Analysing the Market

Market share

Aims:

• To understand the nature and type of markets

• To understand the meaning of market share

• To be able to calculate market size, growth and share.

What is a market?

• Market – any place or process that brings together buyers and sellers with a view to agreeing a price

Defining a market

A market is anywhere where

buyers and

sellers come together to

transact with each other

A market is anywhere where

buyers and

sellers come together to

transact with each other

Localmarkets

Nationalmarkets

Physicalmarkets

Electronicmarkets

Local Markets• Where customers are

a short distance from suppliers

• Common for the sale of fresh and locally-sourced products and the delivery of locally-supplied services

National Markets

• The same product or service is offered to customers who are spread around the country

• A business may have several (or many) locations in the country in order to reach those customers

• A start-up or small business can be focused on a national market, although it is likely that it will have a very small share of the market

Physical markets

• A physical market brings buyers and sellers together in the same location

• Prices are often negotiated by customers

• Examples:– Farmers market– Car boot sale– High street retail– Auction houses

Electronic markets

• Transactions are completed electronically with the delivery method depending on the nature of the product sold

• Examples:– E-commerce– Online auctions

An Invisible Market?

Markets can exist:• over telephone lines• online• in emails

As long as what happens involves buyers and sellers in a business transaction

B2B & B2C

Business 2 BusinessBusiness 2 Consumers

You need a set of mini case studies

Answers on following slide…

• In small groups

• Sort out the business case studies into 3 groups

• B2B• B2C• B2B & B2C

Different types of market focus

B2B only B2C only Both….

Answers….

B2B only B2C only Both….

Premier water coolers (1) Beautiful Vending (3) Rock & Ruby (7)Events Northern (15)

Sports Stars (2)Jo Jingles (4) Fly Fishing (8)Daisy Coffins (10)Curries made Simple(12)Innovations (13)Pet Pavilion (16)Tea on the Green (20)

Mozzo (5)ChemDry (6)Artichoke Ltd (9)Fivez (11)Little Ironies (14)Tutor2U (17)Lynches Direct (18)Links Putt (19)

Analysing the market

• Market size (volume and value measures)

• Market growth (percentage growth)

• Market share (percentage of the market owned by each competitor)

There are three key calculations you need to be able to complete in order to analyse market data in BUSS1

Market Size

Need to have calculators!

Market size

• Market size measures the sales by all companies within the market place.

• It can be measured in 2 ways:»By volume (quantity sold

e.g tonnes or units)»By sales (value of sales

e.g price x quantity sold)

Market size

• What measure could be used to show the volume of the following market places:

• Cars?• Yogurt?• Daffodils?• Hair cuts?• Footballers?• Bank service?• Schools e.g Ashcombe market size?

ExampleCar Valeting Market

Sales (£)

Cleanstyle £65,000

WorcesterValet £45,000

AutoFresh £30,000

Others £110,000

Total £250,000

The total value of sales (market size) can be found by adding up

the sales of each company

Market size by value

• Soft drink = £2,481,544,000 trend = + 4.9%

• Crisps = £1,836,016,000 trend = +2.1%

• Hot drinks = £1,049,619,000trend = -4%

What does the

trend mean?

Trends

• It tells us whether the market is growing or declining.

• It tells companies that there are possible opportunities to increase their market share……… using marketing!

A few quick calculations for you to do!

Do volume and value change in the same direction?

• If you sell 5m units pa and the average price is £4, what is the value of the sales?

• £20m

• If you sell 6m units pa and the average price is £4, what is the value of the sales?

• £24m

• If you sell 6m units pa and the average price is £3, what is the value of the sales?

• £18m

• The value has fallen compared to previous figures

What effect of a trend?

• If a market value is £10,000 and the trend is +2%. What will be the market size next year?

• 10,000 x 0.02 = 200

• So next year value will be £10,200

• If a market value is £10,000 and the trend is -2%. What will be the market size next year?

• 10,000 x 0.02 = 200

• So next year value will be £9,800

Market Growth

Market Growth calculations

• If a market is worth £20m and next year it increases to £22m, it has grown in size

• But by how much?

• 22-20 = 2 / 20 x 100 = 10%

Formula

• Market Growth = change in size x 100

Original market size

A few quick calculations for you to do!

Market Growth

• Market was £40m now is £60… market growth is…?

• 50%

• Market was £40m now is £30… market growth is…?

• - 25%

• Market is worth £2m and its expected to grow by 20%. What will the size of the market be next year?

• £2.4m

Market share

Example

Car Valeting Market

Sales (£) Share (%)

Cleanstyle £65,000 26%

WorcesterValet £45,000 18%

AutoFresh £30,000 12%

Others £110,000 44%

Total £250,000 100%

The total value of sales (market size) can be found by adding up

the sales of each company

Market share is calculated by taking the sales of one company and dividing by the market size

Market Share

• Market share =

Sales of the business X 100 = % Total sales in the market

Does size matter?

• It is used to work out how big each company is… what’s its market share?

• Market share can tell us if the company is a market leader, monopoly or a niche business.

• It can also tell us if the market is growing or declining. Your go…

Interpreting market shareLeading brand

Sales of leading brand

Market size (value)

Market share

Walkers crisp

£447m £1,702m

Nescafe £226m £535m

Kitkat £163m £3,354m

Felix cat food

£541m 19.6%

Walls Magnum

£709m 6.3%

Fill in the gaps

Interpreting market shareLeading brand

Sales of leading brand

Market size (value)

Market share

Walkers crisp

£447m £1,702m 26.3%

Nescafe £226m £535m 42.2%

Kitkat £163m £3,354m 4.9%

Felix cat food

£106m £541m 19.6%

Walls Magnum

£45m £709m 6.3%

Now for something harder

• Felix has 106m sales and 19.6%

• How do you calculate the market size?

• If Felix has 19.6%

• Then how big is 1% of £106m sales?

• 106/19.6 = ?

• Multiply this by 100 to get the answer

Should get an answer close

to £541m

Brain strain….

• Kit kat has 7% market share with sales of £179m…. How big is the market size?

• Heinz soup has 35.7% market share and £133m sales …. How big is the market size?

179 / 7 x 100

AND

133 / 35.7 X 100

Market Leader or Market dominator?

Leading brand

Sales of leading brand

Market size (value)

Market share

Share of nearest competitor

Walkers crisp

£447m £1,702m 26.3% 7.1%

Nescafe £226m £535m 42.2% 15.3%

Kitkat £163m £3,354m 4.9% 3.9%

Felix cat food

£106m £541m 19.6% 18.3%

Walls Magnum

£45m £709m 6.3% 5.1%Kitkat leads the market with 1% more

share

Walker’s dominates the market with

26.3% share (the nearest competitor

has 7.1%)

Homework – follow on from assessment

• The idea to open up their own coffee shop was met with overwhelming approval from their friends and family. This enthusiasm seemed justified when Jan carried out some market research which confirmed a growing market for their product/ service. The value of UK coffee shop sales grew from £6.3 million in 2001 to £34 million in 2006.

• Although there was no competition in the village, the

local town (10 miles away) had a coffee shop in the form of Costra Nova Coffee. In 2006, Costra’s UK sales were £5m, making them without doubt the market leader.

1. Define the term, market size (2 marks)

2. Calculate the percentage growth in the UK market for Coffee shops between 2001 and 2006 (4 marks)

3. Calculate Costra Nova’s market share in 2006 (4 marks)

Plenary

• What are the 2 methods of measuring market size?

• What is the formula for calculating market share? Why is important to know a products market share?

• What is the difference between a market leader and a market dominator?

Notes on Markets• What are the FOUR

different market categories.

• What is B2B and B2C stand for?

• How do you calculate market size?

• How do you calculate market growth?

• What is the formula for calculating market share?

• What is the difference between a market leader and a market dominator?