🏪 What is a market?
Big Idea: A market is any place where buyers and sellers come together to exchange goods or services. It doesn't have to be a physical location — online shops count too! 🛒
Key market terms
- Market size — the total value of sales or total volume of units sold in a market
- Market growth — how fast the market is expanding (or shrinking)
- Market share — one company's sales as a percentage of total market sales
- Market leader — the business with the largest market share
Example: If the total smartphone market is worth $500 billion and one company sells $100 billion, its market share is 20%.
🔢 Calculating market share
The Formula: Market share (%) = (Company's sales ÷ Total market sales) × 100
Worked example
- Company sales = $15 million
- Total market sales = $60 million
- Market share = ($15m ÷ $60m) × 100 = 25%
Market share can be measured by value (money) or by volume (number of units). The question will tell you which to use.
Why market share matters
- Shows how well a business is doing compared to competitors
- Growing market share = gaining competitive advantage
- Falling market share = losing ground to rivals
- Market leaders can often set higher prices and attract more investment
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📈 Market size and market growth
Market size
- By value = total revenue in the market (e.g. $500 million)
- By volume = total units sold in the market (e.g. 2 million units)
- A large market size suggests strong demand
Market growth
- Growing markets offer opportunities for new and existing businesses
- Declining markets mean fewer customers and tougher competition
- Businesses must monitor growth trends to plan ahead
Exam tip: A business can increase market share even in a declining market — by taking customers from competitors.