Calculate market share

Question

During the case, I calculated that if the company wants to sell 50M, they need to basically capture ~13% (50 / 382) of the market size. However, during the case debrief, I kept wondering if I should do the calculation differently by adding the 50M to the denominator since the revenue is additional to the existing 382M. That would give us 50 / (382+50) = ~11%. What is wrong with the second calculation?

Answer 1

Hi there,

I understand your logic here, but fundamentally you're assuming that the market grows by 50M.

Your additional sales didn't just “appear”! Rather, they were “stolen” from other competitors.

Just remember, the market size is the market size. If you're going to sell x units in that market, the marker size doesn't change just because you entered (Unless you create demand like Tesla or Apple did). Rather, you're taking a % of the existing pie :)

Answer 2

Since baby clothing is not exactly a new category and is a basic need, it is unlikely that you will create additional demand just from getting in the market… you will be taking market share from other players. So the first option is the correct one.