Market size, share and growth

Question 1

WHY DOES THIS MATTER?

Answer 1

• Most businesses collect a range of data to assess the market they are in, market share is one method of data. Market size and growth is also used.
• Businesses assess their performance and use this to inform decisions.
• Investors are also interested in this data particularly if they are looking to buy shares.

Question 2

MARKET SIZE

Answer 2

Market size can be measured by the total sales of all businesses in the market (volume or value)
or
the amount of spending (volume or value)
VOLUME or VALUE

Question 3

WORKED EXAMPLE

Answer 3

Last year, 2,500,000 litres of bottled water were sold in the UK at an average
price of £0.70
Market size by volume = 2,500,000 litres of bottled water
Market size by value = 2,500,000 x £0.70 = £1,750,000

Question 4

MARKET SHARE

Answer 4

A firm’s market share measures its sales as a percentage of the total market sales.
Formula
Market share = sales of the business x 100 total sales in the market

Question 5

MARKET SHARE

Answer 5

Last year, the UK bottled water market was worth £1,750,000.
The market leader had £350,000 worth of sales What was its market share?
Market share = sales of the business x 100 total sales in the market
= £350,000 x 100 £1,750,000
= 20% market share

Question 6

MARKET GROWTH

Answer 6

This is a measurement of the change in the size of a market
Formula
Market growth = new market size – original market size X 100 original market size

Question 7

MARKET GROWTH

Answer 7

Last year, the UK bottled water market was worth £1,750,000. This year it is worth £1,810,500
What is the change in market size?
Market size = new market size – original market size original market size
x 100
= £1,810, 500 - £1,750,000 x 100 £1,750,000
= 3.46% growth