How is market share defined?

• A. Market share equals the total market sales.
• B. Market share is calculated as price divided by cost.
• C. Market share indicates brand loyalty.
• D. Market share equals a company’s sales divided by total market sales over a period.

Answer: (D)

Market share measures how big a slice a single company holds of the overall market in a given period. It is calculated as the company’s sales divided by the total market sales, usually shown as a percentage. The period matters because market size can change over time, so you compare the company’s sales to the market total during the same timeframe. Sales can be measured in value (revenue) or in units, as long as both the company and the market use the same measure.

For example, if a company sells $50 million in a year and the entire market sells $200 million in that year, the market share is 25%. This is a direct indication of the company’s relative size within the market and is useful for benchmarking against competitors and tracking growth or decline over time.

This concept is distinct from the total market sales itself (that’s the market size), from profitability metrics like price divided by cost (which is margin), and from indicators of brand loyalty (which reflect consumer behavior rather than the firm’s share of sales).