Average market share "of the industry"?

Question

What exactly is the average "market share of the industry"? In simple terms, what is this? The market share of the average player? Arithmetically, is this the arithmethic average of market shares of all players in the region or what? Very confusing at first sight and not sure how it is relevant in the case. If my understanding of what it means is correct, then this metric just shows fragmentation of the market in different regions, which then contradicts some of the guidance in the answer of the case. I'd suggest to make it clear - in the case and in the guided answer - what it means and what the logic in assessing it is.

Answer 1

Hi there,

Thanks for your question.

The average market share is: Sum of the market share of the players in the market / Number of players

Together with the information on the market share of the client, it is an indication of the positioning of the client compared to the average of the players in the market. If the client has less market share than the average, it means there is potential to grow compared to at least one competitor.

As mentioned in the case, this alone is not enough to define whether that market will be attractive. You can state a hypothesis that the market where we have below-average market share is the most promising to expand. However, as stated, you should also understand if (i) you can increase your market share there and (ii) what is the size of the market.

If you have additional questions please feel free to PM me.

Best,

Francesco

Answer 2

Hi there,

I actually have to agree with you here.

In terms of case instructions, don't overcomplicate - you need to take the total market (1005) divided by the number of players (6).

That said, this is a pretty silly/simplistic way to do things. If 1 player had 80% share, and the rest 4%, the average market share would be 16.7%.

Alternatively, if every player had equal share...well, you guessed it...the average market share would be 16.7%.

It's a nonsensical exercise that would not be used in a real consulting project.

Answer 3

Hey A,

The average market share of the industry here is the percentage of total sales in the industry by the clients' company (BlissOttica in this case). Arithmetically, to count the average MS, you need to take the sales of the company over a certain period and divide them by the sales of the industry over the same period.

As can be seen in the math logic, without knowing the proportion of the market share, it is impossible to calculate total market potential and, finally, the revenues.

If you are interested, where the numbers come from, check on the graphs with share per regions and age groups both for the company and for the industry in general.

If you have any other questions - feel free to reach out!

GB

Answer 4

Agree with you this is a strange term I haven't come across before. I presume this to mean the average player in the industry holds x% market share (i.e. like you said a simple arithmetic avg of all market shares).

I imagine the point of this is to demonstrate it is a fragmented market