Market Share Analysis: Definition, Examples, and Key Steps
An informative guide to calculating market share and assessing industry structure
A market share analysis is a vital tool for companies to evaluate their market position, uncover growth opportunities, and boost profitability. Determining market share can often be challenging—it involves a complex, multi-step process with several potential pitfalls along the way.
This guide provides steps for estimating market share, along with specific examples and best practices, drawing on the expertise of Freedonia Strategic Insights, a trusted source of industry market research for more than 15 years.
What Is a Market Share Analysis?
A market share analysis allows you to identify the leading players in a specific market by ranking and quantifying each company by their revenue.
Market share is the amount of a market’s total revenue that a single player earns. Market share is expressed as a percentage of a specific product’s total market revenue. A basic example is below.
Total market = $30 million
Company A – 33% market share ($10 million)
Company B – 33% market share ($10 million)
Other manufacturers earn the remaining 33% of the market
Benefits of a Market Share Analysis
A market share analysis is useful for understanding the size of the total market opportunity relative to company size and a company’s position within the market. It can also be used to:
- Benchmark performance relative to the industry standard
- Identify opportunities and capitalize on high-growth areas
- Support new product development and other strategic initiatives
- Inform investor relations documents
5 Steps for Determining Market Share
Here, we walk you through the key steps for determining market share and provide an example related to the roofing industry to bring the concepts to life.
1. Assess the Competitive Landscape
To calculate market share, start by making a qualitative assessment of the competitive landscape and identifying the top three to five companies in the market based on their revenue from products or services sold.
For example, to analyze US roofing market share, you would need to identify the largest roofing manufacturers in the United States: GAF Materials (a subsidiary of Standard Industries), Owens Corning, the CertainTeed subsidiary of Saint-Gobain, and Elevate (a subsidiary of Holcim).
2. Define the Scope of Your Market
The next step is to define the scope of your analysis. Decide what is in scope and out of scope in terms of products, geographies, end-markets, and applications.
To return to our roofing example, depending on your objectives, you may choose to define the scope of the US roofing market with the following:
- Products: Asphalt shingles, metal roofing, bituminous roofing, plastic single-ply roofing, rubber single-ply roofing, roofing tile, wood shingle & shake roofing, and small volume roofing products
- Applications: New construction and reroofing
- Markets: Residential and commercial
- Regions: Northeast, Midwest, South, and West
When you clearly understand the scope of the market, you can accurately determine market size, an essential element for calculating market share.
3. Calculate Market Size
Market size refers to the annual volume or value of a product sold, representing the total opportunity available for companies that supply those goods. Calculating market size can rely on a top-down or bottom-up approach and combines extensive secondary research—including information from company websites, government statistics, and trade journals—and primary research—such as consumer surveys and in-depth interviews with industry participants.
Market sizing is both an art and a science that requires a clear understanding of the entire value chain. Our analysts at Freedonia triangulate multiple data sources and methods to estimate the size of the market to ensure accuracy and reliability. Because market sizing requires specialized expertise, companies often purchase market sizing data available in published market research reports from reputable firms such as The Freedonia Group, or commission a study from Freedonia Strategic Insights for information on more niche markets.
For our roofing example, Freedonia analysts calculated the roofing market size to be approximately 286 million squares in 2023, which is worth about $25 billion. As this example indicates, market size can be calculated in terms of volume and value.
4. Estimate the Market Share of Specific Players
Along with market sizing, you will need to understand the revenue of the top industry participants. For private companies, this information is not usually publicized and may only be known by a handful of industry insiders.
In addition, keep in mind that many companies are not pure players and may operate in multiple industry segments. In these cases, you will need to estimate their total revenue and determine the portion that is relevant to the market you are analyzing. Validating your estimates through primary market research can help ensure accuracy.
Once you have estimated the revenues of market leaders, you can calculate their market share by dividing each company’s revenue by the total market size.
In our roofing example, market share can be illustrated as follows:
5. Create Company Profiles
A market share analysis is typically paired with company profiles that describe a company’s sales revenue, major brands, key products, value proposition, recent developments, merger and acquisition activity, and operational strategies. These profiles can help you look beyond the top-line data to identify a company’s competitive advantages and understand how it competes in the market.
A published market research report such as Freedonia’s US Roofing provides company profiles for the top eight companies. Freedonia Strategic Insights often works with market leaders to assess as many as 20 of their closest competitors to provide more customized and granular market data. Depending on your needs, either option may be an ideal solution.
Keys to a Successful Market Share Analysis
To calculate market share effectively, you need:
- A well-defined scope
- Accurate market size data
- A well-informed data set
Your data set should include historical supply and demand data, manufacturer sales, macro and microeconomic forecasts, and real-time interviews with industry experts.
A market share analysis incorporates many different pieces of data that may not be publicly available. Many organizations find it challenging—if not impossible—to conduct this kind of research on their own, so they often turn to firms like Freedonia for assistance.
Your Trusted Partner
Need market share data and company profiling? Freedonia’s experienced in-house research staff are experts in analyzing company sales, estimating market size, tracking industry trends, and calculating market share. For decades, we have supported many of the world’s largest industrial companies in making informed decisions through hundreds of complex projects.
Contact us today to discuss your goals. Even if your research deliverables are not fully defined yet, we would love to meet with you and discuss how our capabilities can support your success.
