What does the term 'market share' refer to?

Market share refers specifically to the percentage of sales that a company controls within a particular industry or market segment. This metric is crucial for understanding a company's relative position in the marketplace, as it indicates how well it is performing compared to its competitors. A higher market share typically suggests that a company is selling a larger proportion of the total available products or services in that industry, which can lead to increased economies of scale and bargaining power with suppliers.

In contrast, the amount of revenue generated by a company does not directly measure its market presence or dominance within a particular industry, as revenues can vary based on numerous factors, including pricing strategies and product lines. The total number of competitors in a market and the total number of customers in a market also do not accurately define market share. Instead, they illustrate the competitive landscape and market potential, but not the specific sales percentage that indicates how much of the market a company has secured. Thus, the focus on the percentage of sales makes the concept of market share a key indicator of competitive strength in the market.