentandreversethetrendofdecliningmarketshare.Whencompaniesareconfidentandhavethesupportofcorrespondingresources,theyshouldmakethischoice.
2.Thedeclineinbusinesssalesisfasterthanthedeclineinindustrysales.Thedeclineinmarketsharecausedbythedeclineinindustrysalesmeansthatthetotalmarketdemandisdeclining,theindustryisindecline,andthemarkethasnodevelopmentvalue.Therapiddeclineincorporatesalesindicatesthatthemarketcrisishashadaparticularlysignificantandseriousimpactonthecompany,andthatthecompany’sproductslackcompetitivenessinthemarket.Inresponsetothissituation,companieshavethefollowingoptions:
(1)Maintainthestatusquostrategy
Trytomaintainthenumberofmarketsharesorslowdowntherateofmarketsharedecline.Companiescanstimulatedemandbyincreasingsalespromotionorloweringpricesattherighttime.Thiscountermeasurecanbechosenwhenthecompanyfindsthattheproductreturnsarestillgoodafteranalysisandresearch.
(2)Takeadvantageofthetrendandfollowthestrategy
Enterpriseswillnotmakemoreeffortstoreducethenumberofmarketsharesandstillmaintaintheoriginalmarketingplan.Thisstrategyshouldbechosenwhenthecompanybelievesthatthemarketrevenueoftheproductisnotverygoodafteranalysisandresearch,andthecostofchangingthenumberofmarketsharesmaybemorethanthebenefitbroughtbyit.
(3)Acceleratedharvestingstrategy
Enterprisesreducetheoriginalmarketingplantoreducecostsandincreasetheshort-termbenefitsofproducts.Whenthecompanybelievesthat
theproductwillrapidlydeclineandhavedoneagoodjobinassettransfer,thisstrategycanbechosen.
(4)Abandonmentstrategy
Enterpriseswillliquidateandsellproductswhosemarketshareisrapidlydeclining,andfinallyabandontheiroperations.Whenanenterpriseneedstodevelopabetterbusiness,itcanconsiderimplementingastrategyofabandoningtheproductandusingtheassetsfromthesaletodevelopnewbusinesses.
Growthstrategy
Thepurposeofincreasingmarketshareistosubstantiallyincreaseandcontinuetoincreasethecompany’smarketshare.Theextenttowhichacompanychangesitsmarketshareisgenerallydeterminedbythestructureofitsindustry.Undernormalcircumstances,thischangeshouldbeabout100%-150%ofthecompany'smarketshare,andtheminimumisnotlessthan50%ofthemarketshare.Inordertomeetthisstandard,companiesneedtoinvesthigherthanthenormalinvestmentlevelofcompaniesofthesamesizeintheindustry.Intermsofspecificmethods,inadditiontoself-raisingpartofthefunds,thecompanymustalsobeabletoattractmorefunds.Inaddition,companiescanalsocarryoutsomeformofalliance,orinsomeaspects,formamajoradvantagethatcansurpasscompetitorsandpromotechangesinmarketshare.
Undernormalcircumstances,marketsharewillchangeatthebeginningorconsolidationphaseoftheproduct-marketdevelopmentcycle.Inthesestages,theindustry'scompetitivebasisoftenchanges,andatthesametime,theindustry'sproduct-marketdevelopmentstagesoftenalsoindicatethetypesofcompetitiveadvantagesthatcompaniesmayestablish.Forexample,inthedevelopmentstage,thebasisofcompetitioninmanyindustriesisinseparablefromproductdesign,productpositioningandproductquality.Intherectificationphase,thecompetitionbasisoftheindustryusuallyshiftstoproductcharacteristics,marketsegmentation,positioning,salesandserviceefficiency.
Ofcourse,evenifcompaniesunderstandthesechangesintheproduct-marketstage,theystillneedacreativedecision-makingprocesstoformaneffectivemarketshareincrease.Thisismainlybecause:
(1)Evenifcompaniesknowthatthereisanewbasisforcompetitionintheindustry,theystillneedtocreativelyfindthebestwaytocompeteinthesenewfields.Inotherwords,companiesmustunderstandtheproductdesign,productpositioning,andproductcharacteristicsrequiredbythelistingsiteatthesestagesinordertobettercompete.
(2)Alltheabove-mentionedphasedchangesareonlygeneralchangesandarenotusedinallindustries.Forexample,high-techproductshaveashortlifespan,growrapidlyinthemarket,anddeclinerapidly.Generally,thereisnorectificationstage,maturitystage,andsaturationstage.Therefore,whentheyarestillintheinitialstageofproduct-marketdevelopment,theirprice,productioncapacityandsaleschannelsaremoreimportantthanproductdesignandproductquality.
(3)Ifhugechangeshavetakenplaceintheindustryatthesestages,itwillalsoaffectthegrowthrateofmarketshare.Forexample,industry-leadingcompaniesmakemistakes,makemajorbreakthroughsinproductproductiontechnology,orcompaniesintendtomakemajorinvestments,whichwillgreatlychangethecompany'smarketshare,andmayevenaffectthecompetitivepositionofotherstagesofproduct-marketdevelopment.
Inshort,itiseasierforacompanytoformacertaincompetitiveadvantageincertainstagesofproduct-marketdevelopment,butitmusthaveamajorcompetitiveadvantageovercompetitorsincertainaspectsinordertoformastrategytoincreasemarketshare.
Howtoincrease
Speakingofhighmarketshare,generallyspeaking,inthefollowingtwosituations,highmarketsharemeanshighprofits.
Thecompanyprovideshigh-qualityandhigh-pricedproducts,andtheincreaseinpricesexceedstheadditionalcostofhigh-quality.Improvingproductqualitywillnotincreasethecompany'scosts,becausethecompanyalsoreduceswasteandafter-salesserviceconsumption.Andifitsfeaturesareverysuitablefortheneedsofconsumers,theywouldratherpaymorethanthecostforthis.
Improvingtheintangibleassetsofacompany/commodityisalsoawaytoincreasethemarketshareofaproduct.