Market share is an organization's percentage of the total sales in an industry. Market share can be based on either unit volume or sales volume. Thus, a firm could sell a substantial number of low-priced products into a market and claim a large market share based on unit volume, while another firm could sell far fewer units but at a much higher price per unit, thereby claiming the same market share based on sales volume.
A business might focus on market share in order to ramp up its production volume, which allows it to reduce its per-unit production costs, thereby allowing it to earn a profit at price points that would bankrupt its competitors. However, the unending pursuit of market share may not be viable, since some niches within a market can be quite unprofitable.
The pursuit of increased market share is especially useful in a rapidly growing market, where a firm with a large existing share of the market will grab a similarly large proportion of new sales as the market continues to expand.
The ability of an organization to increase its market share can be severely limited by the existence of barriers to entry, or by the restrictive pricing practices of those firms already competing in the industry.
Market share can be increased by adopting aggressively low price points, or employing better customer service than competitors, or providing enhanced product features. At some point, the rate of growth in customers attracted by a particular strategy will begin to fall off, resulting in a firm settling into a consistent long-term market share.
It is not always easy to calculate market share, since it can be difficult to obtain sales information within certain industries.