Question

Market share measures a firm's external performance relative to that of its competitors. Which of the following represents how a firm measures market share?

a. Multiplying the firm's sales by the industries total sales
b. Dividing the firm's sales by the total market sales for the entire industry
c. Subtracting your competitors sales from your total sales
d. Subtracting the industries total sales from the firm's total sales

Answer 1

b. Dividing the firm's sales by the total market sales for the entire industry

Step-by-step explanation:

The formula to compute the market share is shown below:

Market share = Firm sales revenue ÷ Overall market sales revenue

Let us take an example

The firm sales revenue is $100,000

And Overall market sales revenue $50,000

So, the market share would be

= $100,000 ÷ $50,000

= 2

Therefore, the most appropriate option is b.